2012 Agricultural Outlook Update Dairy Outlook: Indiana Perspectives
34
2012 Agricultural Outlook Update Dairy Outlook: Indiana Perspectives Mike Schutz and Nicole Olynk Purdue University
description
2012 Agricultural Outlook Update Dairy Outlook: Indiana Perspectives. Mike Schutz and Nicole Olynk Purdue University. Outline. Looking back Strong rebound in milk prices But, continued tight margins What’s going on today? US and Indiana The Dairy Policy Debate(s) 2012 Price Outlook. - PowerPoint PPT Presentation
Transcript of 2012 Agricultural Outlook Update Dairy Outlook: Indiana Perspectives
2012 Agricultural Outlook Update
Dairy Outlook: Indiana Perspectives
Mike Schutz and Nicole OlynkPurdue University
Outline• Looking back
– Strong rebound in milk prices– But, continued tight margins
• What’s going on today? US and Indiana• The Dairy Policy Debate(s)• 2012 Price Outlook
Purdue University is an Equal Opportunity/Equal Access institution.
Where are we today?
Modified
Purdue University is an Equal Opportunity/Equal Access institution.Source:http://future.aae.wisc.edu/
Purdue University is an Equal Opportunity/Equal Access institution.
Source:http://future.aae.wisc.edu/
Production per Cow in US
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec15001550160016501700175018001850190019502000
2006 2007 2008 2009 2010 2011
Lbs.
per
Mon
th
Production per Cow in Indiana
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec1500
1550
1600
1650
1700
1750
1800
18502006 2007 2008 2009 2010 2011
Cow
s x1
,000
State Trends
June1997187511042979140K186M 1380
Grade A Herds Grade B HerdsFarmsCowsMilk ProductionProduction/cow
Change - 30% - 76% - 47% +21% +57% +24%
(Dairy Program, IBOAH & Indiana Ag. Statistics)
June20001668 7862454148K198M1400
June20061392 3241716166K277M1670
June20101346 3061652168K285M1695
June20111317 2621579170K291M1710
Slaughter Dairy CowsManaging US Herd Size?
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec150
170
190
210
230
250
270
290
2005 2006 2007 2008 2009 2010 2011
Dai
r y C
ows
(100
0 s.)
With tight margins and high cull cow values … what next???
Purdue University is an Equal Opportunity/Equal Access institution.
Is 2 the new 3?
Balance Point?
Milk Price vs Feed Costs
2005
2006
2007
2008
2009
2010
2011
0
5
10
15
20
2516% Ration Cost/cwt
$
Purdue University is an Equal Opportunity/Equal Access institution.
Source:http://future.aae.wisc.edu/
Purdue University is an Equal Opportunity/Equal Access institution.
Butter in Cold Storage
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0
50
100
150
200
250
300
2006 2007 2008 2009 2010 2011
1,00
0,00
0 lb
s
NASS US Butter Price1/
6/20
073/
6/20
07
5/6/
2007
7/6/
2007
9/6/
2007
11/6
/200
7
1/6/
2008
3/6/
2008
5/6/
2008
7/6/
2008
9/6/
2008
11/6
/200
8
1/6/
2009
3/6/
2009
5/6/
2009
7/6/
2009
9/6/
2009
11/6
/200
9
1/6/
2010
3/6/
2010
5/6/
2010
7/6/
2010
9/6/
2010
11/6
/201
0
1/6/
2011
3/6/
2011
5/6/
2011
7/6/
2011
1.01.21.41.61.82.02.22.4
Butter Price
$ / L
B
Total Natural Cheese in Storage
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec600,000650,000700,000750,000800,000850,000900,000950,000
1,000,0001,050,0001,100,000
2006 2007 2008 2009 2010 2011
1,00
0 lb
s
NASS US Cheese Price1/
6/20
073/
6/20
075/
6/20
077/
6/20
079/
6/20
0711
/6/2
007
1/6/
2008
3/6/
2008
5/6/
2008
7/6/
2008
9/6/
2008
11/6
/200
81/
6/20
093/
6/20
095/
6/20
097/
6/20
099/
6/20
0911
/6/2
009
1/6/
2010
3/6/
2010
5/6/
2010
7/6/
2010
9/6/
2010
11/6
/201
01/
6/20
113/
6/20
115/
6/20
117/
6/20
11
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
Cheddar Block Price Cheddar Barrel Price
$ / L
B
Purdue University is an Equal Opportunity/Equal Access institution.
