Post on 01-May-2020
2016 Dairy Situation & 2017 OutlookWisconsin Agricultural Outlook Forum
Mark Stephenson, Ph.D.Director of Dairy Policy Analysis
High Impact Trends!
0
10
20
30
40
50
60
U.S.PerCapitaConsumption
AmericanCheese OtherCheese Yogurt Butter
High Impact Trends!
0
50
100
150
200
250
300
U.S.PerCapitaConsumption
FluidMilk AllIceCream
Good News
500
520
540
560
580
600
620
640
MilkEquivalent—AllProducts
We add almost 2 pounds per capita per year.
High Impact Trend!
250,000
260,000
270,000
280,000
290,000
300,000
310,000
320,000
330,000
2000 2002 2004 2006 2008 2010 2012 2014
1000sPeople
U.S.Population
We add almost 3 million people per year
High Impact Trend!
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
PoundsofMilkperCowperYear
Very linear—about 284 pounds per cow per year
Milk per Cow per Day
56
57
58
59
60
61
62
63
64
65
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
MilkperCowperDay
2012 2013 2014 2015 2016
Number of Cows
9,150
9,200
9,250
9,300
9,350
9,400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1000sofCow
s
2012 2013 2014 2015 2016
Sustained Growth Needs Exports!
The Importance of Trade
Profit is a Market’s Signal to Produce More
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
2000 2002 2004 2006 2008 2010 2012 2014 2016
MPPMargin
MPP Ration Value
$0
$2
$4
$6
$8
$10
$12
$14
$16
2000 2002 2004 2006 2008 2010 2012 2014 2016
Corn SBM Alfalfa
Percent Change in U.S. Milk Production
2.6%
-1.7%
4%
-1.3%
9%
1.6%-3.3%
4.2%
3.1%
2.1%
-1.6%
2.3%
2.9%
8.3%
-3.3%
3.6%
0.1%
0.8%
-3.3%
2.4%
0.5%
2.7%
4.3%
7%
-3.6%
4.9%
0.7%
-7.7%
-1.9%
0.2%
6.6%
-8.2%
-14.1%
-6.3%
3.1%
-3.1%
-2.8%
-14.5%
-4.5%
-3.7%
6.6% 2.2%1.4%
-2.3%
-0.6%
-5.2%
3.4%
-2%
-10.7%-0.6%
Northern States Making More Milk?Change in Milk Production—First 3 Qtrs of 2016 compared to 2015
Consumer Confidence
0
20
40
60
80
100
120
140
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
ConsumerConfidence
Consumer Confidence
0
20
40
60
80
100
120
140
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
ConsumerConfidence
Present
Expectations
U.S. Unemployment Rate
4.0
5.0
6.0
7.0
8.0
9.0
10.02003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Percent
UnemploymentRate
Economic Indicators
-3
-2
-1
0
1
2
3
0
10
20
30
40
50
60
70
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
U.S.EconomicIndicators
ISM-PMI LeadingIndex,US
Dairy Products are a Good BuyBLS —Dairy and Related Products
100
120
140
160
180
200
220
240
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
U.S. Versus International Prices
U.S. Versus International Prices
U.S. Versus International Prices
U.S. American Cheese Stocks
550,000
600,000
650,000
700,000
750,000
800,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1000sPounds
AmericanCheeseStocks
2012 2013 2014 2015 2016
Exports Need a Boost
U.S. Versus International Prices
U.S. Butter Stocks
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1000sPounds
ButterStocks
2012 2013 2014 2015 2016
Global Dairy Trade Index
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
2013 2014 2015 2016 2017
GDTPriceIndex
Other Factors
U.S. Farm Milk Prices Held Up Better than Most
U.S. Farm Milk Prices are Holding Up Better than Most
U.S. farm gate prices were about $17-18 while EU prices were about $13-14 and NZ as low as $10 per cwt.
Much bigger price spread than is usual—Why?U.S. had strong domestic economy to absorb lost export sales
EU used market intervention purchases to support prices
NZ just let the price fall to clear markets
Output Down from Major Exporters
Price Cycles
0
2
4
6
8
10
12
14
16
18
1 5 9 13 17 21 25 29 33 37 41 45
MPP
Mar
gin
Months from Start of Cycle
MPP Margin of Recent Price Cycles
2001-2004
2004-2007
2007-2011
2011-2014
2014-2017
My Price Forecast
Intervention Stocks Overhang Markets
The Alternative to Producing Milk
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
CullCowPrice
My Forecast…Our relatively strong U.S. economy is helping consume dairy products
World supply has slowed allowing world demand to begin to pull down on stocks
World prices are recovering faster than U.S. pricesOur prices never fell as farThis is a supply driven recovery—not a demand recoveryHow fast will the rest of the world respond with production?
I’m more optimistic than USDA about prices in 2017I have class III up $2.50 and class IV up $3.40That should bring a WI All Milk Price up about $2.45
I am also forecasting WI milk production to be up by less than it has been this year. But, it will exceed the 30 billion pound goal.
Questions?