2013-14 Dairy Outlook: Indiana Perspectives

Nicole Olynk Widmar and Mike SchutzPurdue University

Purdue University is an Equal Opportunity/Equal Access institution.2013 in Review

Purdue University is an Equal Opportunity/Equal Access institution.

DAIRY COW INVENTORYUS Total, Monthly

9140

9160

9180

9200

9220

9240

9260

9280

JAN MAR MAY JUL SEP NOV

Thou Head

Avg.2007-11

2012

2013

07/22/13Livestock Marketing Information CenterData Source: USDA-NASS

Last official numbers released by USDA-NASS was for February 2013.All data points following are LMIC estimates.

Purdue University is an Equal Opportunity/Equal Access institution.Source:http://future.aae.wisc.edu/8/14/13

?

Slaughter Dairy CowsManaging US Herd Size?

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec150170190210230250270290310

2006 2007 2008 2009 2010 2011 2012 2013

Dai

r y C

ows

(100

0 s.)

With tight margins and high cull cow values … what next???

08/15/2013Purdue University is an Equal Opportunity/Equal Access institution.Livestock Marketing Information CenterData Source: USDA-NASS

Production per Cow in Indiana

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec1550

1600

1650

1700

1750

1800

1850

1900

1950

20002007 2008 2009 2010 2011 2012 2013

Poun

ds

10/16/2012Purdue University is an Equal Opportunity/Equal Access institution.Livestock Marketing Information CenterData Source: USDA-NASS

Very high digestibility of drought -stressed forages?Or are cow numbers significantly underestimated?

MILK PRODUCTIONUS Total, Monthly

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

JAN MAR MAY JUL SEP NOV

Bil Pounds

Avg.2007-11

2012

2013

07/22/13Livestock Marketing Information CenterData Source: USDA-NASS

Indiana State Trends

June1997187511042979140K186M 1380

Grade A Herds Grade B HerdsFarmsCowsMilk ProductionProduction/cow

Change ‘97 to ‘13 - 35% - 88% - 55% +25% +76% +36%

(Dairy Program, IBOAH & Indiana Ag. Statistics)

June20001668 7862454148K198M1400

June20061392 3241716166K277M1670

June20121240 1631403176K307M1745

June20131216 130*1346~175K328M~1874

*Annual decline in Manufacturing Grade herds driven by state code changes to SCC limit of 750,000 cells/ml (same as Grade A), and requirement of running hot water in milk house.

MILK PRODUCTION FORECASTSUS Total, Quarterly

42

44

46

48

50

52

54

JAN-MAR APR-JUN JUL-SEP OCT-DEC

Bil. Pounds

Avg. 2008-012

2013

2014

07/22/13Livestock Marketing Information CenterData Source: USDA-NASS, Compiled & Analysis by LMIC

Purdue University is an Equal Opportunity/Equal Access institution.

Source:http://future.aae.wisc.edu/8/14/13

US RANGE AND PASTURE CONDITIONPercent Poor and Very Poor, Weekly

15

2025

3035

40

4550

5560

65

May Jul Sep

Percent

Avg.2007-112012

2013

G-NP-3008/13/13

Livestock Marketing Information CenterData Source: USDA-NASS, Compiled & Analysis by LMIC

Purdue University is an Equal Opportunity/Equal Access institution.

Source:http://future.aae.wisc.edu/

Purdue University is an Equal Opportunity/Equal Access institution.

Source:http://future.aae.wisc.edu/

BUTTER IN COLD STORAGEEnd of the Month

100

150

200

250

300

350

JAN MAR MAY JUL SEP NOV

Mil. Pounds

Avg.2007-11

2012

2013

Livestock Marketing Information CenterData Source: USDA/NASS 07/23/13

BUTTER PRICESGrade AA, CME, Monthly

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

$ Per Pound

Avg.2007-11

2012

2013

08/02/13Livestock Marketing Information CenterData Source: USDA-AMS, Dairy Market News

TOTAL CHEESE IN COLD STORAGEEnd of the Month

875

925

975

1,025

1,075

1,125

1,175

JAN MAR MAY JUL SEP NOV

Mil. Pounds

Avg.2007-11

2012

2013

Livestock Marketing Information CenterData Source: USDA/NASS 07/23/13

CHEDDAR CHEESE PRICES40 Pound Block, CME, Monthly

1.201.301.401.501.601.70

1.801.902.002.102.20

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

$ Per Pound

Avg.2007-11

2012

2013

Livestock Marketing Information CenterData Source: USDA-AMS, Dairy Market News

08/02/13

Purdue University is an Equal Opportunity/Equal Access institution.

June 2013 exports were 2nd highest month ever, totalling $596 million

(2nd to May 2013) totalling $631 million

* Fiscal year 2013 up 9% from previous period

Purdue University is an Equal Opportunity/Equal Access institution.

