u.s. dairy market outlook and what it means to california(wmp) production is exported. meanwhile,...

U.S. Dairy Market Outlook and What it Means to

California

Mary Ledman, Dairy Economist mary@dailydairyreport.com

847-680-9693

o  U.S.  &  Regional  Milk  Produc5on  o  Global  Dairy  Update  o  U.S.  Dairy  Exports  o  Dairy  Product  Produc5on  and  Stocks  o  Outlook    

Outline

April  25,  2013   Daily  Dairy  Report,  Inc.   2  

U.S. Milk Production

14,000

15,000

16,000

17,000

18,000

Jan Apr Jul Oct

(Mill

ion

Lbs.

)

2011 2012 2013

Chg. vs. Feb. '13 +1.3% Chg. vs. Mar. '12 -0.3% YTD Avg. +0.0%

April  25,  2013   Daily  Dairy  Report,  Inc.   3  

U.S. Milk Per Cow

1,500

1,600

1,700

1,800

1,900

Jan Apr Jul Oct

(Pou

nds)

2011 2012 2013

Chg. vs. Jan. ’13 +1.8% Chg. vs. Feb. ’12 +0.3% YTD Avg. +0.5%

April  25,  2013   Daily  Dairy  Report,  Inc.   4  

U.S. Dairy Herd

9,000

9,100

9,200

9,300

Jan Apr Jul Oct

(1,0

00 h

ead)

2011 2012 2013

Chg. vs. Jan. ’13 +0.0% Chg. vs. Feb. ’12 -0.3% YTD Avg. -0.3%

April  25,  2013   Daily  Dairy  Report,  Inc.   5  

Regional Milk Production

o  Key States: New York, Pennsylvania, Vermont

o  26.3 billion pounds 2012 o  More than 40% of milk used

in fluid market o  Yogurt focus o  Balancing with power plants

Northeast Milk Production

1,900

2,000

2,100

2,200

2,300

Jan Apr Jul Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Feb. ’13 +0.9% Chg. vs. Mar. ’12 +1.3% 2013 YTD +1.7%

April  25,  2013   Daily  Dairy  Report,  Inc.   7  

o  Key States: Michigan, Minnesota, Wisconsin

o  45.1 billion pounds in 2012 o  85% of milk used in cheese/

whey and butter production o  U.S. cheese production 35% o  U.S. butter production 25% o  New SMP plant in Michigan

May 2012 capacity 4 million pounds of milk per day

Midwest Milk Production

3,300

3,450

3,600

3,750

3,900

Jan Apr Jul Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Feb. ’13 +0.3% Chg. vs. Mar. ’12 +2.8% 2013 YTD +3.7%

April  25,  2013   Daily  Dairy  Report,  Inc.   8  

o  Represents Arizona, New Mexico, Texas

o  22.3 billion pounds 2012 o  More than 35% of milk used

in fluid market o  Large manufacturing plants >

4,000 metric tons per day •  Southwest Cheese •  Hilmar Cheese –Dalhart

Southwest Milk Production

1,500

1,650

1,800

1,950

2,100

Jan Apr Jul Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Feb. ’13 +1.2% Chg. vs. Mar. ’12 -3.4% 2013 YTD -1.9%

April  25,  2013   Daily  Dairy  Report,  Inc.   9  

o  Key States: California, Idaho, Washington

o  61.6 billion pounds in 2012 o  33% of Total U.S. Production o  U.S. SMP/NDM production

75% of and exports more than 50% of its SMP/NDM production

o  50% of U.S. butter production o  30% of U.S. cheese

production

Western Milk Production

4,400

4,650

4,900

5,150

5,400

Jan Apr Jul Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Feb. ’13 +2.6% Chg. vs. Mar. ’12 -2.1% 2013 YTD -2.8%

April  25,  2013   Daily  Dairy  Report,  Inc.   10  

o  Production down 3.3% vs. March 2013, driven primarily by lower milk per cow.

o  Dairy herd 1,782,000 as of February 2013, down 2,000 head vs. last year.

o  Potential for significant year-over-year increases in production during 2H of 2013. •  Profitability •  Weather?

