today’s topics...4 2014-2015 agricultural policy and outlook conference series notable trends:...

1 2014-2015 Agricultural Policy and Outlook Conference Series

Cameron Thraen, OSU-AEDE

Extension State Specialist

Dairy Markets & Policy

Website @ AEDE/OSU:

http://aede.osu.edu/research/ohio-dairy-web

US. Markets and Prices 2015

U.S. Dairy Export Markets

Today’s Topics

U.S. Dairy Safety Net Policy

http://aede.ag.ohio-state.edu/programs/OhioDairy/quickchart/daily_settle_prices_3_averages.htm


Ohio dairy numbers…

2013 Wayne Holmes Knox Ashland

Lic Farms (a/m) 233 (162) 292 (133) 45 (26) 58 (75)

Milk Cows 32,500 17,000 3,500 6,000

County Rank 1 3 22 13

Source: Ohio Dept. Agric. Statistics

Allocated revenue is the return to capital and management. Estimate Thraen

Average number of cows per dairy farm:

61 cows 2001 & 96 cows 2014

Average production per dairy farm:

1.0m #’s 2001 & 1.9m #’s 2014

Allocated Revenue per cow estimate*: ~$1,400 {2007: $1,240.00 / 2009: $70.00}


Ohio dairy numbers…

Source: Ohio Dept. Agric. Statistics

Ohio Milk Cows ~ 267,000

Total Milk Production 2014 ~ 5.4 billion pounds

Gross Cash Revenue for Sale of Milk ~ $1.3 billion


Notable Trends:

U.S. total milk cow numbers edge up to 9.285 million head.

U.S. total milk production continues long run expansion reaching over

204 billion pounds in 2014.

U.S. milk production per cow continues steady upward trend to 22,178 # in 2014, .

Milk Cows & Production: U.S.

Data source: http://www.ers.usda.gov/data-products/


Notable Trends:

Herds 1,000+ cows increase from 26% to 46.6% of all herds.

Herds 1,000+ cows increase share from 29.4% to 50.6% of U.S.

production

Herds under 500 cows 41.5% and have a production share of 37% .

Milk Cows & Production: U.S.



Regional Comparisons.

Accounting for milk not reported within the FMMO

system, the U.S. is running a net surplus of 328 million

pounds per month.

Use per month


Regional Comparisons.


CHEESE

+13% from 2000

• Italian cheeses 15# pc

• Cheddar 9# pc

MILK BEVERAGES

-10% from 2000

• Fluid Milk & Cream

• 175# pc

OTHER DAIRY

• Ice Cream

• 18# pc

• Yogurt

• 15# pc

Commercial Use

Source : FMMO 32 Central Marketing Service Bulletin 10/14.


Demand Trends

Consumer interest in dairy products lies with Cheese, primarily Cheddar

and Italian types and with Yogurt. Beverage milk products continue a long

downward slide despite promotion efforts. Perhaps a new strategy is in

order? Source : FMMO 32 Central Marketing Service Bulletin 10/14.


Oil Economics: $1.5t transfer

Gas

Shale Consumer

U.S. shale oil

production

has

increased @

3.5mb a day

since 2008

U.S. average

gas prices

have fallen

from $3.63 to

$2.74

Each 10 cent

decline in gas

price adds

$11b to U.S.

economy

$500 to U.S.

Households

+0.4 faster

U.S. GDP

growth

+350k new

jobs

OPEC is not a factor at the

moment.

World capacity is 95mbd

and consumption is at

92mbd.

Russia, Iran,

Venezuela, Nigeria

under stress. Iran

needs $138 oil to fund

it’s social programs

Down 40%


U.S. Dairy Trade

Whey

Cheese

Lactose WMP

NDM/SMP

U.S. Dairy Export Council http://www.usdec.org


U.S. Dairy Trade MT and $

U.S. Dairy Export Council – Global Dairy Market Outlook 2014 http://www.usdec.org

Exports growth slows in 2014 on strong U.S

butterfat and lactose prices.


Exports climb from less than 4% in 1996 to over 15% of U.S. milk

production in 2014. Imports shrink to less than 3%.

Source: U.S. Dairy Export Council USDEC

U.S. Dairy Export Trade


U.S. Dairy Trade 2014


U.S. Exports fall to lowest level in 19 months

increased supplies in Europe and Oceana

Russia imposes ban on imports from Europe

China slows imports in 2014 to adjust inventories. WMP+SMP peaked in

January 2014 at 150k mt and are now at 40k mt.


