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Dairy Market Update: May 2013

Feb 25, 2016

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Dr. Craig Thomas Michigan State University Extension Dairy Farm Business Management & Milk Marketing Educator Sanilac, Huron, Tuscola, St. Clair, Lapeer, Saginaw, Genesee, Macomb, Oakland, Washtenaw, Wayne, & Monroe Counties. Dairy Market Update: May 2013. 2013 Sponsors. Benefactor ($200). - PowerPoint PPT Presentation

Dairy Market Update

Dairy Market Update:May 2013Dr. Craig ThomasMichigan State University Extension Dairy Farm Business Management & Milk Marketing EducatorSanilac, Huron, Tuscola, St. Clair, Lapeer, Saginaw, Genesee, Macomb, Oakland, Washtenaw, Wayne, & Monroe Counties

1Benefactor ($200)Active Feed Co.Major Sponsor ($75-$100)Contributor ($50)Exchange State BankEastern Michigan BankThumb Veterinary ServicesCrop Production Services-Sandusky & Deckerville2013 SponsorsDairy Farmers of America-Steve SteelyGraff Chevrolet/Buick, Inc.Sanilac Drain & Tile Co.Secher Site Specific LLCGreenStone FCS

+ $1.87 Class III vs. Apr 2012 ($14.68, +$2.91 vs. Apr average)April Milk Prices+ $3.30 Class IV vs. Apr 2012 ($14.80, +$3.30 vs. Apr average)$18.10+$0.35$17.59+$0.66USDA Michigan MailboxJan 2013:

$19.81 up $0.77

+0.2% Nationally versus April 2012U.S. Production 2012 +2.1% vs. 20112013 +0.1% vs. 2012(99-12 ave. = +1.6%)+0.3% Top 23 States versus April 2012

+0.2% Nationally versus April 2012U.S. Production 2012 +2.1% vs. 20112013 +0.1% vs. 2012(99-12 ave. = +1.6%)Tenth time in past eleven months below trend increase.

Record 200.324 billion lbs.for 2012!

+0.2% Nationally versus April 2012U.S. Production 2012 +2.1% vs. 20112013 +0.1% vs. 2012(99-12 ave. = +1.6%)BUT

Q-1 2012 U.S. milk production was up 4.2% vs. 2011!

+0.2% Nationally versus April 2012U.S. Production 2012 +2.1% vs. 20112013 +0.1% vs. 2012(99-12 ave. = +1.6%)Michigan +1.3%versus April 2012.

+0.2% Nationally versus April 2012U.S. Production 2012 +2.1% vs. 20112013 +0.1% vs. 2012(99-12 ave. = +1.6%)Seqestration!

Milk Production Report

No cow numbers!

No milk per cow!

administrative data only

+0.2% Nationally versus April 2012U.S. Production 2012 +2.1% vs. 20112013 +0.1% vs. 2012(99-12 ave. = +1.6%)M:F ratio $ vs. replacement heifers

xbred calf likely more value than purebred heifer

Less sexed semen usage

Holstein heifers being sold in lots destined for the feedlot

Strong beef prices continue to fuel unprecedented dairy cull rates

Beef industry will continue to pull dairy to beef

Thus, dairy herd will eventually shrink and may be more difficult to grow in the future.

Going StrongBetter! No??!!2012 vs. 2011 +1.7%; 2013 vs. 2012 +0.8%(1996-12 average = +1.6%)Cheese: 1996-12 average = +2.5%2012 vs. 2011 +1.2%; 2013 vs. 2012 +0.1%

Going StrongBetter! No??!!2012 vs. 2011 +1.7%; 2013 vs. 2012 +0.8%(1996-12 average = +1.6%)Cheese: 1996-12 average = +2.5%2012 vs. 2011 +1.2%; 2013 vs. 2012 +0.1%Total commercial disappearance set all-time monthly record for Jan in Jan;but down 0.7% in Feb vs. Feb 2012!

