Dairy Outlook 2013

Marin BozicMidwest Dairy Expo

St Cloud, MN November 27, 2012

Dairy Food Marketing Economics

• Funded by dairy check-off

• Located at the University of Minnesota, but covering 10-state area

• Research:• Risk Management• Price Analysis• Consumer Insights• Dairy Technology

Assessment

MMPA – supporting policy & education work

All-milk price: 2011-2012

Jan-1

1

Mar-11

May-11

Jul-1

1

Sep-11

Nov-11

Jan-1

2

Mar-12

May-12

Jul-1

2

Sep-12

$15.00

$16.00

$17.00

$18.00

$19.00

$20.00

$21.00

$22.00

$23.00

Milk Production: 2012 vs. 2011

Source: Daily Dairy Report

Year-to-Year Changes in U.S. Milk Production

Jan-08

Apr-08Jul-0

8Oct-

08Jan-09

Apr-09Jul-0

9Oct-

09Jan-10

Apr-10Jul-1

0Oct-

10Jan-11

Apr-11Jul-1

1Oct-

11Jan-12

Apr-12Jul-1

2-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

Year-to-Year Changes in Milk Per Cow

Jan-08

Apr-08Jul-0

8Oct-

08Jan-09

Apr-09Jul-0

9Oct-

09Jan-10

Apr-10Jul-1

0Oct-

10Jan-11

Apr-11Jul-1

1Oct-

11Jan-12

Apr-12Jul-1

2-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

Weather Outlook (Feb-Mar-Apr 2013)

Source: http://www.cpc.ncep.noaa.gov/products/predictions/90day/

Weather OutlookMay-Jun-Jul 2013

Difference in U.S. vs. InternationalCheese Prices

Corn: Small stocks = explosive price dynamics

Is Inflation a Problem?

Growth vs. Deleveraging

The Kiwi Cycle(Change in Per Cow Milk Yield)

19771979

19811983

19851987

19891991

19931995

19971999

20012003

20052007

2009-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

New Zeland USA

Source: http://www.cgd.ucar.edu/cas/catalog/climind/soi5.gif

Income over Feed Costs Margin: 2004-2012

Jan-04

Jul-04Jan

-05Jul-0

5Jan

-06Jul-0

6Jan

-07Jul-0

7Jan

-08Jul-0

8Jan

-09Jul-0

9Jan

-10Jul-1

0Jan

-11Jul-1

1Jan

-12Jul-1

2$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

Home-feed profile: Insuring 8-10th month

050

100150200250300350400

024681012141618

LGM Premium Paid Actual Margin

Margin with LGM Net Indemnity

$/Mg of Milk $/cwt of Milk

Policy outlook for 2013

1) ObamaCare

2) 2012/3 Farm Bill- MILC, DPPSP gone- Margin insurance, market

stabilization likely

3) Immigration reform

The Bottom Line

1) High feed costs will keep milk production in check. Exports may falter, providing additional domestic supply.

2) Some chance drought may stay with us.3) High volatility is the new normal, for several

years at least.4) Big policy changes coming up.

Chuck Norris doesn’t need to forecast… he knows prices!

Ignorance abhors uncertainty.

Beware of overconfident brokers, forecasters or policy insiders!

Dairy Outlook 2013presented at the Midwest Dairy Expo 2012

Dr. Marin Bozicmbozic@umn.eduDepartment of Applied EconomicsUniversity of Minnesota-Twin Cities317c Ruttan Hall1994 Buford AvenueSt Paul, MN 55108

You may download this presentation at http://marinbozic.info/