Purdue University is an Equal Opportunity/Equal Access institution.

Milk Price

Purdue University is an Equal Opportunity/Equal Access institution.

Jan

Aug Mar OctMay Dec Ju

lFeb

Sep

Apr Nov Jun

Jan

Aug Mar OctMay Dec Ju

l9

11

13

15

17

19

21

23

25Class I Class II Class III Class IVUSDA High USDA Low CME Futures

$

Milk Class Prices (8/15/2015)

2007 2008 2009 20112006 20122010 2013

8/15/2013Purdue University is an Equal Opportunity/Equal Access institution.

Livestock Marketing Information CenterData Source: USDA/NASS

2014

Purdue University is an Equal Opportunity/Equal Access institution.

Source: Jim Hilker's Market Outlook & Probabilistic Price Forecasts for Grain & Livestock;Michigan State University, https://www.msu.edu/~hilker/

• 25% chance less than $17.30

• 25% changes more than $19.25

October 2013 Milk – as of 8-8-13

Most likely price at maturity: $18.16

Purdue University is an Equal Opportunity/Equal Access institution.

Source: Jim Hilker's Market Outlook & Probabilistic Price Forecasts for Grain & Livestock;Michigan State University, https://www.msu.edu/~hilker/

• 25% chance less than $15.77

• 25% changes more than $18.15

December 2013 Milk – as of 8-8-13

Most likely price at maturity: $16.75

Purdue University is an Equal Opportunity/Equal Access institution.

Source: Jim Hilker's Market Outlook & Probabilistic Price Forecasts for Grain & Livestock;Michigan State University, https://www.msu.edu/~hilker/

• 25% chance less than $15.03

• 25% changes more than $17.61

February 2014 Milk – as of 8-8-13

Most likely price at maturity: $16.05

Jan

Aug Mar OctMay Dec Ju

lFeb

Sep

Apr Nov Jun

Jan

Aug Mar OctMay Dec Ju

l9

11

13

15

17

19

21

23

25Class I Class II Class III Class IVUSDA High USDA Low CME Futures

$

Milk Class Prices (8/15/2015)

2007 2008 2009 20112006 20122010 2013

8/15/2013Purdue University is an Equal Opportunity/Equal Access institution.

Livestock Marketing Information CenterData Source: USDA/NASS

2014

Policy: What the US Dairy Industry fears the Dairy Title of the US Farm Bill will look like coming out of conference:

MILC• Payment thus far:

– Jan 11.8 ¢/cwt– Feb 52.5 – March 75.5– April 69.9– May 74.2– June 21.87– July (projected less than 10 ¢/cwt) – likely last payment of the year

Purdue University is an Equal Opportunity/Equal Access institution.

Milk Price Outlook• Lower milk prices • LOWER feed prices• Building stocks – especially butter and cheese

– 24% increase in butter stocks over a year ago– 8% higher total cheese stocks – Holiday baking season is upcoming … helping butter and cheese

prices• Extremely strong export markets

– Nonfat dry milk powder up 23% in May over a year ago; 7% increase year-to-date

• Increase in cow numbers in 18 of 23 dairy states (mostly East)• *Increase* in production for US and traditional dairy states

– How much production/cow and how much cow number growth?

30

Mike Schutzmschutz@purdue.edu

Nicole Olynk Widmarnwidmar@purdue.edu

Purdue University is an Equal Opportunity/Equal Access institution.

NONFAT DRY MILK PRICESCentral and East, Monthly

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

$ Per Pound

Avg.2007-11

2012

2013

Livestock Marketing Information CenterData Source: USDA-AMS, Dairy Market News

08/02/13

Purdue University is an Equal Opportunity/Equal Access institution.

Source:http://future.aae.wisc.edu/8/14/13

Purdue University is an Equal Opportunity/Equal Access institution.

2007

2008

2009

2010

2011

2012

2013

0

200

400

600

800

1000

1200

1400

1600

1800

WholeOrganicReducedLowSkimFlavored Fat Reduced

Mill

ion

Lbs.

Fluid milk sales by category

Livestock Marketing Information CenterData Source: USDA/NASS

CLASS III MILK PRICESFMMO, Monthly

12.0013.0014.0015.0016.0017.00

18.0019.0020.0021.0022.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$ Per Pound

Avg.2007-11

2012

2013

Livestock Marketing Information CenterData Source: USDA-AMS, Dairy Market News

08/02/13

CLASS IV MILK PRICESFMMO, Monthly

11.50

12.50

13.50

14.50

15.50

16.50

17.50

18.50

19.50

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$ Per Pound

Avg.2007-11

2012

2013

Livestock Marketing Information CenterData Source: USDA-AMS, Dairy Market News

08/02/13