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A24-Lmcaster Farming, Saturday, February 7,1987
Dairy Forecast
Editor’s Note: The following report examines what can be expected with milk
production and prices In 1987 based on the trend established in 1986 and the early 80s. Jim
Miller, USDA didry division, originally prepared this report. Dr. Jack J. Kirkland, Penn
State dairy marketing specialist, revised and updated the story.
Price support purchases fell to low levels this fall. Farm and wholesale prices increased
substantially during the latter half of 1906. Both situations resulted from the removal of
substantial milk production capacity by the Whole Herd Buyout Program (Dairy Ter
mination Program) in the form of cows, heifers and calves; growth in commercial use of
milk; rally small increases in production by dairy farmers not in the buyout program; and
low levels of commercial stocks.
Milk production during October and November declined about 4 percent from 1965, a
sharp contrast to large increases in early 1966. Cow numbers were down sharply due to the
buyout program.
Data suggests that dairy farmers not in the buyout program increased cow numbers
slightly last spring and have maintained that number since then. Total cow numbers for
1966 will average more than 1 percent below 1965.
Favorable milk-feed ratios have stimulated increased concentrate feeding and higher
levels of milk per cow. Although output her cow in October and November increased less
than 1 percent than in 1965, this increase was large relative to previous years that were not
affected by the diversion program. For the year, milk per cow will be more than 2 percent
above 1965 and about 6 percent above 1963. Milk production will total almost 1 percent
above 1965 levels 143.7 billion pounds because of early 1986 levels.
1181
12.61
1905
13.00
Effective Ave. Pa. Wholesale Milk Price ($/cwt)
12.80 13.30 13.46 14.01 14.23
Ave. Pa. Corn Prices ($/bn.)
3.55 3.44 2.65
12.12
2.29
2.76
After mid-1906, lower production, growing commercial use, and low commercial stocks
triggered wholesale price increases. Butter and cheese prices increased significantly last
summer and nonfat dry milk prices edged upward in the fall. Wholesale butter and cheese
prices are on the verge of seasonal decreases that could be substantial.
Farmers received an average of $13.40 per hundredweight of milk in November, up 80-
cents from November of 1965. The M-W price reached $11.91 in November, up 93-cents
from the May seasonal low and 72-cents over November 1985. Due to decreases earlier in
1906, the 1906 average milk price will be about 30-cents per hundredweight below 1985 and
about 55-cents lower when adjusted for assessments.
Farm milk prices will probably drop sharply this winter because of the seasonal return
to surplus conditions and the lowering of the support price on Jan. 1. ,
Commercial Disappearance, Million Pounds
Jan. to Nov. 1985 Jan. to Nov. 1986 % Change
119.798 123,639 +TT
Lower milk production and strong Quid milk sales reduced supplies for manufacturing
during the period from July through October. Production of butter, nonfat dry milk, and
American cheese (the major users of surplus milk supplies) fell sharply. Major
manufactured products will use about 83 billion pounds of milk in 1986, about the same as
in 1985.
1986 1985 1984 1983 1982 1981 1980
F.o.2Blend 12.09 12.32 13.00 13.23 13.26 13.39 12.64
Effective 11.60 12.04 12.40 12.73 13.26 13.39 12.64
F.o.4Blend 12.66 12.90 13.67 13.85 13.80 13.95 13.20
Effective 12.17 12.62 13.07 13.35 13.80 13.95 13.20
F.0.J6 Blend 12.22 13.02 13.23 13.36 13.42 13.55 12.89
Effective 11.73 12.74 12.65 12.86 13.43 13.56 12.89
Commercial use of dairy products was less than 2 percent above 1985 during the period
from July through October, following a gain of almost 4 percent during the second quarter
of 1986.
Sales of cheese, Quid milk, and most other products had similar gains in the two periods.
However, commercial disappearance of butter rose sharply from 1985 levels during the
spring and dropped slightly during the period from July through October, a pattern
probably more closely tied to changes in commercial stocks than to final sales. Sales
during these periods indicate that growth in commercial use has probably eased from late
1985 and early 1986, but remains strong.
PA N.E.*
730.000 2,168,000
-0.7% -1.5%
Production Per Cow- Lbs.
14.000 13,414
+ 1.9% +1.4%
*N E refers to the Northeastern region ot the United States
No Cows
Net Change
Commercial stocks totaled 4.8 billion pounds (milk equivalent) on Nov. 1, about the
same as in November 1985, but low for 1986 s market conditions.
The tighter supply-demand situation in the fall of 1986 almost eliminated CCC removals.
During October and November 1986, small cheese purchases were partially offset by some
butter sold back to the industry. Purchases will probably resume before the end of 1986,
but the 1966 annual total will stay below 11 billion pounds (milk equivalent).
Because of wholesale price increases, retail dairy prices in October 1986 were higher
than both a year earlier and last spring. However, retail dairy prices continued to decline
relative to prices of other foods. For all of 1986, retail dairy prices will average very close
to 1985 figures.
Production-
Billion Lbs.
Milk Marketing-
Million Lbs.
Class 1 Sales
Million Lbs.
