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Dairy Market Update: May 2013 Dr. Craig Thomas Michigan State University Extension Dairy Farm Business Management & Milk Marketing Educator Sanilac, Huron,

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Presentation on theme: "Dairy Market Update: May 2013 Dr. Craig Thomas Michigan State University Extension Dairy Farm Business Management & Milk Marketing Educator Sanilac, Huron,"— Presentation transcript:

1 Dairy Market Update: May 2013 Dr. Craig Thomas Michigan State University Extension Dairy Farm Business Management & Milk Marketing Educator Sanilac, Huron, Tuscola, St. Clair, Lapeer, Saginaw, Genesee, Macomb, Oakland, Washtenaw, Wayne, & Monroe Counties

2 Benefactor ($200) Active Feed Co. Major Sponsor ($75-$100) Contributor ($50) Exchange State Bank Eastern Michigan Bank Thumb Veterinary Services Crop Production Services-Sandusky & Deckerville 2013 Sponsors Dairy Farmers of America- Steve Steely Graff Chevrolet/Buick, Inc. Sanilac Drain & Tile Co. Secher Site Specific LLC GreenStone FCS

3 + $1.87 Class III vs. Apr 2012 ($14.68, +$2.91 vs. Apr average) April Milk Prices + $3.30 Class IV vs. Apr 2012 ($14.80, +$3.30 vs. Apr average) $ $0.35 $ $0.66 USDA Michigan Mailbox Jan 2013: $19.81 up $0.77

4 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) +0.3% Top 23 States versus April 2012

5 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) Tenth time in past eleven months below trend increase. Record billion lbs. for 2012!

6 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) BUT… Q U.S. milk production was up 4.2% vs. 2011!

7 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) Michigan +1.3% versus April 2012.

8 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) Seqestration! Milk Production Report No cow numbers! No milk per cow! administrative data only

9 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) M:F ratio <2.0 for 27 of past 29 months.

10 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) April Milk:Feed Price Ratio All-Milk: $19.30 (+0.20) Corn: $6.67 (-$0.46) Soybeans: $14.20 (-$0.40) Alfalfa Hay: $215 (-$4.00)

11 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) Feed costs up 3.8% vs. April 2012 ($11.92 to $12.38).

12 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) USDA report on alfalfa hay and alfalfa hay mixtures: U.S.: -34% vs. last May 1 st Hay stocks declined by 50% or more in nine states vs. last year (MI, MN, NY, OH, VT, WI). Little indication 2013 crop will be large enough to replenish stocks. Hay acreage has fallen to second lowest level on record.

13 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) IOFC up 25.8% (+$1.74/cwt) vs. April 2012 ($8.51 to $6.77).

14 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) IOFC up 5.5% vs. March 2013 (+$0.47).

15 +0.2% Nationally versus April 2012 U.S. Production % vs % vs (99-12 ave. = +1.6%) April all-milk price +$2.50/cwt vs. April 2012.

16 Above Trend For Apr April: +11.9% vs. April % vs. March April +28,600 hd vs. April ,200 hd vs. 2011! YTD +56,200 hd (as of 4/30/13) Jan (296.9) highest monthly slaughter number since 1986; year of the whole-herd buyout.

17 Cull Rate Above Long Term Average (29.0%) +4.1% California: ~100 dairy farms are closing their doors permanently each year.

18 Cull Rate Above Long Term Average (29.0%) +4.1% U.S. cull cow prices down 1.5% vs. March 2012 ($82.90 vs. $84.20).

19 Cull Rate Above Long Term Average (29.0%) +4.1% What will the future hold?

20 Cull Rate Above Long Term Average (29.0%) +4.1% Unusual circumstances moving forward: Steers >$ vs. replacement heifers xbred calf likely more value than purebred heifer Less sexed semen usage Holstein heifers being sold in lots destined for the feedlot Strong beef prices continue to fuel unprecedented dairy cull rates Beef industry will continue to pull dairy to beef Thus, dairy herd will eventually shrink and may be more difficult to grow in the future.