California Milk Production

3,000

3,200

3,400

3,600

3,800

Jan Apr Jul Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Feb. ’13 +3.0% Chg. vs. Mar. ’12 -3.3% 2013 YTD -4.0%

April  25,  2013   Daily  Dairy  Report,  Inc.   11  

Weekly Slaughter

 40    

 45    

 50    

 55    

 60    

 65    

 70    

 75    

1/5   2/5   3/5   4/5   5/5   6/5   7/5   8/5   9/5   10/5  11/5  12/5  

(in  1,000  head)  

2011   2012   2013  

-­‐4  

-­‐3  

-­‐2  

-­‐1  

0  

1  

2  

3  

4  

5  

5-­‐Jan   19-­‐Jan   2-­‐Feb   16-­‐Feb   2-­‐Mar   16-­‐Mar   30-­‐Mar  

(1,000  Head)  

West   East   Midwest  

April  25,  2013   Daily  Dairy  Report,  Inc.   12  

Overland Stockyard Sales Date   Sales  Descrip6on  

April  12   900  milking,  200  replacements  

April  3   2,000  head  

March  28   12,000  head  

March  15   3,000  milking,  3,000  replacements  

March  1   1,500  head  

February  28   10,000  head  

February  20   4,500  milking  

February  12   3,550  head  replacements  

February  8   2,300  Holstein  cows,  1,450  Jersey  &  Jersey  X  

February  6   2,600  head  

April  25,  2013   Daily  Dairy  Report,  Inc.   13  

Income Over Feed Key States

$0

$3

$6

$9

$12

Q1  12 Q2  12 Q3  12 Q4  12 Q1  2013

California

Regional  Milk  Over  Feed(in  $  per cwt.)

$0

$3

$6

$9

$12

Q1  12 Q2  12 Q3  12 Q4  12 Q1  2013

Wisconsin

Regional  Milk  Over  Feed(in  $  per cwt.)

$0

$3

$6

$9

$12

Q1  12 Q2  12 Q3  12 Q4  12 Q1  2013

New  York

Regional  Milk  Over  Feed(in  $  per cwt.)

$0

$3

$6

$9

$12

Q1  12 Q2  12 Q3  12 Q4  12 Q1  2013

Idaho

Regional  Milk  Over  Feed(in  $  per cwt.)

Daily  Dairy  Report,  Inc.  April  25,  2013   14  

Global Dairy Markets Why Should I Care?

0  

40,000  

80,000  

120,000  

160,000  

(1,000  M

etric

 Ton

s)  

2007   (f)  2012  

Global Milk Production: Key Countries

Daily  Dairy  Report,  Inc.  April  25,  2013   16  

Global Dairy Production vs. Exports: Key Countries

8.6   9.5  

19.4  

38.1  

3.6   4.4   1.6   3.3  

0  

10  

20  

30  

40  

50  

NDM   WMP   Bu\er     Cheese  

(Bil.  Lbs.)  

Produc5on   Exports  

Daily  Dairy  Report,  Inc.  April  25,  2013   17  

Global Trade Statistics o  New Zealand produces less than 5% of global milk production but

accounts for more than 50% of dairy product trade. o  The European Union and the United States represent 30% and 20% of

global cow’s milk production. o  Over 40% of global Nonfat Dry Milk (NDM) and Whole Milk Powder

(WMP) production is exported. Meanwhile, only about 10% of global cheese and butter production is exported.

o  New Zealand dominates global WMP production with nearly a 30% share followed by China with a 27% share.

o  The European Union and the United States dominate NDM production and trade.

•  The European Union produces 33% of the world’s NDM and accounts for 36% of global NDM trade.

