1. Dairy Marketing Dr. Roger Ginder Econ 338a Fall 2007 Lecture # 3

2. MILK SUPPLY &DEMAND n Supply –Farms & Cows –Regions –Production Systems –Quantities n Demand & Trends –Utilization –Consumers

3. TOTAL MILK SUPPLY NO. COWS X PROD. PER COW ____________________________ = MILK SUPPLY (TOT. PRODUCTION)

4. Total U.S. Milk Production Source: Dairy Yearbook, ERS & NASS

5. TOTAL MILK DEMAND NO. CONSUMERS X PER CAPITA MILK CONSUMPTION ________________________________ = MILK DEMAND

6. Total U.S. Milk Production and Total Commercial Disappearance, 1980-2006 Sources: Agricultural Statistics, NASS, USDA & Livestock, Dairy & Poultry, ERS, USDA

7. Basic Economic Concepts n Supply Function n Demand Function n Equilibrium Price and Quantity n Market Clearing Price and Quantity n Total Industry Revenue n Price Supports Above Equilibrium

8. Price $/# PePe Supply QeQe Quantity # of milk supplied # of milk demanded

9. Price $/# PePe Supply Demand QeQe Quantity # of milk supplied # of milk demanded

10. Price $/# PePe Supply Demand QeQe Quantity # of milk supplied # of milk demanded

11. Price $/# PePe Supply Demand QeQe Quantity # of milk supplied # of milk demanded Total Revenue = P * Q

12. Total U.S. Milk Production and Total Commercial Disappearance, 1980-2006 Sources: Agricultural Statistics, NASS, USDA & Livestock, Dairy & Poultry, ERS, USDA

13. Price $/# PePe Supply Demand QeQe Quantity # of milk supplied # of milk demanded PSPS QssQds Total Revenue = Ps * Qss

14. Price $/# PePe Supply Demand QeQe Quantity # of milk supplied # of milk demanded PSPS QssQds Total Revenue = Ps * Qss

15. Total U.S. Milk Production and Total Commercial Disappearance, 1980-2006 Sources: Agricultural Statistics, NASS, USDA & Livestock, Dairy & Poultry, ERS, USDA

16. SUPPLY ISSUES  FARMS  PRODUCTION SYSTEMS  COWS  PRODUCTION PER COW  LOCATION OF PRODUCTION  COSTS AND RETURNS

17. DEMAND ISSUES  PRODUCTS CONSUMED  PER CAPITA CONSUMPTION  POPULATION GROWTH

18. Number of Dairy Farms, U.S. Source: Census of Agriculture, NASS, U.S. Dept. of Agriculture

19. Number of Iowa Dairy Farms Source: Census of Agriculture, NASS, U.S. Dept. of Agriculture

20. Number of Dairy Farms, Selected States Source: Census of Agriculture, NASS, U.S. Dept. of Agriculture

21. Number of Dairy Cows, U.S. Source: NASS, USDA, on-line database, 3/28/05

22. Number of Dairy Cows, Iowa Source: NASS, USDA, on-line database, 3/23/05 Proj.

23. Number of Dairy Cows, Selected States Source: Census of Agriculture, NASS, U.S. Dept. of Agriculture

24. Average Number of Cows Per Farm, U.S. Source: Census of Agriculture, NASS, U.S. Dept. of Agriculture

25. Average Number of Cows Per Farm in Iowa Source: Census of Agriculture, NASS, U.S. Dept. of Agriculture

26. Average Number of Cows Per Farm, Selected States Source: Census of Agriculture, NASS, U.S. Dept. of Agriculture

27. Production Per Cow, U.S. Source: NASS, USDA, on-line database, 3.23.05

28. Production Per Cow in Iowa Source: NASS, USDA, on-line database, 3/21/05

29. Production Per Cow, Selected States Source: NASS, USDA, on-line database, 3/21/05

30. USDA, Federal Milk Market Administrator, Tulsa, 2/2002

31. USDA, Federal Milk Market Administrator, Tulsa, 2/2005

33. Number of Cows & Production Per Cow, U.S. Source: NASS, USDA, on-line database, 3/21/05

34. U.S.DAIRY PRODUCTION--SUPPLY n The Production “Plant” –Production Systems used –Producer Size Vs. Production Share n Geographic Distribution of Milk Production

35. GENERAL PRODUCTION SYSTEMS  Tie stall or stanchion  Traditional  Modern (humid climate)  Modern (dry lot)  Rotational grazing

36. DAIRY PRODUCTION METHODS AND FACILITIES n Tie stall (stanchion) barn system –Cows tethered, milked, bedded in stall –Milking unit moved stall-to-stall –Pipeline system through barn –Feed brought to cow –Loft and silo for feed –Smaller operations (less 100 cows)

37. DAIRY PRODUCTION METHODS AND FACILITIES n Advantages –Suited to cold weather –Cow comfort in winter –Aesthetics for many –Existing system On many farms

38. DAIRY PRODUCTION METHODS AND FACILTIES n Problems –Labor intensive –High cost - $7,000-$10,000/cow (with land and cows) –Expansion is difficult –Purchasing and handling ingredients in volume can be difficult

46. DAIRY PRODUCTION METHODS AND FACILITIES n Advantages –Suited to cold weather –Cow comfort in winter –Aesthetics for many –Existing system On many farms

47. DAIRY PRODUCTION METHODS AND FACILTIES n Problems –Labor intensive –High cost - $7,000-$10,000/cow (with land and cows) –Expansion is difficult –Purchasing and handling ingredients in volume can be difficult

48. GENERAL PRODUCTION SYSTEMS  Tie stall or stanchion  Traditional  Modern (humid climate)  Modern (dry lot)  Rotational grazing

49. DAIRY PRODUCTION METHODS AND FACILITIES n “Traditional” system –Milking and housing are separated –Housing in some type of confinement system »Concrete corrals »“Utah” stalls (open with roof over head) »Free stall housing (dry stalls)

50. DAIRY PRODUCTION METHODS AND FACILITIES n Feeding down middle and/or on sides n Feed pelleted concentrate in parlor and forage is fed outside n OR total mixed ration of concentrate and forage is fed n Parlor milking of cows –Flat barn –Four on a side end-to-end –Herringbone

51. DAIRY PRODUCTION METHODS AND FACILITIES n Advantages –Adaptable to climate variability –Adapted to home production of forages/grains –Adaptable to diversified family farm n Problems –Labor requirements –Cost $4,000-$7,000/cow (with land and cows) –Smaller size and input purchasing levels

52. GENERAL PRODUCTION SYSTEMS  Tie stall or stanchion  Traditional  Modern (humid climate)  Modern (dry lot)  Rotational grazing

53. DAIRY PRODUCTION METHODS AND FACILITIES n “Modern” free stall system –Free stall housing –Lagoon Manure Storage –Modern parlors –Free stall in humid areas »Ventilation »Flush systems for waste in parlor »Flushing in concrete walkways and free stalls

54. DAIRY PRODUCTION METHODS AND FACILITIES n “Modern” free stall system—Arid –Similar Free stall housing With larger parlors –Reuse water 2 or 3 times –Free stall in arid areas »Open sides »Fans during hot months »Flush systems for waste in parlor »Flushing in concrete walkways and free stalls

62. DAIRY PRODUCTION METHODS AND FACILITIES n Milking Parlors –High Capacity –Many use 3X milking schedule –Operate more or less continuously 24/7 –Large bulk tank capacity geared to tanker pickup

69. Questions?