Today’s Dairy Market and Financial Situation Adam J. Kantrovich, Ph.D. Associate Professor of Agribusiness Clemson Agribusiness Team Clemson University Extension

Dairy Canada vs. U.S. cow numbers S&D Costs U.S. Per Capita Consumption Global Per Capita Consumption Dairy Production & Prices Now What?

Canadian Reference Canada, Est. Population of 36.95 Million Dairy Farms w/ Milk Shipments: 10,951 Dairy Cows: 945,000 Dairy Heifers: 454,300 United State: Est. Population:325.7 Million 9,394,000 Cows California: 1,749,000 Wisconsin: 1,278,000 New York: 623,000 Idaho: 600,000 Pennsylvania: 525,000 Texas: 511,000

Milk Price & Costs

April 2018 Mailbox Prices Image from Hoards Dairyman, July 23, 2018

2017 Annual Monthly Average Cost of Production per cwt 2017 Annual Monthly Average Cost of Production per cwt. of Milk – USDA ERS All States* Total Dir & Overhead Expenses per cwt $ 15.99 $ With value of unpaid Labor and Management, capital recovery, & opportunity cost of land (rental rate) $ 22.27 Average Annual Monthly Mailbox Milk Price per cwt $ 17.34 USDA ERS for 2017 using 2010 base & updated using current milk production per cow and production input indexes December mailbox price was estimated for Avg. Monthly Annual Mailbox Price

U.S. Per Capita Consumption

Fluid Milk Consumption

Cheese

Ice Cream & Frozen Products

Condensed, Evap & Dry Milk

Total Dairy U.S. Per Capita Consumption (Dairy Equivalent Milk Fat Basis) 6% Increase for years 2008 - 2017

Dairy Consumption Tid Bits 2012 – 2017: Whole Milk sales increased 8% 90% of non-dairy milk consumers also purchase dairy milk Flavored milk growth of an estimated 18% (2012 – 2017) Who’s Cheese is being eaten, U.S. or Imported? In some cases it is cheaper to import “fine cheeses” vs. U.S. produced cheese Eat more pizza? Consumption of Pizza growth globally has continued to rise Butter

Global per capita Consumption

Global Dairy Trading Index

Global Dairy Trading Index Online global dairy market 10 years old Some have referenced to indicate demand

Global Tid Bits Dairy Prices in other parts of the world are higher than the U.S. May push U.S. price upward to meet global pricing

Dairy Production & Prices

USDA - NASS

U.S. Annual Cow Numbers

U.S. Annual Milk Production

U.S. Annual Rate Per Cow

Sept. 19, 2018 Milk Production Report 23 Major States Aug. Prod. At 17.2 billion pounds, up 1.4% over Aug. 2017 Production per cow avg. 1,974 lbs for Aug., up 28 lbs. from Aug. 2017 8.74 Million head, 3,000 head less than Aug. 2017 4,000 head more than the previous month U.S. Milk production up 1.4% (18.3 billion pounds) Production per cow for the month of July avg. 1,946 up 27 lbs. from Aug. 2017 Milk Cows at 9.40 million head, 4,000 lower than Aug. 2017 but 5,000 more head than July 2018.

Now What

Dairy Cow Slaughter Jan – June 2018, Slaughter up 4.9% over same period 2017. June Cow slaughter 2nd highest since 2000 (237,500) 2009: 256,000 June Slaughter

Good News Some indications in 2018 in some of the “big” 23 states that a contraction might be in the works in cow numbers Dairies are continuing to go out of business with fewer cows heading to other dairies High dairy cow slaughter Lower replacement heifer prices Higher International Prices While many southern states continue to see fewer dairies and cows a few states are seeing a slight increase in cow numbers Positives on the export side of the market

Summary Still, too Many Cows producing too much milk! Some parts of the country can not produce what is necessary for profitability. Some limited regions/states were having processing capacity issues New processing capacity is supposed to be coming but may not be soon enough Bullish variables look to increase prices (only slightly, 10-15%) Not enough to make many lower performing dairies profitable. Many may still have difficulty with cash flow Demand for Cheese and Butter looks to be increasing 2018 Price Forecast for All Milk Price to $16.15 – $16.45 2019 Price Forecast for All Milk Price raised to $17.45

Contact Information Adam J. Kantrovich, Ph.D Associate Professor of Agribusiness Clemson University Extension Sandhill Research and Education Center 900 Clemson Rd. Columbia, SC 29229 akantro@clemson.edu 803-778-5700 Office

Clemson University Extension AgBusiness Team Thank You Clemson University Extension AgBusiness Team http://www.clemson.edu/extension/agribusiness 2017 Enterprise Budgets www.clemson.edu/extension/agribusiness/enterprise-budgets