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Today’s Topics
U.S. Dairy Safety Net Policy
US. Markets and Prices 2015
U.S. Dairy Export Markets
Cameron Thraen, OSU-AEDE
Extension State Specialist
Dairy Markets & Policy
Website @ AEDE/OSU:
http://aede.osu.edu/research/ohio-dairy-web
2014-2015 Agricultural Policy and Outlook Conference Series
1
Ohio dairy numbers…
Average number
of cows
per dairyKnox
farm:
Wayne
Holmes
Ashland
61 cows 2001 & 96 cows 2014
Lic Farms (a/m) 233 (162)
(133)
45 (26)
58 (75)
Average production per292
dairy
farm:
Milk Cows
32,500
6,000
1.0m #’s 2001
& 1.9m 17,000
#’s 2014 3,500
County Rank
1
22
13
Allocated Revenue
per3cow estimate*:
~$1,400
2013
Source: Ohio Dept. Agric. Statistics
{2007: $1,240.00 / 2009: $70.00}
Allocated revenue is the return to capital and management. Estimate Thraen
2014-2015 Agricultural Policy and Outlook Conference Series
2
Ohio dairy numbers…
 Ohio Milk Cows ~ 267,000
 Total Milk Production 2014 ~ 5.4 billion pounds
Source: Ohio Dept. Agric. Statistics
 Gross Cash Revenue for Sale of Milk ~ $1.3 billion
2014-2015 Agricultural Policy and Outlook Conference Series
3
Milk Cows & Production: U.S.
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,
.
2014-2015 Agricultural Policy and Outlook Conference Series
Data source: http://www.ers.usda.gov/data-products/
4
Regional Comparisons.
2014-2015 Agricultural Policy and Outlook Conference Series
5
Regional Comparisons.
2014-2015 Agricultural Policy and Outlook Conference Series
6
Commercial Use
CHEESE
+13% from 2000
MILK
BEVERAGES
-10% from 2000
OTHER DAIRY
• Italian cheeses 15# pc
• Cheddar 9# pc
• Fluid Milk & Cream
• 175# pc
• Ice Cream
• 18# pc
• Yogurt
• 15# pc
Source : FMMO 32 Central Marketing Service Bulletin 10/14.
2014-2015 Agricultural Policy and Outlook Conference Series
7
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.
2014-2015 Agricultural Policy and Outlook Conference Series
8
U.S. Dairy Trade
Whey
NDM/SMP
WMP
Cheese
Lactose
U.S. Dairy Export Council http://www.usdec.org
2014-2015 Agricultural Policy and Outlook Conference Series
9
U.S. Dairy Trade MT and $
Exports growth slows in 2014 on strong U.S
butterfat and lactose prices.
U.S. Dairy Export Council – Global Dairy Market Outlook 2014 http://www.usdec.org
2014-2015 Agricultural Policy and Outlook Conference Series
10
U.S. Dairy Export Trade
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
2014-2015 Agricultural Policy and Outlook Conference Series
11
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 last half of 2014
U.S. Dairy Export Council – Global Dairy Market Outlook 2013 http://www.usdec.org
2014-2015 Agricultural Policy and Outlook Conference Series
12
Importance of U.S. Dairy Trade
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
2003
2007
4.5
5.7
9.5
16.4
20.8
34.6
416
518
873
13.34
12.52
19.13
2014
15.9
58.0
1,480
~24.00
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.
Data source: http://www.ers.usda.gov/data-products/
2014-2015 Agricultural Policy and Outlook Conference Series
13
Global Dairy Trade 11-18
Global Price Index 10 years history
2014-2015 Agricultural Policy and Outlook Conference Series
14
Global Dairy Trade 11-18
Trade Product Price Performance
2014-2015 Agricultural Policy and Outlook Conference Series
15
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 !
2014-2015 Agricultural Policy and Outlook Conference Series
16
U.S. Dairy Trade 2014
U.S. Exports Value continues to increase
 $5.6 billion dollars in 2014.
 Up 14% over 2013.
 Most products show year to date
increases in volume exported.
U.S. Dairy Export Council – Global Dairy Market Outlook 2014 http://www.usdec.org
2014-2015 Agricultural Policy and Outlook Conference Series
17
U.S. a Trusted Supplier
Positive Trends that will continue:
2014-2015 Agricultural Policy and Outlook Conference Series
18
C3 and C4 2015 Projection
Lower butterfat
and protein
prices on the
way in 2015
CME forecast for C3 and C4 Milk in 2015 falls from 2014
highs.
2014-2015 Agricultural Policy and Outlook Conference Series
19
U.S. All Milk Price 2015
U.S. All Milk
Price expected
to soften in 2015
Forecast for U.S. All Milk Price in 2015 falls from 2014 highs.
2014-2015 Agricultural Policy and Outlook Conference Series
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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.
2014-2015 Agricultural Policy and Outlook Conference Series
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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
2014-2015 Agricultural Policy and Outlook Conference Series
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MPP Safety Net Program
The Basic Design of MPP-Dairy
Registration(CCC-781) and Coverage Election (CCC-782)
1.
2.
Establish the operation’s production history PH
Producers select
a) Coverage Level Threshold - $4 to $8 in 50¢ increments
b) Coverage Level Percentage – 25% to 90% of production history
3.
4.
One coverage level on all eligible milk
Change annually (within year termination only in case of death,
5.
retirement, dissolution)
Benefits calculated 6 times each year and paid on 1/6th of PH.
6.
2015 THE LAST DAY TO FILE WITH THE FSA DECEMBER 05 !
2014-2015 Agricultural Policy and Outlook Conference Series
24
MPP Premium Rates
$1.36
Premium Rates
$1.00
$0.01
$0.02
$0.03
$0.04
$0.04
$0.10
$0.06
$0.16
$0.09
$0.29
$0.22
$4.00
$4.50
$5.00
$5.50
$6.00
$6.50
$7.00
$0.60
$0.40
$0.20
$0.00
FREE
First 4 M lbs PH
$0.30
$0.00
$0.00
$0.80
$7.50
$0.48
$1.20
$6.50 to $7.00 coverage has $0.54
increase in Tier 2 premium
$0.83
$1.40
$1.06
$1.60
$8.00
After 4 M lbs PH
Tier 1: First 4M #s / Tier 2: After 4M #s
2014-2015 Agricultural Policy and Outlook Conference Series
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IOFC 2015 Projection
2015 planning
IOFC margin
Margin forecast
remains strong in
2015 and above
the long term
U.S. average of
$8.35.
2014-2015 Agricultural Policy and Outlook Conference Series
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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?
2014-2015 Agricultural Policy and Outlook Conference Series
27
Today’s Topics
U.S. Dairy Safety Net Policy
US. Markets and Prices 2015
U.S. Dairy Export Markets
Cameron Thraen, OSU-AEDE
Extension State Specialist
Dairy Markets & Policy
Website @ AEDE/OSU:
http://aede.osu.edu/research/ohio-dairy-web
2014-2015 Agricultural Policy and Outlook Conference Series
28
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