Cameron S. Thraen OSUE Dairy Economist Dairy Market Outlook Prepared for the 2003 Midwest, Great Plains, and Western Outlook Conference August 14,15 Indianapolis, IN

Policy & Outlook Program 2 Charles Dickens on the U.S. Dairy Economy… “It was the best of times, it was the worst of times, It was the spring of hope, it was the winter of despair”. Tale of Two Cities, Charles Dickens

Policy & Outlook Program 3 A Dickens Economy… U.S. All Milk Price $/cwt Cash Income from sale of milk Percent Change 1999$14.35$23.3 bAMP / C$ 2000$12.44$20.7 b-13.6% / -11% 2001*$15.05$24.9 b+21.4% / +19.9% 2002*$12.11$20.5 b-19.5% / % 2003*$11.85$20.1 b-2.1% / -1.9% *Does not include MILC payments

Policy & Outlook Program 4 20 State Cows and Yields Turn Down… finally

Policy & Outlook Program 5 Total U.S. milk production slows its growth rate…

Policy & Outlook Program 6 Margins drive expansion…

Policy & Outlook Program 7 Regional Milk Production Trends…  West (CA, ID, NM, WA, TX)  Upper Midwest (WI, MN)  North East (NY, VT)  North Central (OH, MI, PA)  Midcentral (IA, IL, IN)

Policy & Outlook Program 8 Cows in the West…

Policy & Outlook Program 9 Yields in the West…

Policy & Outlook Program 10 Cows in the UMW…

Policy & Outlook Program 11 Yields in the UMW…

Policy & Outlook Program 12 Cows in the NE…

Policy & Outlook Program 13 Yields in the NE…

Policy & Outlook Program 14 Cows in the NC…

Policy & Outlook Program 15 Yields in the NC…

Policy & Outlook Program 16 Cows in the MC…

Policy & Outlook Program 17 Yields in the MC…

Policy & Outlook Program 18 Big West vs. Big East…

Policy & Outlook Program 19 Use, Inventories and all that jazz… Commercial Disappearance (MF) Stocks to Production Ratios –Butter and Cheese U.S. All Milk Price

Policy & Outlook Program 20 Commercial Disappearance in all products (milkfat basis)… Source: USDA/ERS/AMS

Policy & Outlook Program 21 Butter Stocks to Production Ratio

Policy & Outlook Program 22 Keeps Lid on NASS Butter Prices…

Policy & Outlook Program 23 Cheese Stocks to Production Ratio

Policy & Outlook Program 24 Not a limit to NASS Cheese Prices…

Policy & Outlook Program 25 Source: USDA/ERS/AMS

Policy & Outlook Program 26 Source: CsT / OSUE

Policy & Outlook Program – 2004 Price Forecast Review Handouts on Milk Price Update Will the current price rally in the CME cash cheese be sustained? Butter inventories do not forecast a similar rise in cash butter prices.

Policy & Outlook Program 28 Forecasts? Sure I got that…

Policy & Outlook Program 29 Dairy Commodity Prices ‘03

Policy & Outlook Program Milk Component Prices

Policy & Outlook Program 31 Dairy Commodity Prices ‘04

Policy & Outlook Program Milk Component Prices

Policy & Outlook Program 33 Class III CME Settle Prices

Policy & Outlook Program 34 Dairy Market & Policy Challenges Ahead…  MILC… who’s got the MILC $$’s  Higher milk prices a welcome relief !!  $1.670 billion through August 7, 2003  Higher market prices may take the heat off…?

Policy & Outlook Program 35 MILC Numbers Selected States

Policy & Outlook Program 36 Dairy Market & Policy Challenges Ahead…  Import of Milk Proteins (HR1160 / S560)

Policy & Outlook Program 37 Cam Thraen (614) Aede.osu.edu/programs/ohiodairy/

Policy & Outlook Program 38 Casein & Caseinates…