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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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)

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

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

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

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

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

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)

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

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

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

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

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

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

Questions?