Dairy Market—Situation & Outlook
Mark Stephenson, Ph.D.
Director of Dairy Policy Analysis
$12.00
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Remember When…
All Milk Price
$28.00
$26.00
$24.00
$22.00
$20.00
$18.00
$16.00
$14.00
MPP Ration Value
$16
$14
$12
$10
$8
$6
$4
$2
$0
2000
2002
2004
2006
Corn
2008
SBM
2010
Alfalfa
2012
2014
Annual MPP Margin
MPP Margin
Highest
Margin Ever!
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
2000
2002
2004
2006
2008
2010
2012
2014
Average Daily U.S. Milk Production
Percent Change in U.S. Milk Production
Number of Cows
9,350
9,330
1000s of Cows
9,310
9,290
9,270
9,250
9,230
9,210
9,190
9,170
9,150
Jan Feb Mar Apr May Jun
2012
2013
Jul
2014
Aug Sep Oct Nov Dec
2015
Milk per Cow per Day
65
Milk per Cow per Day
64
63
62
61
60
59
58
57
56
Jan
Feb Mar Apr May Jun
2012
2013
Jul
2014
Aug Sep Oct Nov Dec
2015
A Tale of Two Regions…
Change in Milk Production—First Three Quarters
0.64%
-0.44%
-1.55%
1.63%
6.89%
3.95%
-1.91%
0.1%-0.47%
1.71%
3.97%
11.16%
2.36%
3.59%
1.74%
4.41%
8.19%
3.88%
1.13%
3.62%
-3.09%
2.22%
0.94%
0.29%
0.07%
8.36%
3.05%
1.07%
1.64%
-0.38%
-1.35%
-3.14%
0%
-6.99%
-5.95%
1.04%
-0.27% 3.87%
3.43%
4.77%
3.83%
-7.87% -7.87%
3.47%-6.92%
6.89%
4.97%
0.4%
-6.37%
2.85%
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
72
Average Daily Pounds per Cow
70
68
66
64
62
60
58
California
56
54
Wisconsin
52
50
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
$12.00
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
CA All Milk Price
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
All Milk Price
$28.00
WI All Milk Price
$26.00
$24.00
$22.00
$20.00
$18.00
$16.00
$14.00
Opinions Change Over Time
Opinions Change Over Time
MPP Margin Forecast
Opinion as of Sept 30, 2014
Opinion as of Jan 8, 2016
Consumer Confidence
140
Consumer Confidence
120
100
80
60
40
20
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Consumer Confidence
Restaurant Performance Index
103
102
101
100
99
98
97
96
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Dairy Products are a Good Buy
240
BLS —Dairy and Related Products
220
200
180
160
140
120
100
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
We Need Exports!
12 Month Rolling Average Trade as a Percent of Solids Produced
16%
14%
12%
Exports
10%
Imports
8%
6%
4%
2%
0%
2000
2002
2004
2006
2008
2010
2012
2014
U.S. Versus International Prices
U.S. Versus International Prices
U.S. Versus International Prices
U.S. American Cheese Stocks
American Cheese Stocks
730,000
710,000
1000s Pounds
690,000
670,000
650,000
630,000
610,000
590,000
570,000
550,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2011
2012
2013
2014
2015
Exports Need a Boost
U.S. Versus International Prices
U.S. Butter Stocks
Medical Community Declares Truce
CME Spot Butter Prices
Global Dairy Trade Index
GDT Price Index
1,700
1,500
1,300
1,100
900
700
500
2013
2014
2015
U.S. Farm Milk Prices are Holding Up Better than Most
$18.38
$13.61
$10.61
Other Factors
Export Competitors’ Milk Supply
Change in Milk Produc on
First 10 Months of 2015
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
U.S.
N.Z.
Aus.
E.U. 28
Can We Tap on the Brakes?
Strongest El Niño in 50 Years!
The Option to Producing Milk
Cull Cow Price
$130
$120
$110
$100
$90
$80
$70
$60
$50
$40
2008
2009
2010
2011
2012
2013
2014
2015
Price Cycles
MPP Margin of Recent Price Cycles
18
16
MPP Margin
14
12
2001-2004
2004-2007
2007-2011
2011-2014
2014-2017
10
8
6
4
2
0
1
5
9
13 17 21 25 29 33 37 41 45
Months from Start of Cycle
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 down about 60¢, Class IV up $1.00,
All-Milk down 30¢
• Maybe more downside potential than upside
Questions?