Dairy

Exports

All

Products

% of U.S.

Production

Used in

Export

Days of

U.S.

Production

Exported

Export

Equivalent

number of

cows (000)

U.S. All

Milk Price

($ cwt)

1997 4.5 16.4 416 13.34

2003 5.7 20.8 518 12.52

2007 9.5 34.6 873 19.13

2014 15.6 58.0 1,480 ~24.00

Importance of U.S. Dairy Trade

U.S. milk production increased 34 billion pounds from 2003 – 2014. U.S.

exports increased by 25.7 billion pounds absorbing 75% of the growth in

U.S. milk production.



Global Price Index 10 years history

Global Dairy Trade 11-18

"The kiwi is under pressure from two fronts," ANZ Bank New Zealand senior

FX strategist Sam Tuck said. "The US dollar bounced (and) the other thing is

the GlobalDairyTrade auction. It was another weak auction which pretty much

locks in the fact that the 2014-15 season is going to be a very hard one for NZ

dairy farmers. FW+ BusinessDesk, 12/2/2014


Global Dairy Trade 11-18

Trade Product Price Performance


Danger on the Export Horizon

Strong U.S. dollar and high U.S.

dairy product prices could bring

storms to the U.S. Export market in

2015 !


U.S. Dairy Trade 2014


U.S. Exports Value continues to increase

$6.1 billion dollars in 2014.

Up 11% over 2013.

Most products show year to date

increases in volume exported.


U.S. a Trusted Supplier

Positive Trends that will continue:


C3 and C4 2015 Projection

CME forecast for C3 and C4 Milk in 2015 falls from 2014

highs.

Lower butterfat

and protein

prices on the

way in 2015


U.S. All Milk Price 2015

Forecast for U.S. All Milk Price in 2015 falls from 2014 highs.

U.S. All Milk

Price expected

to soften in 2015


U.S. All Milk Price 2015

Lower Feed Input costs in

2015 coupled with a

reduction in U.S. All Milk

Price will keep IOFC

margin strong for 2015.

Risk Management for U.S. Dairy

Research & Extension education efforts

supported by the following:

The following USDA funding grant is acknowledged:

USDA-AMS Cooperative Agreement: Risk Management in the U.S. Dairy Industry

USDA-NIFA Award No. 2012-49200-20032


www.dairymarkets.org/mpp

http://www.dairymarkets.org/mpp


IOFC 2015 Projection

Margin forecast

remains strong in

2015 and above

the long term

U.S. average of

$8.35.

2015 planning

IOFC margin


Closing Thoughts for 2015

Lagged U.S. milk production response to

record equity buildup in 2014…

Renewed concerns of general economic

weakness outside the U.S….

End of dairy quota in Europe…

Long term impact from Russia’s dairy import

ban…

How will these events translate into a lower U.S.

All Milk price? Will U.S. grain and soybean meal

prices remain low in 2015?


Dairy Markets Sliding Down

FMMO Europe Oceania Futures < 7.50 < 7.00 < 6.00

Butter 1.97 1.63 1.40 1.74 1.40 1.25 1.25

NFM 1.20 1.04 1.08 1.22 1.08 1.00 1.00

Cheese 1.62 1.70 1.70 1.61 1.50 1.60 1.50

Whey 0.57 0.55 0.55 0.48 0.55 0.55 0.50

Class 3 16.62 17.13 17.03 15.96 16.07 16.00 14.75

Class 4 16.50 13.68 13.05 16.51 13.05 11.73 11.73

All Milk 18.04 17.29 17.00 17.66 16.43 15.89 15.15

Feed

Index

9.23 9.23 17.00 9.23 9.23 9.23 9.23

MPP# 8.77 8.02 7.72 8.38 7.15 6.62 5.87

#The data in this table are estimates only and do not represent any actual data. The calculations are

the product of Cameron Thraen and are intended for discussion only.


Cameron Thraen, OSU-AEDE

Extension State Specialist

Dairy Markets & Policy

Website @ AEDE/OSU:

http://aede.osu.edu/research/ohio-dairy-web

US. Markets and Prices 2015

U.S. Dairy Export Markets

Today’s Topics

U.S. Dairy Safety Net Policy

http://aede.ag.ohio-state.edu/programs/OhioDairy/quickchart/daily_settle_prices_3_averages.htm

today’s topics...4 2014-2015 agricultural policy and outlook conference series notable trends:...

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