1. Dairy Market Outlook Josh Maples Asst. Prof. Mississippi State Univ.
Southern Extension Outlook Conference
September 26, 2017
Atlanta, GA

2. Overview Domestic and International Demand Increased supplies
Price roller coaster
Forecast
What’s up with Canada and NAFTA?
Goals for MPP

3. Data Source: USDA-AMS, Dairy Market News
Livestock Marketing Information Center

4. Data Source: USDA-AMS, Dairy Market News
Livestock Marketing Information Center

5. Data Source: USDA-AMS, Dairy Market News
Livestock Marketing Information Center

6. Data Source: USDA-AMS, Dairy Market News, Compiled by LMIC

7. Data Source: USDA-AMS, Dairy Market News
Livestock Marketing Information Center

8. Data Source: USDA-AMS, Dairy Market News
Livestock Marketing Information Center

9. Data Source: USDA-AMS, Dairy Market News, Compiled by LMIC

10. Data Source: USDA-AMS
Livestock Marketing Information Center

11. Data Source: USDA-AMS
Livestock Marketing Information Center

12. Data Source: USDA-AMS
Livestock Marketing Information Center

13. Data Source: USDA-AMS
Livestock Marketing Information Center

14. Supply

15. Data Source: USDA-NASS
Livestock Marketing Information Center

16. Data Source: USDA-NASS
Livestock Marketing Information Center

17. Data Source: USDA-NASS
Relatively good weather in major states. Michigan has the highest production per cow – up 2 percent from was up 2 percent from 2015.
Data Source: USDA-NASS
Livestock Marketing Information Center

19. Worldwide Production
Source: U.S. Dairy Export Council

20. Data Source: USDA-NASS
Livestock Marketing Information Center

21. Data Source: USDA-NASS
Livestock Marketing Information Center

22. 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.

24. Trade

25. Data Source: USDA-FAS
Livestock Marketing Information Center

26. Data Source: USDA-FAS
Livestock Marketing Information Center

27. Data Source: USDA-FAS
Livestock Marketing Information Center

28. Data Source: USDA-FAS
Livestock Marketing Information Center

29. Feedstuffs

30. Data Source: USDA-AMS
Livestock Marketing Information Center

31. Data Source: USDA-AMS
Livestock Marketing Information Center

32. Data Source: USDA-NASS
Livestock Marketing Information Center

33. Data Source: USDA-NASS
Livestock Marketing Information Center

34. Prices

35. Data Source: USDA-AMS, Dairy Market News
Livestock Marketing Information Center

37. 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

38. USDA All-Milk Forecasts

39. 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
$ $17.50
$15.75-$16.25 IV
52.88
$17 - $18
$16 - $17
2017 Avg
214.86
$ $17.75
$16 - $16.50
2018
54.02
$ $16.50
55.45
$15 - $16
53.7
$ $17.75
53.46
2018 Avg
216.63
$ $18

40. 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.

41. 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

42. 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

43. 2018 MPP Enrollment period is Sept 1 – Dec 15
Sec. Perdue – producers can opt out

44. 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)

45. Thank you!
Josh Maples

46. Dairy MPP The sum of: Corn Price multiplied by 1.0728
Soybean Meal price per ton *
Alfalfa Hay price *

47. Data Source: USDA-FAS, Compiled & Analysis by LMIC