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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, Tuscola, St. Clair, Lapeer, Saginaw, Genesee, Macomb, Oakland, Washtenaw, Wayne, & Monroe Counties. Dairy Market Update: May 2013. 2013 Sponsors. Benefactor ($200).

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Dairy Market Update: May 2013

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  1. 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 Dairy Market Update: May 2013

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

  3. +$0.66 $17.59 +$0.35 $18.10 April Milk Prices + $1.87Class III vs. Apr 2012 ($14.68, +$2.91 vs. Apr average) + $3.30Class IV vs. Apr 2012 ($14.80, +$3.30 vs. Apr average) USDA Michigan Mailbox Jan 2013: $19.81 up $0.77

  4. +0.3%Top 23 States versus April 2012 +0.2%Nationally versus April 2012 U.S. Production 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 (’99-’12 ave. = +1.6%)

  5. +0.2%Nationally versus April 2012 U.S. Production 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 (’99-’12 ave. = +1.6%) Tenth time in past eleven months below trend increase. Record 200.324 billion lbs. for 2012!

  6. +0.2%Nationally versus April 2012 U.S. Production 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 (’99-’12 ave. = +1.6%) BUT… Q-1 2012 U.S. milk production was up 4.2% vs. 2011!

  7. +0.2%Nationally versus April 2012 U.S. Production 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 (’99-’12 ave. = +1.6%) Michigan +1.3% versus April 2012.

  8. +0.2%Nationally versus April 2012 U.S. Production 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 Seqestration! Milk Production Report No cow numbers! No milk per cow! “administrative data” only (’99-’12 ave. = +1.6%)

  9. +0.2%Nationally versus April 2012 U.S. Production 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 (’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 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 (’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 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 (’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 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 USDA report on alfalfa hay and alfalfa hay mixtures: U.S.: -34% vs. last May 1st 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. (’99-’12 ave. = +1.6%)

  13. +0.2%Nationally versus April 2012 U.S. Production 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 (’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 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 (’99-’12 ave. = +1.6%) IOFC up 5.5% vs. March 2013 (+$0.47).

  15. +0.2%Nationally versus April 2012 U.S. Production 2012 +2.1% vs. 2011 2013 +0.1% vs. 2012 (’99-’12 ave. = +1.6%) April all-milk price +$2.50/cwt vs. April 2012.

  16. Above Trend For Apr 2012 +187,200 hd vs. 2011! YTD +56,200 hd (as of 4/30/13) April: +11.9% vs. April 2012 +1.1% vs. March April +28,600 hd vs. April 2012 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.

  21. Going Strong…Better! No??!! 2012 vs. 2011 +1.7%; 2013 vs. 2012 +0.8% (1996-12 average = +1.6%) Cheese: 1996-12 average = +2.5% 2012 vs. 2011 +1.2%; 2013 vs. 2012 +0.1%

  22. Going Strong…Better! No??!! 2012 vs. 2011 +1.7%; 2013 vs. 2012 +0.8% (1996-12 average = +1.6%) Total commercial disappearance set all-time monthly record for Jan in Jan; but down 0.7% in Feb vs. Feb 2012! Cheese: 1996-12 average = +2.5% 2012 vs. 2011 +1.2%; 2013 vs. 2012 +0.1%

  23. Going Strong…Better! No??!! 2012 vs. 2011 +1.7%; 2013 vs. 2012 +0.8% (1996-12 average = +1.6%) 2013 vs. 2012 (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) Cheese: 1996-12 average = +2.5% 2012 vs. 2011 +1.2%; 2013 vs. 2012 +0.1%

  24. Going Strong…Better! No??!! 2012 vs. 2011 +1.7%; 2013 vs. 2012 +0.8% (1996-12 average = +1.6%) March fluid milk 38th consecutive month of declining sales versus same month last year. Cheese: 1996-12 average = +2.5% 2012 vs. 2011 +1.2%; 2013 vs. 2012 +0.1%

  25. American Cheese(+5.3%Apr vs. Apr 2012, +35.2 M lbs.vs. 5/1/12) Total Cheese(+4.5%Apr vs. Apr 2012, +48.1 M lbs. vs. 5/1/12) May 07-12 Average = $1.5505 5/28/13 Close = $1.7388

  26. American Cheese(+5.3%Apr vs. Apr 2012, +35.2 M lbs.vs. 5/1/12) Total Cheese(+4.5%Apr vs. Apr 2012, +48.1 M lbs. vs. 5/1/12) Total Cheese Inventory Above 1.0 billion pounds fifth consecutive month! May 07-12 Average = $1.5505 5/28/13 Close = $1.7388

  27. American Cheese(+5.3%Apr vs. Apr 2012, +35.2 M lbs.vs. 5/1/12) Total Cheese(+4.5%Apr vs. Apr 2012, +48.1 M lbs. vs. 5/1/12) Cheese Inventories All-time historical highs! May 07-12 Average = $1.5505 5/28/13 Close = $1.7388

  28. American Cheese(+5.3%Apr vs. Apr 2012, +35.2 M lbs.vs. 5/1/12) Total Cheese(+4.5%Apr vs. Apr 2012, +48.1 M lbs. vs. 5/1/12) 2013 cheese production (Jan-Mar): American cheese 2.7% (1.9%) Total cheese +1.7% (2.7%) vs. Jan-Mar 2012. May 07-12 Average = $1.5505 5/28/13 Close = $1.7388

  29. Butter +22.2%versus Apr 2012 May 07-12 Average = $1.5062 5/28/13 Close = $1.5450

  30. Butter +22.2%versus Apr 2012 Butter Inventory All-time historical high! May 07-12 Average = $1.5062 5/28/13 Close = $1.5450

  31. Butter +22.2%versus Apr 2012 2013 butter production (Jan-Mar) +4.4% (2.3%) vs.Jan-Mar 2012. May 07-12 Average = $1.5062 5/28/13 Close = $1.5450

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

  33. 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%)

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

  35. 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%)

  36. Dairy Exports 2011-2012 One of every 8 tanker loads of raw milk was ultimately exported!

  37. 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. 2012 (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 2013. 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. Dairy Exports

  38. 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).

  39. Dairy Exports USD Strengthening!

  40. 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.”

  41. 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!

  42. 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.”

  43. 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...”

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

  45. Class III Current Class III futures prices are averaging +$1.93 (2013), +$1.86 (next 12 mos.), +$0.73(2014) versus the 2007-2013 averages.

  46. Class III / Cheese 4/29/13 2013: $18.13 ($18.52) (-$0.39) Next 12 mos: $18.55 ($18.06) (-$0.49) 2014: $16.93 ($16.85) (+$0.07)

  47. Class III Current Class III futures prices are averaging +$1.93 (2013), +$1.86 (next 12 mos.), +$0.73(2014) versus the 2007-2013 averages.

  48. Where’s the Market Headed? • Cheese prices. 5/29/13 Ave. $1.7388 4/29/13 $1.7663 block/barrel cheese price.

  49. Where’s the Market Headed? • Cheese prices. 5/29/13 Ave. $1.7388 Decrease of $0.0275

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