1. 1 Farm and Risk Management Team Cooperative Extension – Ag and Natural Resources Dairy Price Risk Management Milk Market Outlook Last Update: May 1, 2009

2. 2 Monthly Basis

3. 3 Q: What’s a Good Price? A: It All Depends…..

4. 4 Outlook Information Milk Production Report Issued by NASS (USDA’s National Agricultural Statistics Service) mid-month covering previous month Milk cow numbers, Milk per cow, and total milk production Monthly data for 20 selected states representing about 85 % of U.S. milk production Quarterly data for all states

5. 5 NASS Milk Production Report: Mar ‘09 Milk Cows and Production: By State, March 2008-2009 -------------------------------------------------------------------------------- : Milk Cows 1/ : Milk Per Cow 2/ : Milk Production 2/ :--------------------------------------------------------------------- State : : : : : : : Change : 2008 : 2009 : 2008 : 2009 : 2008 : 2009 : From : : : : : : : 2008 -------------------------------------------------------------------------------- : 1,000 Head ---- Pounds --- Million Pounds Percent : AZ : 186 190 2,190 2,090 407 397 -2.5 CA : 1,842 1,822 1,975 1,920 3,638 3,498 -3.8 CO : 126 128 1,945 1,980 245 253 3.3 FL : 120 116 1,655 1,680 199 195 -2.0 ID : 540 549 1,885 1,810 1,018 994 -2.4 IL : 102 102 1,640 1,675 167 171 2.4 IN : 166 167 1,700 1,750 282 292 3.5 IA : 216 215 1,730 1,730 374 372 -0.5 KS : 115 122 1,790 1,820 206 222 7.8 MI : 345 354 1,870 1,890 645 669 3.7 MN : 463 468 1,630 1,645 755 770 2.0 MO : 110 108 1,300 1,320 143 143 NM : 340 333 1,990 2,110 677 703 3.8 NY : 626 623 1,690 1,670 1,058 1,040 -1.7 OH : 280 277 1,560 1,590 437 440 0.7 OR : 114 114 1,700 1,695 194 193 -0.5 PA : 549 550 1,680 1,670 922 919 -0.3 TX : 408 430 1,800 1,850 734 796 8.4 UT : 85 85 1,720 1,720 146 146 VT : 140 137 1,590 1,555 223 213 -4.5 VA : 98 97 1,590 1,590 156 154 -1.3 WA : 245 239 1,990 1,960 488 468 -4.1 WI : 1,251 1,256 1,660 1,685 2,077 2,116 1.9 : 23-State : Total : 8,467 8,482 1,794 1,788 15,191 15,164 -0.2 -------------------------------------------------------------------------------- 1/ Includes dry cows, excludes heifers not yet fresh. 2/ Excludes milk sucked by calves.

6. 6 Milk Cow Inventory

7. 7 Milk per Cow

8. 8 Milk Production Trend

9. 9 Outlook Information (Cont.) Milk/Feed Price Ratio Pounds of 16% dairy ration equal in value to one pound of milk Published around the first of the month as part of NASS monthly Agricultural Prices Dairy Product Stocks Commercial and government-held inventories of butter, cheese (by category) and NDM Published as part of NASS monthly Cold Storage Report

10. 10 Milk-Feed Price Ratio

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14. 14 Outlook Information (Cont.) Dairy Product Production Monthly factory production of all major dairy products, U.S. and major states Published by NASS around the first of the month for second preceding month Dairy Product Prices Weekly prices and weights used to calculate all Federal Order Class prices Covers Butter, Block and Barrel Cheddar Cheese, Nonfat Dry Milk, and Dry Whey Issued by NASS Friday am; covers week ending the previous Saturday

15. 15 US Production of Major Manufactured Dairy Products, Jan-Feb 2009 v. Year Earlier

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19. 19 Chicago Mercantile Exchange (CME) Daily Cash or Spot Markets Grade A butter Block and barrel cheddar cheese Grade A and extra-grade nonfat dry milk Auction markets – bids and offers with sale when a bid is filled or an offer is accepted Reported price changes with a sale, an unfilled bid, or an uncovered offer Thin markets: sales represent only a small fraction of production Reference markets: prices for off-market contractual sales tied to CME prices

20. 20 Outlook Information (Cont.) Commercial Disappearance Imputed consumption – includes “pipeline” stocks as well as sales Published monthly by USDA’s Economic Research Service Retail Dairy Prices Prices and price indices for major dairy products; national and regional Published monthly by Bureau of Labor Statistics (BLS)

21. 21 Change in Commercial Disappearance, Nov ’08 - Jan ‘09 v. Year Earlier

22. 22 2000 and 2001 are USDA Forecasts

23. 23 Sources of Outlook Information Dairy Market News Includes up-to-date information on all important outlook indicators Issued weekly on Friday. No longer available in hard copy, but can be accessed free at:  http://www.ams.usda.gov/dairy/mncs/weekly.htm  NASS Reports Subscribe to individual reports(varying subscription charges and release dates) or access free at:  http://www.usda.gov/nass/

24. 24 Sources of Outlook Information Internet Sites U-W Madison, Dept. of Ag. And Applied Econ.  http://www.aae.wisc.edu/future/ http://www.aae.wisc.edu/future/ Links to all contracts and exchanges Charts and tables updated daily as new info released Includes excellent interactive tutorial on futures and options trading  Downes-O’Neill Dairy Team  http://www.dairy.nu/ http://www.dairy.nu/ Very quick access to current futures and options quotes Includes market analysis; daily summaries and forecasts

25. 25 Sources of Outlook Information Internet Sites (Cont.)  Penn State University – Ken Bailey  http://www.aers.psu.edu/dairyoutlook Long-range price forecasts Good links to all USDA reports Weekly market analysis  National Program for Integrated Dairy Risk Management Education and Research  http://www-agecon.ag.ohio- state.edu/faculty/cthraen/idmer/Default.htm http://www- Not an outlook site, but contains a wealth of educational materials on risk management in general and futures and options specifically

26. Consensus(??) Milk Price Outlook – 2009 Dairy Cow Numbers: Milk/Feed Price ratio: Stocks:Cheese Butter Product Prices:Cheese Butter Nonfat Dry Milk Total Milk Supply: Commercial Use Other???