•  The United States produces 25% of the world’s NDM and accounts for 28% of global trade.

o  FAO estimates that 7% of global milk production is traded.

18  Daily  Dairy  Report,  Inc.  April  25,  2013  

Global Milk Production

30,000  

40,000  

50,000  

JAN   APR   JUL   OCT  

Chart  Title  

2011   2012   2013  

Milk  Produc6on  (AR,AU,EU,NZ,US)  (30-­‐day  month,  in  million  lbs.)  

April  25,  2013   Daily  Dairy  Report,  Inc.   19  

Change in YOY Global Milk Production

-­‐500  

0  

500  

1,000  

1,500  

2,000  

Jan-­‐12   Feb   Mar   Apr   May   Jun   Jul   Aug   Sep   Oct   Nov   Dec   Jan-­‐13   Feb  

(Million  Lbs.)  

YOY  Chg  Global  Produc5on   4-­‐Year  Average  Change  

April  25,  2013   Daily  Dairy  Report,  Inc.   20  

Export Summary Through February 2013

Million  Lbs. %  exports  vs.  2012 %  of  Produc5on

NFDM/SMP 147.3 -­‐14% 40%

Bu\er/Milkfat 19.9 +36% 5.2%

Total  Cheese 96.1 +11% 5.4%

Cheddar  Cheese 20.9 +1% 3.9%

Dry  Whey  (human) 77.4 -­‐7.8% 45%

WPC  (<  80%) 37.8 +46% 53%

Milk  and  Whey  Protein  >  80%

6.6 +2.3% 50%    of  WPI  produc5on

Lactose  >  99% 81.6 +40% *combined  equates  

Lactose  <  99% 42.8 -­‐14% To  75%  of  lactose  produc5on

21  Daily  Dairy  Report,  Inc.  April  25,  2013  

$0.90$1.15$1.40$1.65$1.90$2.15$2.40$2.65

$2.90

Jan-­‐12 Apr-­‐12 Jul-­‐12 Oct-­‐12 Jan-­‐13 Apr-­‐13

International  Price  for  SMPWorldBi-­‐Weekly  SMP  Price(in  USD  per  lb.)

NZ  

GDT  

EU   NDPSR  

22  Daily  Dairy  Report,  Inc.  April  25,  2013  

$1.40

$1.65

$1.90

$2.15

Jan-­‐12 Apr-­‐12 Jul-­‐12 Oct-­‐12 Jan-­‐13 Apr-­‐13

TitleOceania Europe  (Edam) CME

WorldBiweekly  Cheese  Price(in  USD  per  lb.)

23  Daily  Dairy  Report,  Inc.  April  25,  2013  

Domestic Demand

0.30%

2.10%

2.60%

1.10%

0.40% 0.50%

2.20%

1.00% 1.10%

0.20% 0.50%

0.60%

0.0%

-0.3%

-2.4%

-1.9%

-0.6%

-2.1% -2.5%

-2.2%

-1.0%

-1.8%

-1.3%

-1.8%

-0.1%

-1.9%

-1.0%

-2.3% -1.9%

-1.3% -1.6%

-1.2%

-2.3%

-1.3% -1.6%

-3.9%

-2.4% -2.7%

-3.1%

-2.1% -2.3%

-0.1%

-1.8%

-0.1%

-1.5%

-0.1%

-1.7%

-2.2% -2.1%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

Jan - 09 Jul Jan - 10 Jul Jan - 11 Jul Jan - 12 July Jan-13

Year%over%Year(Percentage(Change(of(Pounds(of(Fluid(Milk(Sales(by(Month((Federal(Milk(Market(Order(&(California)(

Fluid Milk Sales

April  25,  2013   Daily  Dairy  Report,  Inc.   25  

Commercial Disappearance

o  Jan. – Dec. 2012 +1.7% Butter +1.6% American Cheese +2.0% Other Cheese +1.6% NDM +17.9% Fluid Milk -1.9%

o  Nov. – Jan. 2013 +0.6% Butter -14.8% American Cheese +1.7% Other Cheese +1.2% NDM -33.6% Fluid Milk -2.1%

