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Dairy Market Update: June 2011

Dr. Craig Thomas Michigan State University Extension Dairy Educator Sanilac, Huron, Tuscola, St. Clair, Lapeer, Genesee, Macomb, & Oakland Counties. Dairy Market Update: June 2011. Benefactor ($200). Greenstone FCS. Severance Ag Services. Secher Site Specific LLC.

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Dairy Market Update: June 2011

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  1. Dr. Craig Thomas Michigan State University Extension Dairy Educator Sanilac, Huron, Tuscola, St. Clair, Lapeer, Genesee, Macomb, & Oakland Counties Dairy Market Update: June 2011

  2. Benefactor ($200) Greenstone FCS Severance Ag Services Secher Site Specific LLC Major Sponsor ($100-$199) Active Feed Co. Thumb Veterinary Services Sponsor ($75) Crop Production Services: Sandusky & Deckerville Eastern Michigan Bank Contributor ($50) Copeland Insurance Agency

  3. -$0.35 $16.52 +$0.51 $20.29 May Milk Prices + $3.14 Class III vs. May 2010 ($13.07, +$3.45vs. May average) +$5.00Class IV vs. May 2010 ($13.65, +$6.64vs. May average) USDA Michigan Mailbox Jan-Mar: $18.57 up $2.87

  4. +1.3% Nationally versus May 2010 +1.5% Top 23 States versus May 2010 U.S. Production 2010 +1.8% vs. 2009 2011 +1.9%vs. 2010 (’99-’10 ave. = +1.6%) Below trend second consecutive month

  5. +1.3% Nationally versus May 2010 U.S. Production 2010 +1.8% vs. 2009 2011 +1.9%vs. 2010 (’99-’10 ave. = +1.6%) Michigan +0.3% versus May 2010.

  6. Cow Numbers Climbing Again? Yes! East of Mississippi River Since May 2010 (+9,000) Michigan (364K) up 5,000 hd versus May 2010 +13,000 hdAprMay May 2011 vs. May 2010 Nationwide: +81,000 hd Top 23 States: +103,000 hd CA, AZ, NM, ID, WA: +62,000 hd Feb 2005: +189,000 hd Up or even in 18 of Top 23 States

  7. Cow Numbers Climbing Again? Yes! East of Mississippi River Since May 2010 (+9,000) Rnd #10 CWT removed 34,442 cows, but USDA cow numbers up 79,000 hd since Sep low. Up or even in 18 of Top 23 States

  8. Milk Per Cow Climbing Again?! Yes, but slowing +0.5% May vs. May ’10 (U.S., +8 lb/cow; MI, -25 lbs/cow) Long Term Trend Increase Since 1999 = +1.6%/year 2010 = +2.8%; 2011 = +1.0% Fifth consecutive month below trend. May Milk:Feed Ratio = 1.74 (42ndconsec. mo. <3.0)

  9. Milk Per Cow Climbing Again?! Yes, but slowing +0.5% May vs. May ’10 (U.S., +8 lb/cow; MI, -25 lbs/cow) M:F ratio >2.0 only 19 of past 38 months. May Milk:Feed Ratio = 1.74 (42ndconsec. mo. <3.0)

  10. Milk Per Cow Climbing Again?! Yes, but slowing +0.5% May vs. May ’10 (U.S., +8 lb/cow; MI, -25 lbs/cow) May Milk:Feed Price Ratio All-Milk: $19.40 (-$0.20) Corn: $6.15 (-$0.20) Soybeans: $13.00 (-$0.10) Alfalfa Hay: $186 (+$31) May Milk:Feed Ratio = 1.74 (42ndconsec. mo. <3.0)

  11. Milk Per Cow Climbing Again?! Yes, but slowing +0.5% May vs. May ’10 (U.S., +8 lb/cow; MI, -25 lbs/cow) Feed costs up 61.4% vs. May 2010 ($6.90 to $11.15). May Milk:Feed Ratio = 1.74 (42ndconsec. mo. <3.0)

  12. Milk Per Cow Climbing Again?! Yes, but slowing +0.5% May vs. May ’10 (U.S., +8 lb/cow; MI, -25 lbs/cow) IOFC up 11.7% vs. May 2010 ($6.30 to $7.04). May Milk:Feed Ratio = 1.74 (42ndconsec. mo. <3.0)

  13. Milk Per Cow Climbing Again?! Yes, but slowing +0.5% May vs. May ’10 (U.S., +8 lb/cow; MI, -25 lbs/cow) IOFC down 5.0% vs. Apr 2011 (-$0.35). May Milk:Feed Ratio = 1.74 (42ndconsec. mo. <3.0)

  14. Milk Per Cow Climbing Again?! Yes, but slowing +0.5% May vs. May ’10 (U.S., +8 lb/cow; MI, -25 lbs/cow) May all-milk price +$4.40/cwt vs. May 2010. May Milk:Feed Ratio = 1.74 (42ndconsec. mo. <3.0)