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22 Going Strong…Better! No??!! 2012 vs %; 2013 vs % ( average = +1.6%) Cheese: average = +2.5% 2012 vs %; 2013 vs %

23 Going Strong…Better! No??!! 2012 vs %; 2013 vs % ( average = +1.6%) Cheese: average = +2.5% 2012 vs %; 2013 vs % Total commercial disappearance set all-time monthly record for Jan in Jan; but down 0.7% in Feb vs. Feb 2012!

24 Going Strong…Better! No??!! 2012 vs %; 2013 vs % ( average = +1.6%) Cheese: average = +2.5% 2012 vs %; 2013 vs % 2013 vs (YTD Jan-Feb) American Cheese: +1.8% (+2.3%) Other Cheese: +1.9% (+2.5%) Butter: +10.2% (+2.8%) NFDM: -18.7% (+5.3%) Fluid Milk: -4.4% (Feb)

25 Going Strong…Better! No??!! 2012 vs %; 2013 vs % ( average = +1.6%) Cheese: average = +2.5% 2012 vs %; 2013 vs % March fluid milk 38 th consecutive month of declining sales versus same month last year.

26 American Cheese (+5.3% Apr vs. Apr 2012, M lbs. vs. 5/1/12) Total Cheese (+4.5% Apr vs. Apr 2012, M lbs. vs. 5/1/12) 5/28/13 Close = $ May Average = $1.5505

27 American Cheese (+5.3% Apr vs. Apr 2012, M lbs. vs. 5/1/12) Total Cheese (+4.5% Apr vs. Apr 2012, M lbs. vs. 5/1/12) May Average = $ Total Cheese Inventory Above 1.0 billion pounds fifth consecutive month! 5/28/13 Close = $1.7388

28 American Cheese (+5.3% Apr vs. Apr 2012, M lbs. vs. 5/1/12) Total Cheese (+4.5% Apr vs. Apr 2012, M lbs. vs. 5/1/12) May Average = $ Cheese Inventories All-time historical highs! 5/28/13 Close = $1.7388

29 American Cheese (+5.3% Apr vs. Apr 2012, M lbs. vs. 5/1/12) Total Cheese (+4.5% Apr vs. Apr 2012, M lbs. vs. 5/1/12) May Average = $ cheese production (Jan-Mar): American cheese 2.7% (1.9%) Total cheese +1.7% (2.7%) vs. Jan-Mar /28/13 Close = $1.7388

30 +22.2% versus Apr 2012 Butter May Average = $ /28/13 Close = $1.5450

31 +22.2% versus Apr 2012 Butter May Average = $ Butter Inventory All-time historical high! 5/28/13 Close = $1.5450

32 +22.2% versus Apr 2012 Butter May Average = $ butter production (Jan-Mar) +4.4% (2.3%) vs. Jan-Mar /28/13 Close = $1.5450

33 Dairy Exports Dairy trade surpluses 37 consecutive months! FY-2013 (Oct-Mar): $918.1 M!

34 FY-2013: October-March U.S. dairy exports equaled: CY-2011, 13.3%; CY-2012, 13.2%. March 13.5% of total U.S. milk solids production! Jan-Mar 13.1% (12.9%)

35 FY-2013: October-March U.S. dairy exports equaled: CY-2011, 13.3%; CY-2012, 13.2%. March 24 th time in past 25 months exports exceeded $400 million!

36 Dairy Exports CY-2013 (Jan-Mar) Exports as a % of total U.S. production: NFDM/SMP: 41% (44%) Cheese: 5.6% (5.3%) Butter: 5.9% (5.2%) Dry Whey: 46% (46%) Lactose: 72% (68%)

37 Dairy Exports One of every 8 tanker loads of raw milk was ultimately exported!

38 Dairy Exports 2013 Outlook Milk production growth in Oceania, EU, and U.S., unlikely to satisfy world dairy product demand. China expected to increase dairy imports by 14%. New Zealand milk prdn down >16% in Mar; -2.3% in Feb. YTD up 4.8% vs. 2012; Australia -1.6% vs (drought driven). Offerings are tight…servicing existing accounts on the books and having little extra for other demand. EU milk prdn down every month vs. last year since July 2012; weak 2013 spring flush. Thus, no significant finished product stocks in EU or Oceania to buffer markets moving into remainder of U.S. dairy product prices remain below international prices. Higher international demand has softened demand (at least in the short term); however, look for stronger prices in second half of 2013.