Where It Was In 1986, Where It Is Headed In 1987
The 1986 Situation
Ave. Wholesale Pa. MJJk Price (|/cwt)
1M in IK 1M
13.90 13.96 14.01 14.23
Federal Order Average Prices ($/cwt)
PA
10,293
+ 1.2%
ORDER 36 ORDER 2 ORDER 4
1,823 10,990 6,475
1 5% -5.9% +0.9%
4,676
-0.1%
2,000
-( 0.5%
3.38 3.23
U.S.
10,400,00
-4.1%
13,640
+2.0%
N.E.
29,081
-0.2%
TOTAL N.E
27,789
-2 7%
3,065 13,033
+ 2 0% -*-0 8%
The buyout program will continue to be the most important factor affecting the dairy
industry during the first half of 1967. Production and CCC removals will be well below a
year earlier. Basic economic forces will be increasingly apparent as the year progresses.
It is unclear whether production increases by dairy farmers not in the buyout program
will be greater than the increase in commercial use of milk during 1987.
What happens could indicate the extent of surplus production through 1990.
In 1987, milk per cow probably will increase 2 percent or more because of record-high
milk-feed price ratios and heavier concentrate feeding. However, the incentive for dairy
farmers not in the buyout program to expand cow numbers has diminished since the early
1980 s.
Effective returns over concentrate costs probably will increase somewhat from 1985,
but will remain below those of the early 19605. In addition, threatened future reductions in
the support price and increased sales of dairy farms may weaken cow numbers.
During the first half of 1967, milk production will probably be 2 to 4 percent lower than
the same period in 1986. Total 19067 milk production is expected to fall from 1 to 3 percent.
Next spring’s farm milk prices will likely be below those of 1966. The size of the second
half price rise in uncertain, although a moderate increase probably similar to the one in
1966 is expected. Such an increase would leave the 1987 average price slightly below the
1966 level. The effective price (adjusted for deductions) would be about the same as in
1966.
Prices will probably peak this winter and then will remain steady or decline slightly
until early summer of 1987. Depending on the size of the second-half seasonal increase,
1967 retail prices could average 1 to 3 percent above 1966 levels.
1980
13.61
13.61
Manufactured product output will be down in 1967 due to lower milk marketings.
In 1987, declining real retail prices, economic growth, and heavy promotion (the driving
forces in the 1983 to 86 gains) will probably increase commercial use from 1 to 3 percent,
following 1966 s 3 percent increase
Rebuilding commercial stocks in early 1987 will absorb some of this winter’s surplus
dairy production.
Net CCC purchases in 1987 will fall substantially and will probably be in the range of 4 to
7 Billion pounds. Government dairy stocks might be low by late 1987.
u.s.
141,700
-2.3%
Class 1 Price-
Class 2 Price-
Blend Price-
PROD
FARM USE
MKTGS
BEG COM
STOCKS
IMPORTS
TOTAL
COMM
DISAP
END COM
STOCKS
CCCPUR
TOTAL
FARM PRICE
ALL MILK
F. 0.36 BLEND 13.36
AVGANN
ASSESSMT
EFFECTIVE
PRICE
•PROJECTED
Bucks-Montgomery Crops Day Scheduled
CREAMERY - The Bucks-
Montgomery Crops Day is slated
for Thursday Feb. 12 at the Meyers
Restaurant, Quakertown.
Registration begins at 9 a.m.
Phil Durst, Penn State extension
agronomy project associate, is
scheduled to talk about the use of
starter fertilizer and nutrient
management for the farm.
Dick Bailey, Bucks County
extension agent will discuss the
new Pennsylvania pesiticide law.
John Yocum, senior research
associate with the Penn State
agronomy department, will ex
plain soybean cultural pracUfifa,
The 1987 Outlook
ORDER 36
$13.35
+1.1%
$11.25
-0.3%
$12.37
+0.6%
1983
139.7
2.4
1984
135.4
2.9
137.3
132.5
144.5
140.4
122.5
126.9
5.2
16.8
144.5
140.4
13.57
13.45
13.23
12.88
12.63
KEY
PROD = Production
MKTGS= Marketings
BEG COM STOCKS = Beginning Commercial Stocks
COMM DISAP= Commercial Disappearance
END COM STOCKS= Ending Commercial Stocks
CCC PUR= CCC Purchases
AVG ANN ASSESSMT = Average Annual Assessment
••FORECAST
new herbicides and 1986 weed
problems.
In the afternoon session Bailey
will explain the use of boom
sprayers and Durst will tell how to
reduce nitrogen use.
Elwood Hatley, Penn State
extension agronomist, will present
a program on alternative crops
and intensive cereal crop
management.
Reservation for lunch or
exhibitor space are needed by Feb.
10 Checks should be made payable
to the Bucks County Extension
Service, Neshaminy Manor
Center, Doylestown, PA 18901.
ORDER 2 ORDER 4
$13.87 $14.46
+1.8% +2.3%
$11.28 $11.36
+0.3% +0.6%
$12.23 $12.87
+1.3% +2.0%
1985
143.7
2.5
1986*
144.9
2.3
141.2
142.6
148.9
150.0
131.1
134.6
4.6
13.2
4.2
11.2
148.9
150.0
12.73
12.25
13.01
12.30
12.73
11.81
1987**
142.0
2.3
139.7
147.6
137.0
147.6
12.30
12.37
11.98