  15. Milk Per Cow Climbing Again?! Yes, but slowing +0.5% May vs. May ’10 (U.S., +8 lb/cow; MI, -25 lbs/cow) Will CW prevail? Lower milk per cow? May Milk:Feed Ratio = 1.74 (42ndconsec. mo. <3.0)

  16. Milk Per Cow Climbing Again?! Yes, but slowing +0.5% May vs. May ’10 (U.S., +8 lb/cow; MI, -25 lbs/cow) Feed CostsCornSoymeal Okeechobee, FL $8.55 $416 Turlock, CA $8.18$404 Lynden, WA $8.45$398 May Milk:Feed Ratio = 1.74 (42ndconsec. mo. <3.0)

  17. Well Above Trend For May Cull rate above trend 15thtime in last 16 months. May 2011 +10,900 hd vs. May 2010 2011: +86,500 vs. 2010 (through 6/4/11)

  18. Cull Rate Above Long Term Average (28.4%) +4.1% What will the future hold?

  19. Cull Rate Above Long Term Average (28.4%) +4.1% Dairy Cow Exports YTD 22,774 hd have been exported. Turkey, Mexico, and Russia are the leading destinations.

  20. Cull Rate Above Long Term Average (28.4%) +4.1% U.S. cull cow prices up 34.1% vs. May 2010 ($79.10 vs. $59.00). Cull rate should stay above trend, but there are plenty of replacement heifers to keep national herd at current level and even allow for some growth in 2011.

  21. Going Strong! 2010: Above trend 10 out of 13 months! 2010 vs. 2009 +3.3; 2011 Jan-Mar vs. 2010 +3.6 (1996-10 average = +1.6%) Cheese: 1996-10 average = +2.6% 2010 vs. 2009 +3.1%; 2011 Jan-Mar vs. 2010 +6.7%

  22. Going Strong! 2010: Above trend 10 out of 13 months! 2010 vs. 2009 +3.3; 2011 Jan-Mar vs. 2010 +3.6 (1996-10 average = +1.6%) Total commercial disappearance set all-time monthly records for Jan, Feb and Mar! Cheese: 1996-10 average = +2.6% 2010 vs. 2009 +3.1%; 2011 Jan-Mar vs. 2010 +6.7%

  23. Going Strong! 2010: Above trend 10 out of 13 months! 2010 vs. 2009 +3.3; 2011 Jan-Mar vs. 2010 +3.6 (1996-10 average = +1.6%) Total cheese commercial disappearance set all-time monthly records for Jan, Feb and Mar! Cheese: 1996-10 average = +2.6% 2010 vs. 2009 +3.1%; 2011 Jan-Mar vs. 2010 +6.7%

  24. Going Strong! 2010: Above trend 10 out of 13 months! 2010 vs. 2009 +3.3; 2011 Jan-Mar vs. 2010 +3.6 (1996-10 average = +1.6%) 2011 vs. 2010 American Cheese: +6.0% Other Cheese: +7.3% Butter: +8.1% NFDM: +0.9% Fluid Milk: -1.3% (Jan-Apr) Cheese: 1996-10 average = +2.6% 2010 vs. 2009 +3.1%; 2011 Jan-Mar vs. 2010 +6.7%

  25. Going Strong! 2010: Above trend 10 out of 13 months! 2010 vs. 2009 +3.3; 2011 Jan-Mar vs. 2010 +3.6 (1996-10 average = +1.6%) Total butter commercial disappearance set all-time monthly records for Feb and Mar! Cheese: 1996-10 average = +2.6% 2010 vs. 2009 +3.1%; 2011 Jan-Mar vs. 2010 +6.7%

  26. Going Strong! 2010: Above trend 10 out of 13 months! 2010 vs. 2009 +3.3; 2011 Jan-Mar vs. 2010 +3.6 (1996-10 average = +1.6%) Apr fluid milk 15th consecutive month of declining sales versus same month last year. Cheese: 1996-10 average = +2.6% 2010 vs. 2009 +3.1%; 2011 Jan-Mar vs. 2010 +6.7%

  27. Going Strong! 2010: Above trend 10 out of 13 months! 2010 vs. 2009 +3.3; 2011 Jan-Mar vs. 2010 +3.6 (1996-10 average = +1.6%) 2010 decline in fluid milk sales greatest since 1982. Cheese: 1996-10 average = +2.6% 2010 vs. 2009 +3.1%; 2011 Jan-Mar vs. 2010 +6.7%

  28. American Cheese(+0.9% May vs. May 2010, +5.5 M lbs. vs. 6/1/10) Total Cheese(+2.1% May vs. May 2010, +21.7 M lbs. vs. 6/1/10) Am cheese first AprMay decline since 2001! June 97-10 Average = $1.4312 6/27/11 Close = $2.1038