Going StrongBetter! No??!!2012 vs. 2011 +1.7%; 2013 vs. 2012 +0.8%(1996-12 average = +1.6%)Cheese: 1996-12 average = +2.5%2012 vs. 2011 +1.2%; 2013 vs. 2012 +0.1%2013 vs. 2012 (YTD Jan-Feb)

American Cheese: +1.8% (+2.3%)Other Cheese: +1.9% (+2.5%)Butter: +10.2% (+2.8%)NFDM: -18.7% (+5.3%)Fluid Milk: -4.4% (Feb)

Going StrongBetter! No??!!2012 vs. 2011 +1.7%; 2013 vs. 2012 +0.8%(1996-12 average = +1.6%)Cheese: 1996-12 average = +2.5%2012 vs. 2011 +1.2%; 2013 vs. 2012 +0.1%March fluid milk 38thconsecutive month ofdeclining sales versussame month last year.

American Cheese (+5.3% Apr vs. Apr 2012, +35.2 M lbs. vs. 5/1/12) Total Cheese (+4.5% Apr vs. Apr 2012, +48.1 M lbs. vs. 5/1/12)5/28/13 Close = $1.7388May 07-12 Average = $1.550526

American Cheese (+5.3% Apr vs. Apr 2012, +35.2 M lbs. vs. 5/1/12) Total Cheese (+4.5% Apr vs. Apr 2012, +48.1 M lbs. vs. 5/1/12)May 07-12 Average = $1.5505Total Cheese Inventory

Above 1.0 billion pounds fifthconsecutive month!5/28/13 Close = $1.738827

American Cheese (+5.3% Apr vs. Apr 2012, +35.2 M lbs. vs. 5/1/12) Total Cheese (+4.5% Apr vs. Apr 2012, +48.1 M lbs. vs. 5/1/12)May 07-12 Average = $1.5505Cheese Inventories

All-time historical highs!5/28/13 Close = $1.738828

American Cheese (+5.3% Apr vs. Apr 2012, +35.2 M lbs. vs. 5/1/12) Total Cheese (+4.5% Apr vs. Apr 2012, +48.1 M lbs. vs. 5/1/12)May 07-12 Average = $1.55052013 cheese production (Jan-Mar):American cheese 2.7% (1.9%)Total cheese +1.7% (2.7%)vs. Jan-Mar 2012.5/28/13 Close = $1.738829

+22.2% versus Apr 2012ButterMay 07-12 Average = $1.50625/28/13 Close = $1.545030

+22.2% versus Apr 2012ButterMay 07-12 Average = $1.5062Butter Inventory

All-time historical high!5/28/13 Close = $1.545031

+22.2% versus Apr 2012ButterMay 07-12 Average = $1.50622013 butterproduction (Jan-Mar) +4.4% (2.3%) vs. Jan-Mar 2012.5/28/13 Close = $1.545032Dairy ExportsDairy trade surpluses 37 consecutive months!

FY-2013 (Oct-Mar): $918.1 M!

FY-2013: October-March

U.S. dairy exports equaled:CY-2011, 13.3%; CY-2012, 13.2%.

March13.5% of total U.S. milk solids production!

Jan-Mar13.1% (12.9%)FY-2013: October-March

U.S. dairy exports equaled:CY-2011, 13.3%; CY-2012, 13.2%.March24th time in past 25 months exports exceeded $400 million!Dairy ExportsCY-2013 (Jan-Mar)

Exports as a % of total U.S. production:

NFDM/SMP: 41% (44%)

Cheese: 5.6% (5.3%)

Butter: 5.9% (5.2%)

Dry Whey: 46% (46%)

Lactose: 72% (68%)Dairy Exports2011-2012One of every 8 tanker loads of raw milk was ultimately exported!Dairy Exports2013 Outlook

Milk production growth in Oceania,EU, and U.S., unlikely to satisfy world dairy product demand.

China expected to increase dairy imports by 14%.

New Zealand milk prdn down >16% in Mar; -2.3% in Feb.YTD up 4.8% vs. 2012; Australia -1.6% vs. 2012(drought driven). Offerings are tightservicing existingaccounts on the books and having little extra for other demand.

EU milk prdn down every month vs. last year since July 2012;weak 2013 spring flush.

Thus, no significant finished product stocksin EU or Oceania to buffer markets moving intoremainder of 2013.

