Extension Summer Outlook Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | August 2015 C o n n e c t i n gC o w s,C o o p e r a t i v e s,C a p i t o lH i l l,&C o n s u m e r s National Milk Producers Federation Extension Summer Outlook Conference Dairy Market Outlook John

2015 Extension Summer Outlook ConferenceAugust Record High U.S. Milk Prices in 2014 Dairy Product Support Price Ineffective Since 2010 Source: USDA AMS, FSA, and author’s calculations

2015 Extension Summer Outlook ConferenceAugust Forecast Annual Milk Production Growth Rates Big-5 Exporters Source: USDEC includes USDEC forecasts Current YTD U.S. Milk Production Growth Rate at 1.4% Based on USDA NASS

2015 Extension Summer Outlook ConferenceAugust Milk Production Forecast Higher in 2015 Following Record Prices of 2014 Source: USDEC includes USDEC forecasts Total: 633 Billion Lbs. +0.9% +0.4% +1.5% +3.0% +1.8% +0.1% +3.7% +1.8%

2015 Extension Summer Outlook ConferenceAugust Demand Missing, China and Russia Imports Needed to Offset Overhanging Supply Source: USDEC, GTIS. Southeast Asia-5 includes Indonesia, Philippines, Malaysia, Thailand and Singapore.

2015 Extension Summer Outlook ConferenceAugust YTD U.S. Dairy Exports Down in 2015 When Will China Return and Duration of Russian Ban Are Major Unknowns. Source: USDA FAS GATS U.S. Dairy Exports by ValueU.S. Dairy Exports by Volume Value reduction driven by lower dairy commodity prices

2015 Extension Summer Outlook ConferenceAugust Projections for Export Share of U.S. Milk Production is Flat in Source: USDA NASS and WASDE. Export share based on author’s calculations.

2015 Extension Summer Outlook ConferenceAugust Ample Supplies Weigh on Markets and Competition is Aggressive in Powders Source: USDA AMS CheeseButter Dry WheyNonfat and SMP

2015 Extension Summer Outlook ConferenceAugust Butter and Cheese Prices Stabilizing, Nonfat Continues Slide Source: USDA AMS NFDM Prices At Old Price Support Levels of $0.80/lb

2015 Extension Summer Outlook ConferenceAugust Other Cheese American-Type Cheese Nonfat and Skim Milk Powders Butter Long Run Trends For All Products Show Increasing Consumption, But Butter Showing Short Run Decline Source: USDA ERS

2015 Extension Summer Outlook ConferenceAugust Source: USDA NASS 2015 Butter Production YTD is Down 1.5% While Cheese and Nonfat Remain Firm Over Prior Year Levels Nonfat Dry Milk Dry Whey Total Cheese Butter

2015 Extension Summer Outlook ConferenceAugust Butter Stocks Remain Relatively Tight While Cheese and Nonfat At Or Near Records Source: USDA NASS

2015 Extension Summer Outlook ConferenceAugust Many U.S. Farmers Responded to Record 2014 Prices by Expanding Herd/Milk Output (U.S. +50K Head Through Jun YOY) Source: USDA NASS California milk production is down 85 Lbs/cow YOY

2015 Extension Summer Outlook ConferenceAugust Ample Supplies and Demand Slowdown in U.S. Pulling Milk Prices Down Source: USDA NASS

2015 Extension Summer Outlook ConferenceAugust Source: USDA FAS and WAOB 80% of U.S. Milk Production in 2015 is Enrolled in MPP-Dairy (55% of Farms)

2015 Extension Summer Outlook ConferenceAugust Source: USDA FAS and author’s calculations Cumulative Percent of Projected Milk Production Enrolled in MPP-Dairy Higher coverage levels had higher premium rates Weighted Average: $4.82/cwt

2015 Extension Summer Outlook ConferenceAugust Source: USDA FAS and author’s calculations Estimate: $60 Million USD Collected in MPP-Dairy Premiums in 2015 Only $8 Has Triggered MPP-Payments to Holders of $8 Coverage Jan-Feb: $4,336 Mar-Apr: $482,134 May-Jun: $4,530

2015 Extension Summer Outlook ConferenceAugust U.S. Milk Prices Down Nearly 40% from 2014 Highs, Down 27% YOY Source: USDA NASS

2015 Extension Summer Outlook ConferenceAugust Source: USDA NASS and author’s calculations The Tale of Two Corn Belts Favorable Weather in W. Corn Belt May Offset Yield/Acreage Losses in E. Corn Belt BPA Corn is Only 2.2 BPA Less than 2014 Record Above 2014 Yields in W. Corn Belt

2015 Extension Summer Outlook ConferenceAugust Low Feed Prices Keeps MPP Margin Near Historical Average Despite Milk Price Fall *NMPF/USDA Forecast Payments Possible Through % Lower Bound 75% Upper Bound Average Source: USDA NASS, AMS, FSA. Forecast based on author’s calculations as of August 11, 2015.

2015 Extension Summer Outlook ConferenceAugust MPP-Dairy Outperforming MILC as a Dairy Farm Safety Net Source: USDA NASS, FSA and author’s calculations.

C o n n e c t i n gC o w s,C o o p e r a t i v e s,C a p i t o lH i l l,&C o n s u m e r s National Milk Producers Federation John Newton Senior Director of Economic Research Extension Summer Outlook Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | August 2015

2015 Extension Summer Outlook ConferenceAugust Global Milk Production is Increasing YOY in All Major Export Markets Source: USDEC includes USDEC forecasts Forecast