  29. American Cheese(+0.9% May vs. May 2010, +5.5 M lbs. vs. 6/1/10) Total Cheese(+2.1% May vs. May 2010, +21.7 M lbs. vs. 6/1/10) 2011 cheese production: American cheese +1.1% (2.1%) Total cheese +3.2% (2.8%) Jan-Apr June 97-10 Average = $1.4312 6/27/11 Close = $2.1038

  30. Butter -19.8%versus May 2010 Began June 2011with 42.1 M lbs. less butter than June 2010. June 97-10 Average = $1.3760 6/27/11 Close = $2.0200

  31. Butter -19.8%versus May 2010 17th consecutive month of declining inventory versus same month last year. June 97-10 Average = $1.3760 6/27/11 Close = $2.0200

  32. Butter -19.8%versus May 2010 Jan-Apr butter production +11.1% vs. 2010. June 97-10 Average = $1.3760 6/27/11 Close = $2.0200

  33. Dairy Exports Dairy trade surpluses 19 of last 20 mos. 2009 dairy trade deficit of $218 M 2010 dairy trade surplus of $1.168 B 2010 dairy exports $3.71 B +63% vs. 2009

  34. Dairy Exports CY-2011 Jan: $335 M, +49% vs. Jan 2010 Feb: $348 M, +55% vs. Feb 2010 Mar: $421M, +42% vs. Mar 2010 Apr: $403 M, +40% vs. Apr 2010 Q1: U.S. dairy exports equaled 13.2% of total U.S. solids production.

  35. Dairy Exports FY-2011 (Oct-Apr) Total exports: $2.517 B, +46% vs. FY-2010 Dairy trade surplus: $820 M March cheese exports a record! 49.3 M lbs., +67% vs. March 2010 Equaled 5.4% of total U.S. cheese production!

  36. Dairy Exports CWT The U.S. dairy export market is growing nine times faster than our domestic market.

  37. Dairy Exports CWT In 2010 68% of exported cheddar cheese went through CWT export assistance program.

  38. Dairy Exports CWT FAPRI: over past two years CWT export assistance program added $0.20/cwt to all-milk price.

  39. Dairy Exports EU/Oceania Not likely to make any significant inroads into our export market share anytime soon?

  40. Dairy Exports EU/Oceania New Zealand’s production season ended very strong! Jan-Apr prod- uction up 9.3% (+33.3% Apr). May up 4-5% vs. last year. Additional milk moving into WMP production. NZ-WMP exports up 38%.

  41. Dairy Exports Bottomline Exports should continue strong; but current cheese, butter, and powder prices may be near the limit to maintain current export levels.

  42. Retail Food Prices April MPFE CPI = +7.6% All-Food CPI = +3.2% Dairy CPI = +6.3% Whole Milk CPI = +11.9% Price: +$0.457/gal Butter CPI = +22.9% Price: +$0.874/lb Ice Cream CPI = +9.9% Price: +$0.432/half gal. Cheese CPI = +4.6% Price: -$0.048/lb(p) +$0.557/lb(n)

  43. Class III Current Class III futures prices are averaging +$4.46(2011), +$4.40 (next 12 mos.), +$3.19 (2012) versus their 16-year averages.

  44. Class III / Cheese 5/27/11 2011: $17.68 ($17.67) (+$0.0083) Next 12 mos: $17.54 ($17.63) (-$0.0866) 2012: $16.21 ($16.38) (-$0.1667)

  45. Class III Greed Hope Fear Current Class III futures prices are averaging +$4.46(2011), +$4.32 (next 12 mos.), +$2.99 (2012) versus their 16-year averages.

  46. 2011 Class III 1995-2011 Class III Ave. $13.28 2011 Class III Average $17.68 $18.67 First half 2011: $17.08 (~$17.97) Second half 2011: $18.28 (~$19.38) Current Class III futures prices are averaging +$4.46(2011), +$4.32 (next 12 mos.), +$2.99 (2012) versus their 16-year averages.

  47. Next 12 Months Class III 1995-2011 Class III Ave. $13.28 Next 12 Months Class III Average $17.54 $18.53 Current Class III futures prices are averaging +$4.46(2011), +$4.32 (next 12 mos.), +$2.99 (2012) versus their 16-year averages.

  48. 2012 Class III 1995-2011 Class III Ave. $13.28 2012 Class III Average $16.21 2012: $17.20 Current Class III futures prices are averaging +$4.46(2011), +$4.32 (next 12 mos.), +$2.99 (2012) versus their 16-year averages.

  49. Where’s the Market Headed? • Cheese prices. 6/27/11 Ave. $2.1038 5/27/11 $1.8138 block/barrel cheese price.

  50. Where’s the Market Headed? • Cheese prices. 6/27/11 Ave. $2.1038 Increase of $0.2900

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