U.S. dairy product prices remain below international prices.Higher international demand has softened demand(at least in the short term); however, look forstronger prices in second half of 2013.Dairy ExportsBig 5 Dairy Exporters

USDEC predicts will be down >1% in milk prdn for first half of 2013; a shortfall of 1.6 M tons of milk (~3.5 B lbs).Dairy ExportsUSD Strengthening!

Dairy ExportsTom Suber

USDEC president

Global economic signs are starting tomove in a more positive direction,demand and consumption will continuerising, and world prices are expectedto come more in line with U.S. prices.Dairy ExportsChina

will be a key player in determining thehealth of global dairy markets given itsdemand for an ever-growing share ofdairy supplies.

+8.1% GDP growth in 2013 (+7.5% in 2011)

>5% annual growth in dairy consumption!Dairy ExportsWorld

there are currently no significantsurplus stocks in the United States orthe EU to buffer markets. Consequentlyglobal economic and population growthare expected to keep driving importdemand which could put upward pressureon dairy prices particularly towards thesecond half of 2013.Dairy ExportsLong Term Outlook

Bright, but loaded with risk.U.S. Dairy Export Council

The United States cannot absorb backinto the domestic market 13% of annualmilk solids produced in this country. Andas we produce more milk, most of it hasto go to international customers becausedomestic consumption is growing slowly...Retail Food PricesMarchWhole MilkCPI = +1.9%Price: -$0.068/galCheeseCPI = -1.3%Price: -$0.109/lb (p) +$0.077/lb (n)ButterCPI = +1.0%Price: NAAll-FoodCPI = +1.5%DairyCPI = -0.5%MPFECPI = +1.2%Ice CreamCPI = +0.0%Price: -$0.001/half gal.

Class IIICurrent Class III futures prices are averaging +$1.93 (2013), +$1.86 (next 12 mos.), +$0.73 (2014) versus the 2007-2013 averages.46

Class III / CheeseNext 12 mos: $18.55 ($18.06) (-$0.49)4/29/132013: $18.13 ($18.52) (-$0.39)2014: $16.93 ($16.85) (+$0.07)47Class IIICurrent Class III futures prices are averaging +$1.93 (2013), +$1.86 (next 12 mos.), +$0.73 (2014) versus the 2007-2013 averages.

Wheres the Market Headed?Cheese prices. 5/29/13Ave.$1.73884/29/13$1.7663 block/barrelcheese price.

Wheres the Market Headed?Cheese prices. 5/29/13Ave.$1.7388Decrease of$0.0275Wheres the Market Headed?

Wheres the Market Headed?

Wheres the Market Headed?USDA ForecastMayMilk production:2013201.8 B lbs. +0.7%Milk consumption:195.0 B lbs. +0.9%2013 prices:

Class III: $17.80-$18.30 (-5)

Class IV: $18.20-$18.80 (+10)

All-Milk: $19.5-$20.00 (+5)

Cheese: $1.745-$1.795 (+1)

Butter: $1.570-$1.650 (+1)

NFDM: $1.590-$1.630 (+0.5)

Dry whey: $0.580-$0.610 (-2.5)Prices

Spring flush ending soon; major heat in 2013?Domestic consumption weak, exports remain strong;push on to produce more milk, esp. w/lower feed $;will U.S. dairy herd shrink? Will higher prices andstronger USD limit upside?

Cheese: flat then up? $2.00 by mid-summer?

Butter: flat then up? $2.00 by mid-summer?

Class III & IV: flat near term; ave. near or aboveUSDA top?

Will cow numbers fall;international demand remain strong?Wheres the Market Headed?LGM-Dairy

FY-2014 budget calls for increase inLGM subsidies from $20 M to $100 M.

DSA likely component of newFarm Billbut when?Wheres the Market Headed?55

Long Range Weather ForecastJun-Jul-AugTemperature

Long Range Weather ForecastAug-Sep-OctTemperature

Long Range Weather ForecastJun-Jul-AugPrecipitation

Long Range Weather ForecastAug-Sep-OctPrecipitation

Prediction is verydifficult, especially if it is about the future.-Neils Bohr

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