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The dairy community was heartened a bit after the USDA released its World Agriculture Supply and Demand Estimates (WASDE) report this week, projecting that milk prices are likely to move upward despite Mexico’s tariff’s on U.S. cheese.

For the remainder of the year and into 2019, the Class III price will increase due to the stronger whey price. Both Class III and Class IV prices are expected to increase, with the all milk prices targeted at $16.60 and $17.00 per cwt. for the next six months and increasing to $16.70 to $17.70 per cwt. for 2019, according to the report.

USDA officials reduced the milk production forecast for the next 18 months based on the slightly lower cow numbers and slower than expected growth in milk per cow.

“For 2018, fat basis exports are raised from the previous month as second-quarter exports are strong and continued strength in sales of a number of fat-containing products will largely mitigate the impacts of Mexico’s tariffs on U.S. cheese,” USDA officials projected in the report.

For 2019, the fat basis export forecast is lowered. Skim-solids basis export forecasts for 2018 and 2019 are raised from the previous month on robust demand for non-fat dry milk and lactose thus far in 2018, adding that this strength is expected to carry into 2019.

The USDA noted that fat basis imports for 2018 and 2019 are expected to increase based on higher imports of butterfat products, while skim-solids basis import forecasts for 2018 and 2019 are reduced on lower imports of milk proteins and a number of other dairy products.

While the cheese price for the remainder of the year was unchanged, the report indicated upward movement in prices for 2019. Nonfat dry milk and whey prices will also gain ground during the coming 18 months thanks to strong demand and reduced production.

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