Dairy Market Outlook Josh Maples Asst. Prof. Mississippi State Univ. Southern Extension Outlook Conference September 26, 2017 Atlanta, GA
Overview Domestic and International Demand Increased supplies Price roller coaster Forecast What’s up with Canada and NAFTA? Goals for MPP
Data Source: USDA-AMS, Dairy Market News Livestock Marketing Information Center
Data Source: USDA-AMS, Dairy Market News Livestock Marketing Information Center
Data Source: USDA-AMS, Dairy Market News Livestock Marketing Information Center
Data Source: USDA-AMS, Dairy Market News, Compiled by LMIC
Data Source: USDA-AMS, Dairy Market News Livestock Marketing Information Center
Data Source: USDA-AMS, Dairy Market News Livestock Marketing Information Center
Data Source: USDA-AMS, Dairy Market News, Compiled by LMIC
Data Source: USDA-AMS Livestock Marketing Information Center
Data Source: USDA-AMS Livestock Marketing Information Center
Data Source: USDA-AMS Livestock Marketing Information Center
Data Source: USDA-AMS Livestock Marketing Information Center
Supply
Data Source: USDA-NASS Livestock Marketing Information Center
Data Source: USDA-NASS Livestock Marketing Information Center
Data Source: USDA-NASS Relatively good weather in major states. Michigan has the highest production per cow – up 2 percent from 2016. 2016 was up 2 percent from 2015. Data Source: USDA-NASS Livestock Marketing Information Center
Worldwide Production Source: U.S. Dairy Export Council
Data Source: USDA-NASS Livestock Marketing Information Center
Data Source: USDA-NASS Livestock Marketing Information Center
Ending Stocks This is an important story. Stocks are relatively high for all major products. The decrease in butter stocks looks good here, but that July 2016 value was pretty high too – 21 percent higher than July 2015.
Trade
Data Source: USDA-FAS Livestock Marketing Information Center
Data Source: USDA-FAS Livestock Marketing Information Center
Data Source: USDA-FAS Livestock Marketing Information Center
Data Source: USDA-FAS Livestock Marketing Information Center
Feedstuffs
Data Source: USDA-AMS Livestock Marketing Information Center
Data Source: USDA-AMS Livestock Marketing Information Center
Data Source: USDA-NASS Livestock Marketing Information Center
Data Source: USDA-NASS Livestock Marketing Information Center
Prices
Data Source: USDA-AMS, Dairy Market News Livestock Marketing Information Center
Market Outlook Domestic demand is OK, but… Relatively high stocks Increased production – head and per cow Continued low feed prices Lower expected exports (especially cheese) Overall, lower prices expected
USDA All-Milk Forecasts
U.S. Total Production (b) All-Milk Price Class 3 Price 2016 Avg 212.44 $16.30 $14.87 2017 I 53.56 $18.23 $16.49 II 55.31 $16.70 $15.74 III 53.2 $16.50 - $17.50 $15.75-$16.25 IV 52.88 $17 - $18 $16 - $17 2017 Avg 214.86 $17.25 - $17.75 $16 - $16.50 2018 54.02 $15.50 - $16.50 55.45 $15 - $16 53.7 $16.75 - $17.75 53.46 2018 Avg 216.63 $16.50 - $18
Canada and NAFTA Many U.S. producers expanded to supply ultra-filtered milk to Canada - increased from $28m in ’10 to over $100m Demanded in Canada for cheese processing Canada created a quota, but it couldn’t be applied to U.S. because of NAFTA Changed the national ingredients strategy Ontario implemented a new Class 6 milk pricing program that “will include skim milk solids in all forms that can be used as ingredients, including but not limited to skim milk, skim milk powder, ultrafiltered and diafiltered milk, whole milk powder and condensed or evaporated milk (not for retail).” The price for this milk is based on international prices of milk products, effectively dropping the price of milk to Canadian processors, and in doing so severely cut into this well-established market for U.S. milk protein substances. Canada then continued to build on this approach by translating it into a national program. The agreement to pursue that national path was reached in July 2016 when the national ingredients strategy was announced. The provincial governments of Canada adopted the program earlier this year.
Dairy MPP Margin is the difference between all-milk price and average feed costs Cat coverage triggered when margin is less than $4/cwt Up to $8/cwt coverage available
Dairy MPP Only about 7% of MPP milk production is enrolled in Buy-up coverage (>$4/cwt) This is compared to 39% in 2015 Why? Primarily – Low feed costs Far more $ in premiums paid than indemnities received
2018 MPP Enrollment period is Sept 1 – Dec 15 Sec. Perdue – producers can opt out
Future of MPP What are the big players pushing for? Increase feed ration by 10% (AFBF & NMPF) Reduce premiums for first 4m pounds Change data used (alfalfa quality, location of corn price, etc) (NMPF) Raise CAT coverage to $4.50, lower BU max to $7.50 (AFBF)
Thank you! Josh Maples Josh.maples.msu@gmail.com
Dairy MPP The sum of: Corn Price multiplied by 1.0728 Soybean Meal price per ton * 0.00735 Alfalfa Hay price * 0.0137
Data Source: USDA-FAS, Compiled & Analysis by LMIC