39 Dairy Exports Big 5 Dairy Exporters USDEC predicts will be down >1% in milk prdn for first half of 2013; a shortfall of 1.6 M tons of milk (~3.5 B lbs).

40 Dairy Exports USD Strengthening!

41 Dairy Exports Tom Suber USDEC president Global economic signs are starting to move in a more positive direction, demand and consumption will continue rising, and world prices are expected to come more in line with U.S. prices.

42 Dairy Exports China will be a key player in determining the health of global dairy markets given its demand for an ever-growing share of dairy supplies. +8.1% GDP growth in 2013 (+7.5% in 2011) >5% annual growth in dairy consumption!

43 Dairy Exports World …there are currently no significant surplus stocks in the United States or the EU to buffer markets. Consequently global economic and population growth are expected to keep driving import demand which could put upward pressure on dairy prices particularly towards the second half of 2013.

44 Dairy Exports Long Term Outlook Bright, but loaded with risk. U.S. Dairy Export Council The United States cannot absorb back into the domestic market 13% of annual milk solids produced in this country. And as we produce more milk, most of it has to go to international customers because domestic consumption is growing slowly...

45 Retail Food Prices March Whole Milk CPI = +1.9% Price: -$0.068/gal Cheese CPI = -1.3% Price: -$0.109/lb (p) +$0.077/lb (n) Butter CPI = +1.0% Price: NA All-Food CPI = +1.5% Dairy CPI = -0.5% MPFE CPI = +1.2% Ice Cream CPI = +0.0% Price: -$0.001/half gal.

46 Class III Current Class III futures prices are averaging +$1.93 (2013), +$1.86 (next 12 mos.), +$0.73 (2014) versus the averages.

47 Class III / Cheese Next 12 mos: $18.55 ($18.06) (-$0.49) 4/29/ : $18.13 ($18.52) (-$0.39) 2014: $16.93 ($16.85) (+$0.07)

48 Class III Current Class III futures prices are averaging +$1.93 (2013), +$1.86 (next 12 mos.), +$0.73 (2014) versus the averages.

49 Wheres the Market Headed? Cheese prices. 5/29/13 Ave. $ /29/13 $ block/barrel cheese price.

50 Wheres the Market Headed? Cheese prices. 5/29/13 Ave. $ Decrease of $0.0275

51 Wheres the Market Headed?

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53 USDA Forecast May Milk production: B lbs. +0.7% Milk consumption: B lbs. +0.9% 2013 prices: Class III: $17.80-$18.30 (-5¢) Class IV: $18.20-$18.80 (+10¢) All-Milk: $19.5-$20.00 (+5¢) Cheese: $1.745-$1.795 (+1¢) Butter: $1.570-$1.650 (+1¢) NFDM: $1.590-$1.630 (+0.5¢) Dry whey: $0.580-$0.610 (-2.5¢)

54 Prices Spring flush ending soon; major heat in 2013? Domestic consumption weak, exports remain strong; push on to produce more milk, esp. w/lower feed $; will U.S. dairy herd shrink? Will higher prices and stronger USD limit upside? Cheese: flat then up? $2.00 by mid-summer? Butter: flat then up? $2.00 by mid-summer? Class III & IV: flat near term; ave. near or above USDA top? Will cow numbers fall; international demand remain strong? Wheres the Market Headed?

55 LGM-Dairy FY-2014 budget calls for increase in LGM subsidies from $20 M to $100 M. DSA likely component of new Farm Bill…but when? Wheres the Market Headed?

56 Long Range Weather Forecast Jun-Jul-Aug Temperature

57 Long Range Weather Forecast Aug-Sep-Oct Temperature

58 Long Range Weather Forecast Jun-Jul-Aug Precipitation

59 Long Range Weather Forecast Aug-Sep-Oct Precipitation

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61 Prediction is very difficult, especially if it is about the future. -Neils Bohr Wheres the Market Headed?

62 It doesnt matter how smart you are unless you stop and think. -Thomas Sowell

63 Craig Thomas Web Site

64 News Web Site msue.anr.msu.edu Agriculture Dairy

65 2013 Ag Market Updates Live over the Net! Send me your address to receive advance notification of live Ag Market Update webinars.

66 Craig Thomas

67 The End


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