April  25,  2013   Daily  Dairy  Report,  Inc.   26  

Dairy Product Production & Stocks

U.S. Butter Production

100

125

150

175

200 Ja

n

Apr

Jul

Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Jan. '12 +0.8% Chg. vs. Feb. '13 +4.7% 2013 YTD +4.4%

April  25,  2013   Daily  Dairy  Report,  Inc.   28  

Total Butter Stocks

0

100

200

300 Ja

n

Apr

Jul

Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Feb. '13 +22.4% Chg. vs. Mar. '12 +6.9%

April  25,  2013   Daily  Dairy  Report,  Inc.   29  

Butter & Milkfat Exports

-

5.0

10.0

15.0

20.0 Ja

n

Apr

Jul

Oct

(mill

ion

Lbs.

)

2011 2012 2013

Chg. vs. Jan. '13 +21% Chg. vs. Feb. '12 +30% 2013 YTD +36%

April  25,  2013   Daily  Dairy  Report,  Inc.   30  

American Cheese Production

320

340

360

380 Ja

n

Apr

Jul

Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Jan. '13 +2.1% Chg. vs. Feb. '12 +4.9% 2013 YTD +3.8%

April  25,  2013   Daily  Dairy  Report,  Inc.   31  

American Cheese Stocks

550

600

650

700 Ja

n

Apr

Jul

Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Feb. '13 +2.9% Chg. vs. Mar. '12 +4.5%

April  25,  2013   Daily  Dairy  Report,  Inc.   32  

Total Cheese Exports

-

25.0

50.0

75.0 Ja

n

Apr

Jul

Oct

(mill

ion

Lbs.

)

2011 2012 2013

Chg. vs. Jan. '13 +9.1% Chg. vs. Feb. '12 +8.7% 2013 YTD +11%

April  25,  2013   Daily  Dairy  Report,  Inc.   33  

NFDM/SMP Production

75

125

175

225 Ja

n

Apr

Jul

Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Jan. '13 +4.9% Chg. vs. Feb. '12 -1.6% 2013 YTD -1.6%

April  25,  2013   Daily  Dairy  Report,  Inc.   34  

California Milk Powder Production

0  

20  

40  

60  

80  

100  

120  

Jan   Apr   Jul   Oct  

(Million  Lbs.)  

2012   2013  

April  25,  2013   Daily  Dairy  Report,  Inc.   35  

NFDM Stocks

50

100

150

200

250 Ja

n

Apr

Jul

Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Jan. '13 +13.6% Chg. vs. Feb.'12 +16.5%

April  25,  2013   Daily  Dairy  Report,  Inc.   36  

NDM/SMP Exports

0

50

100

150 Ja

n

Apr

Jul

Oct

(mill

ion

lbs.

)

2011 2012 2013

Chg. vs. Jan. '13 +23% Chg. vs. Feb. '12 -8.5% 2013 YTD -14%

April  25,  2013   Daily  Dairy  Report,  Inc.   37  

2013/14 Outlook

Bullish o  Lower global milk production o  Negative weather conditions o  Drought in Oceania o  Late Spring in Europe and United

States o  Higher feed costs and lack of

quality forages in 1H 2013 limit growth in milk per cow during Q2 2013.

o  Strong exports

Bearish/Moderating o  Higher milk prices and lower feed

costs could lead to greater milk production during Q3 2013 and lower milk prices during Q4 2013 and into 2014.

o  Oceania drought subsiding o  Bumper corn and bean crops o  Moderating alfalfa prices o  Global economy slow down;

namely China’s expected growth slowing to 7.7%

o  Strength of US dollar vs. competitive currencies

April  25,  2013   Daily  Dairy  Report,  Inc.   38