Milk Price
Jan Ju
lJa
n Jul
Jan Ju
lJa
n Jul
Jan Ju
lJa
n Jul
Jan Ju
lJa
n Jul
Jan Ju
l9
11
13
15
17
19
21
23
25Class I Class II Class III Class IV
$
2005
Milk Class Prices
2007 2008 20092004 20112006 20122010
Jan Ju
lJa
n Jul
Jan Ju
lJa
n Jul
Jan Ju
lJa
n Jul
Jan Ju
lJa
n Jul
Jan Ju
l9
11
13
15
17
19
21
23
25Class I Class II Class III Class IVCME Class III USDA High USDA Low PSU Forecast
$
2005
Milk Class Prices (8/18/2011)
2007 2008 20092004 20112006 20122010
Purdue University is an Equal Opportunity/Equal Access institution.
Source:http://future.aae.wisc.edu/
December 2011 Futures (as of 8/16/11)
• 80% chance between $14.60 and $20.94
RRecall: – December 2010: 80%
chance between $12.51 and $16.75
($13.48 Dec. 2010)
Source: Jim Hilker's Market Outlook & Probabilistic Price Forecasts for Grain & Livestock;Michigan State University, https://www.msu.edu/~hilker/
March 2012 Futures (as of 8/16/11)
• 80% chance between $13.11 and $21.12
Source: Jim Hilker's Market Outlook & Probabilistic Price Forecasts for Grain & Livestock;Michigan State University, https://www.msu.edu/~hilker/
An Industry Divided, Policy-wise
• Foundation for the Future (FFTF) by National Milk Producers Federation.– Dairy Market Stabilization (Supply management)– Margin Protection (Gov. funded margin insurance)– Federal Order Reform– Strongly opposed by IDFA; DPAC; MN Milk Producers
Assn.; WI Dairy Buisiness Assn.; CA Dairies, Inc.; Southeastern dairy orgs.; and others.
– Introduced by Colin Peterson (D-MN) and co-sponsored by Mike Simpson (R-ID).
An Industry Divided, Policy-wise
• Debate over Somatic Cell Count limits– Reduction to 400K required for EU exports– Proposal lost 26-25 at NCIMS (regional differences)– Some very early discussion in IN … BOAH rule?– Kroger single sourcing milk at 250,000
• Do you need regulation when you have “Politics via the market”?
Milk Price Outlook
• On one hand …– Fat basis exports rise in 2011 (over 2010)
but soften in 2012– Historically high feed costs expected– Increased milk production
• Larger US herd size – but – feed prices should slow growth in milk/cow
– Increased production in Oceania expected – Weakening international demand …
Slower growth in exports
Milk Price Outlook• And on the other hand …
– Feed prices and recent weather impacting output• Especially butterfat
Tight butter inventories • Higher proportion late lactation cows in winter/spring
– Near record high milk prices– Cheese inventories relatively high – but – recent
movements should lessen downward pressure on prices
– Theoretically … high cow cull prices providing incentives to reduce herd size/cow numbers ?
In Summary … We’re Fragile
• Policy???• Domestic demand? Economic conditions?
– Home consumption versus eating out
• Export markets• FEED COSTS … will squeeze margins in 2012
– It isn’t just grains … forage prices are moving upward too!
Purdue University is an Equal Opportunity/Equal Access institution.
Doug Leman named Executive Director of Indiana Professional Dairy Producers
02000400060008000
100001200014000
3032343638404244464850
US Milk Cows 500 Lb. Dairy Heifers
Historical US Dairy Heifer Inventory Heifers for Milk Replacement over 500 lbs.
Cow
s or
Hei
fers
(x1,
000)
YearSource: USDA NASS.
Hei
fers
/ M
ilk C
ows
(%)
Wisconsin Income over Total Variable Costs by Production Level
Feb-09
Apr-09
Jun-0
9
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-1
0
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-1
1-2
0
2
4
6
8
10
12
14
18000 Lbs.22000 Lbs.26000 Lbs.30000 Lbs.
Ken Bolton, UW Center for Dairy Profitability
