Dairy Market Situation & Outlook Michigan Agricultural Credit Conference
Mark Stephenson, Ph.D. Director of Dairy Policy Analysis
1400.0%
1600.0%
1800.0%
2000.0%
2200.0%
2400.0%
2600.0%
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
AllMilkPrice
Remember When…
MPP Ration Value
$0
$2
$4
$6
$8
$10
$12
$14
$16
2000 2002 2004 2006 2008 2010 2012 2014
Corn SBM Alfalfa
0.0000
2.0000
4.0000
6.0000
8.0000
10.0000
12.0000
14.0000
2000 2002 2004 2006 2008 2010 2012 2014
MPPMargin
Annual MPP Margin
Highest Margin Ever!
Average Daily U.S. Milk Production M
illio
ns o
f Pou
nds
Percent Change in U.S. Milk Production
Number of Cows
9,150
9,170
9,190
9,210
9,230
9,250
9,270
9,290
9,310
9,330
9,350
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1000sofCows
2012 2013 2014 2015
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
A Tale of Two Regions…
0.4%
-3.09%
-0.44%
1.64%
3.88%
-3.14%
4.77%
3.59%
-1.91%
3.62%
3.95%1.71%
3.83%
8.19%
1.63%
0.29%
0.64%
11.16%
-0.38%
0%
4.97%
2.22%
4.41%
2.85%
3.97%
3.05%
-1.35%
2.36%
-5.95%
1.74%
-6.99%
1.07%
-6.37%
1.13%
6.89%
8.36%
0.07%
3.43%
-1.55%
0.94%
6.89%0.1%
-0.27%
-0.47%
1.04%
-7.87%
3.47%
3.87%
-6.92%-7.87%
Change in Milk Production—First Three Quarters
Worst CA Drought in 1200 Years
Comparative Feed Cost Data
Wisconsin
Price of Hay = $150
Price of Corn = $3.47
Price of SBM = $370
California
Price of Hay = $260
Price of Corn = $5.01
Price of SBM = $420
Impact of Feed Costs Milk per Cow per Day
50
52
54
56
58
60
62
64
66
68
70
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
AverageDailyPoundsperCow
California
Wisconsin
Impact of Feed Costs Milk per Cow per Day
50
52
54
56
58
60
62
64
66
68
70
72
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
AverageDailyPoundsperCow
California
Wisconsin
Michigan
All Milk Price
$12.00
$14.00
$16.00
$18.00
$20.00
$22.00
$24.00
$26.00
$28.00Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
CAAllMilkPrice
WIAllMilkPrice
MIAllMilkPrice
Opinions Change Over Time
Opinions Change Over Time
MPP Margin Forecast
Opinion as of Sept 30, 2014
Opinion as of Oct 23, 2015
Consumer Confidence
0
20
40
60
80
100
120
140
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
ConsumerConfidence
ConsumerConfide nce
Consumer Confidence
Restaurant Performance Index
96
97
98
99
100
101
102
103
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dairy Products are a Good Buy BLS —Dairy and Related Products
100
120
140
160
180
200
220
240
200420052006200720082009201020112012201320142015
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
2000 2002 2004 2006 2008 2010 2012 2014
MonthlyRollingAveragePercentofSolidsExported
We Need Exports!
U.S. Versus International Prices
U.S. Versus International Prices
U.S. Versus International Prices
U.S. American Cheese Stocks
550,000
570,000
590,000
610,000
630,000
650,000
670,000
690,000
710,000
730,000
Jan FebMarAprMayJun Jul AugSepOctNovDec
1000sPounds
AmericanCheeseStocks
2011 2012 2013 2014 2015
U.S. Versus International Prices
U.S. Butter Stocks
Global Dairy Trade Index
500
700
900
1,100
1,300
1,500
1,700
2013 2014 2015
GDTPriceIndex
U.S. Farm Milk Prices are Holding Up Better than Most
$18.38
$13.61
$10.61
Exports Need a Boost
Other Factors
Export Competitors’ Milk Supply
Last year New Zealand milk production was up 12 % YOY.
This year, New Zealand is forecast to decline by 2%
The European Union is forecast to be up about 1.2% with quotas now off
The NZ loss is more than offset by the EU’s increase.
Can We Tap on the Brakes? Strongest El Niño in 50 Years!
The Option to Producing Milk
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
2008 2009 2010 2011 2012 2013 2014 2015
CullCowPrice
My Forecast…
Our relatively strong U.S. economy is helping consume dairy products
Dairy exports could become more of an issue in the next few months (watch inventory levels)
My deduction is that the MPP margin will be worse than futures forecasts now suggest through the first half of 2016
Class III up 50¢, Class IV up $1.80, All-Milk up 80¢ — increase does not begin until 2nd half of 2016
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