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http://amap.missouri.edu
Dairy Outlook
August 14, 2019
Dr. Scott Brown
Agricultural Markets and Policy
Division of Applied Social Sciences
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What Are the Key Issues?
Dairy cow numbers are finally declining
Productivity increases will keep milk output from falling much
Some states still not in contraction mode
Either supply restraint must continue, or demand must improve
Demand for milkfat has held up, not so much for skim solids
Butter prices continue to run well ahead of nonfat dry milk
Total fluid milk consumption declines continue
Most dairy product stocks have eased a bit, but remain heavy
A mixed bag on the trade side
Export quantities have struggled in 2019, but values hanging in
Other major exporters struggling to push supplies much higher
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U.S. All Milk Price
12
14
16
18
20
22
24
26
28
Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
Dolla
rs p
er
Cw
t.
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U.S. Dairy Cows
9.05
9.10
9.15
9.20
9.25
9.30
9.35
9.40
9.45
9.50
Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
Mill
ion H
ead
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Dairy Cows
5.95
6.00
6.05
6.10
6.15
6.20
1.40
1.50
1.60
1.70
1.80
1.90
Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
Mill
ion H
ead
CO+ID+KS+TX+WA AZ+UT+WI All other (right axis)
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Productivity Adds to Production Growth
-2
-1
0
1
2
3
4
1991 1995 1999 2003 2007 2011 2015 2019 (p)
% C
hang
e v
s. P
revio
us Y
ear
Milk/Cow Cows Production
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Change in Milk Production,
Jan-Jun 2019 vs. Jan-Jun 2018
5.3%
1.5%2.2%
-3.0%
3.2%
-3.2%
-10.9%-1.3%
6.4%
1.9%
0.0%
2.9%
2.2%
0.6%
0.7%
-4.9%
0.7%
-4.6%
0.4%
-8.8%
1.1%
-5.1%
-6.6%
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Quarterly U.S. Milk Production
-4
-2
0
2
4
6
1998 2001 2004 2007 2010 2013 2016 2019
% C
ha
nge v
s. P
revio
us Y
ear
WASDE August 2019 Forecast
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US Milk Returns
0
5
10
15
20
25
30
2004 2008 2012 2016 2020 (p)
Dolla
rs p
er
cw
t.
Feed Costs Non Feed Costs All Milk Price
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2019 DMC Signup Underway
Tier 1 should elect $9.50 coverage in 2019
It appears nearly one-half of production history
signed up for five years to receive the 25%
premium break
Signup ends 9/20/19
2020 signup should start soon after 2019 signup
ends
How does DMC affect aggregate supply response?
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Milk Less Feed Costs (DMC Margin)
0
2
4
6
8
10
12
14
16
18
Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
Dolla
rs p
er
Cw
t.
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DMC Feed Components
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
Dolla
rs p
er
Cw
t.
Corn Soybean Meal Alfalfa
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Historical DMC Payout Versus Premium Costs
0.04 0.06 0.09 0.13 0.180.25
0.340.47
0.65
0.89
1.18
1.51
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 $8.50 $9.00 $9.50Pre
miu
m C
ost
and
Ave
rage P
aym
ent
2000
-2018
DMC Coverage Level
Avg pmt, 2000-2018 Tier 1 Premium Tier 2 Premium
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0
2
4
6
8
10
12
2018 Farm Bill: $9.50 DMC Payments
20% 40% 60% 80%0%
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
CA ID MI MN NY PA TX VA WI
2002 2007 2012 2017
Percentage of operations <200 Cows
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U.S. Fluid Milk Consumption
40
50
60
70
80
90
100
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
Pounds p
er
Pers
on
Whole 2% Lowfat
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Butter Supply and Use Changes
-40
-30
-20
-10
0
10
20
30
Jan 18 Apr 18 Jul 18 Oct 18 Jan 19 Apr 19
Mill
ion P
ounds v
s. Y
ear
Ago
Production Net Exports Stocks
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Cheese Supply and Use Changes
-40
-20
0
20
40
60
80
100
120
Jan 18 Apr 18 Jul 18 Oct 18 Jan 19 Apr 19
Mill
ion P
ounds v
s. Y
ear
Ago
Production Net Exports Stocks
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NFD Supply and Use Changes
-80
-60
-40
-20
0
20
40
60
80
100
Jan 18 Apr 18 Jul 18 Oct 18 Jan 19 Apr 19
Mill
ion P
ounds v
s. Y
ear
Ago
Production Net Exports Stocks
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U.S. Dairy Wholesale Prices
50
75
100
125
150
175
200
225
250
275
300
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Cents
per
Pound
Butter Cheese NFD Milk
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Global Dairy Product Prices
0.0
0.5
1.0
1.5
2.0
2.5
3.0
7 Jan2014
1 Jul2014
6 Jan2015
1 Jul2015
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Dolla
rs p
er
Pound
Butter Cheese SMP
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U.S. Dairy Exports
300
360
420
480
540
600
660
720
780
105
120
135
150
165
180
195
210
225
Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
Mill
ions
Volume (kg) Value ($, right axis)
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Monthly Butter Prices
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16 Jan 18
Do
llars
per
po
un
d
U.S. Oceania
Net Exports 2014 = 105.8 Mil. Lbs.
2015 = -4.0 Mil. Lbs.
2016 = -17.7 Mil. Lbs.
2017 = -11.2 Mil. Lbs.
2018 = -20.8 Mil. Lbs.
YTD 2019 = -18.7 Mil. Lbs.
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Monthly Cheese Prices
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16 Jan 18
Do
llars
per
po
un
d
U.S. Oceania
Net Exports 2014 = 196.7 Mil. Lbs.
2015 = 89.1 Mil. Lbs.
2016 = 72.9 Mil. Lbs.
2017 = 113.3 Mil. Lbs.
2018 = 136.3 Mil. Lbs.
YTD 2019 = 85.5 Mil. Lbs.
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Milk Production Growth, Major Exporters
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
Australia New Zealand EU U.S.
Pe
rce
nt ch
an
ge
vs.
ye
ar
ag
o
2018 2019
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Exports from AU/NZ/EU
400
600
800
1,000
1,200
1,400
1,600
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019(p)
Thousand M
etr
ic T
ons
Cheese Butter SMP
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Skim Milk Powder Stocks
0
50
100
150
200
250
300
350
400
450
500
2000 2003 2006 2009 2012 2015 2018
Thousand M
T
EU Other non-U.S.
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China Powdered Milk Imports
0
100
200
300
400
500
600
700
800
2000 2003 2006 2009 2012 2015 2018
Thousand M
T
WMP SMP
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Quarterly U.S. All Milk Prices
10
12
14
16
18
20
22
24
26
1997 2000 2003 2006 2009 2012 2015 2018
$ p
er
cwt
WASDE August
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Class III Futures, August 2020
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Summary
Milk prices likely move in more of a sideways pattern into 2020 unless:
US Milk supply growth well below 1% annual rate
Demand for dairy products strengthens either in the US or internationally (trade barriers and general economy)
DMC provides greater support for smaller operations than they have seen in some time
Dairy production structure has changed dramatically over the past few years and that likely continues
My all milk price estimate for 2020 is $18.50
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Questions
Dr. Scott Brown
University of Missouri
222 Mumford Hall
Columbia, MO 65211
(573) 882 – 3861
Twitter @MUScottBrown
Weekly Livestock Update, Brownfield Ag News
https://brownfieldagnews.com/brownfield-livestock-market-updates/