1. 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 Newton jnewton@nmpf.org @New10_AgEcon

2. 2015 Extension Summer Outlook ConferenceAugust 2015 2 Record High U.S. Milk Prices in 2014 Dairy Product Support Price Ineffective Since 2010 Source: USDA AMS, FSA, and author’s calculations

3. 2015 Extension Summer Outlook ConferenceAugust 2015 3 Forecast Annual Milk Production Growth Rates Big-5 Exporters Source: USDEC. 2015 includes USDEC forecasts Current YTD U.S. Milk Production Growth Rate at 1.4% Based on USDA NASS

4. 2015 Extension Summer Outlook ConferenceAugust 2015 4 Milk Production Forecast Higher in 2015 Following Record Prices of 2014 Source: USDEC. 2015 includes USDEC forecasts Total: 633 Billion Lbs. +0.9% +0.4% +1.5% +3.0% +1.8% +0.1% +3.7% +1.8%

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

6. 2015 Extension Summer Outlook ConferenceAugust 2015 6 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

7. 2015 Extension Summer Outlook ConferenceAugust 2015 7 Projections for Export Share of U.S. Milk Production is Flat in 2015-2016 Source: USDA NASS and WASDE. Export share based on author’s calculations.

8. 2015 Extension Summer Outlook ConferenceAugust 2015 8 Ample Supplies Weigh on Markets and Competition is Aggressive in Powders Source: USDA AMS CheeseButter Dry WheyNonfat and SMP

9. 2015 Extension Summer Outlook ConferenceAugust 2015 9 Butter and Cheese Prices Stabilizing, Nonfat Continues Slide Source: USDA AMS NFDM Prices At Old Price Support Levels of $0.80/lb

10. 2015 Extension Summer Outlook ConferenceAugust 2015 10 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

11. 2015 Extension Summer Outlook ConferenceAugust 2015 11 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

12. 2015 Extension Summer Outlook ConferenceAugust 2015 12 Butter Stocks Remain Relatively Tight While Cheese and Nonfat At Or Near Records Source: USDA NASS

13. 2015 Extension Summer Outlook ConferenceAugust 2015 13 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

14. 2015 Extension Summer Outlook ConferenceAugust 2015 14 Ample Supplies and Demand Slowdown in U.S. Pulling Milk Prices Down Source: USDA NASS

15. 2015 Extension Summer Outlook ConferenceAugust 2015 15 Source: USDA FAS and WAOB 80% of U.S. Milk Production in 2015 is Enrolled in MPP-Dairy (55% of Farms)

16. 2015 Extension Summer Outlook ConferenceAugust 2015 16 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

17. 2015 Extension Summer Outlook ConferenceAugust 2015 17 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

18. 2015 Extension Summer Outlook ConferenceAugust 2015 18 U.S. Milk Prices Down Nearly 40% from 2014 Highs, Down 27% YOY Source: USDA NASS

19. 2015 Extension Summer Outlook ConferenceAugust 2015 19 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 168.8 BPA Corn is Only 2.2 BPA Less than 2014 Record Above 2014 Yields in W. Corn Belt

20. 2015 Extension Summer Outlook ConferenceAugust 2015 20 Low Feed Prices Keeps MPP Margin Near Historical Average Despite Milk Price Fall *NMPF/USDA Forecast Payments Possible Through 2016 25% Lower Bound 75% Upper Bound Average Source: USDA NASS, AMS, FSA. Forecast based on author’s calculations as of August 11, 2015.

21. 2015 Extension Summer Outlook ConferenceAugust 2015 21 MPP-Dairy Outperforming MILC as a Dairy Farm Safety Net Source: USDA NASS, FSA and author’s calculations.

22. 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 jnewton@nmpf.org Extension Summer Outlook Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | August 2015

23. 2015 Extension Summer Outlook ConferenceAugust 2015 23 Global Milk Production is Increasing YOY in All Major Export Markets Source: USDEC. 2015 includes USDEC forecasts Forecast