1. 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

2. 2003 - 2004 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

3. 2003 - 2004 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% / -17.46% 2003*$11.85$20.1 b-2.1% / -1.9% *Does not include MILC payments

4. 2003 - 2004 Policy & Outlook Program 4 20 State Cows and Yields Turn Down… finally

5. 2003 - 2004 Policy & Outlook Program 5 Total U.S. milk production slows its growth rate…

6. 2003 - 2004 Policy & Outlook Program 6 Margins drive expansion…

7. 2003 - 2004 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)

8. 2003 - 2004 Policy & Outlook Program 8 Cows in the West…

9. 2003 - 2004 Policy & Outlook Program 9 Yields in the West…

10. 2003 - 2004 Policy & Outlook Program 10 Cows in the UMW…

11. 2003 - 2004 Policy & Outlook Program 11 Yields in the UMW…

12. 2003 - 2004 Policy & Outlook Program 12 Cows in the NE…

13. 2003 - 2004 Policy & Outlook Program 13 Yields in the NE…

14. 2003 - 2004 Policy & Outlook Program 14 Cows in the NC…

15. 2003 - 2004 Policy & Outlook Program 15 Yields in the NC…

16. 2003 - 2004 Policy & Outlook Program 16 Cows in the MC…

17. 2003 - 2004 Policy & Outlook Program 17 Yields in the MC…

18. 2003 - 2004 Policy & Outlook Program 18 Big West vs. Big East…

19. 2003 - 2004 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

20. 2003 - 2004 Policy & Outlook Program 20 Commercial Disappearance in all products (milkfat basis)… Source: USDA/ERS/AMS

21. 2003 - 2004 Policy & Outlook Program 21 Butter Stocks to Production Ratio

22. 2003 - 2004 Policy & Outlook Program 22 Keeps Lid on NASS Butter Prices…

23. 2003 - 2004 Policy & Outlook Program 23 Cheese Stocks to Production Ratio

24. 2003 - 2004 Policy & Outlook Program 24 Not a limit to NASS Cheese Prices…

25. 2003 - 2004 Policy & Outlook Program 25 Source: USDA/ERS/AMS

26. 2003 - 2004 Policy & Outlook Program 26 Source: CsT / OSUE

27. 2003 - 2004 Policy & Outlook Program 27 2003 – 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.

28. 2003 - 2004 Policy & Outlook Program 28 Forecasts? Sure I got that…

29. 2003 - 2004 Policy & Outlook Program 29 Dairy Commodity Prices ‘03

30. 2003 - 2004 Policy & Outlook Program 30 2003 Milk Component Prices

31. 2003 - 2004 Policy & Outlook Program 31 Dairy Commodity Prices ‘04

32. 2003 - 2004 Policy & Outlook Program 32 2004 Milk Component Prices

33. 2003 - 2004 Policy & Outlook Program 33 Class III CME Settle Prices

34. 2003 - 2004 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…?

35. 2003 - 2004 Policy & Outlook Program 35 MILC Numbers Selected States

36. 2003 - 2004 Policy & Outlook Program 36 Dairy Market & Policy Challenges Ahead…  Import of Milk Proteins (HR1160 / S560)

37. 2003 - 2004 Policy & Outlook Program 37 Cam Thraen (614) 292-2702 Thraen.1@osu.edu Aede.osu.edu/programs/ohiodairy/

38. 2003 - 2004 Policy & Outlook Program 38 Casein & Caseinates…