Transcript Overview of U.S. and

Overview of U.S. and
Michigan Dairy Industries
Dr. Craig Thomas
Michigan State University Extension
Dairy Educator
Sanilac, Huron, Tuscola, St. Clair, Lapeer, Genesee,
Macomb, Oakland & Saginaw Counties
How Milk Is Sold In The U.S.
 Unit of sale:




Dollars per hundredweight (cwt)
1 cwt = 100 pounds
1 cwt = 12.0 gallons (8.33 lbs/gal)
1 cwt = 45.44 liters
1 cwt = 45.36 kilograms
2
How Milk Is Sold In The U.S.
 Method of sale:
 Farmer to farmer-owned cooperatives (e.g., Michigan Milk
Producers Association, Dairy Farmers of America)
 Farmer to processors (e.g., Dean Foods)
 Farmer to consumers
3
How Milk Is Sold In The U.S.
Top U.S. Dairy Cooperatives (2004)
Rank
Dairy Cooperative
Total Milk
Total Milk
Number of
Marketed
Marketed
Member Farms
(million lb)
(million kg)
12,814
35,975
16,318
656
15,188
6,889
3,557
11,912
5,403
679
6,736
3,055
1
Dairy Farmers of America
2
California Dairies, Inc.
3
Land O'Lakes, Inc.
4
Northwest Dairy Association
5
Family Dairies, USA
3,960
6,678
3,029
6
Dairylea Cooperative, Inc.
2,357
5,612
2,545
7
Associated Milk Producers, Inc.
4,000
5,211
2,364
8
Manitowoc Milk Producers Coop
2,924
5,211
2,364
9
Foremost Farms, USA
3,120
4,774
2,165
10
Select Milk Producers, Inc.
78
3,658
1,659
11
Michigan Milk Producers Assoc.
1,684
3,308
1,500
12
Southeast Milk, Inc.
310
2,895
1,313
~90% of total U.S. milk marketed
4
U.S. Dairy Farm Data
 USDA 2011 U.S. data:
 Total cows: 9.194 million
 Total dairy herds: ~53,000 (licensed)(~173 cows/herd ave.)
 Total milk production: 196.245 billion pounds (89.2 billion

liters; 89.0 billion kilograms)
Average milk/cow per year: 21,525 lb/cow (9,782 liter;
9,764 kg)
Average milk price: ~$20.14/cwt ($0.443/liter; $0.444/kg)

 Total milk income: ~$39.5 billion ($4,335/cow)
5
U.S. Dairy Farm Data
Apr-2012
9,272,000
6
U.S. Dairy Farm Data
7
U.S. Dairy Farm Data
Average = -6.0%
Total = -61.2%
Licensed Dairy Herds: U.S.
1995-2010
150,000
Herds
130,000
110,000
90,000
70,000
50,000
Year
8
U.S. Dairy Farm Data
Average Dairy Herd Size
1995-2010
Michigan
U.S.
Number of Cows
200
175
150
125
100
75
50
Year
9
U.S. Dairy Farm Data
U.S. Dairy Herd Structure, 2003-2011
Dairy Herds (by herd size)
200-
500-
1,000-
Total
Year
<200
499
999
1,999
2,000+
Herds
2003
78,630
4,765
1,700
815
450
86,360
2004
73,810
4,700
1,700
815
495
81,520
2005
70,565
4,662
1,700
850
523
78,300
2006
67,270
4,567
1,700
870
573
74,980
2007
62,316
4,359
1,720
920
680
69,995
2008
59,700
3,950
1,720
900
730
67,000
2009
57,800
3,850
1,700
910
740
65,000
2010
55,200
3,950
1,670
920
760
62,500
2011
52,600
4,000
1,650
950
800
59,750
Source: USDA-NASS, "Farms, Land in Farms and Livestock Operations,
10
U.S. Dairy Farm Data
 USDA 2010 U.S. data:
 500+ cow herds: 5.4% of all herds
 500+ cow herds: 56.7% of all dairy cows
 500+ cow herds: 61.0% of total milk production
11
U.S. Dairy Farm Data
(total milk production)
Top 10 U.S. Dairy States (total milk production, 2011)
Milk/cow
Rank
State
(lbs./year)
Total Milk
Total Milk
Total Milk
Production
Production
Production
% of U.S.
Cows
(billion pounds)
(billion liters)
(billion kg)
Total
Number of
1
2
1
California
23,435
1,769,917
41.5
18.8
18.8
21.1%
2
Wisconsin
20,660
1,265,083
26.1
11.9
11.9
13.3%
3
Idaho
22,940
578,417
13.3
6.0
6.0
6.8%
4
New York
20,990
610,000
12.8
5.8
5.8
6.5%
5
Pennsylvania
19,610
540,750
10.6
4.8
4.8
5.4%
6
Texas
22,190
431,333
9.6
4.3
4.3
4.9%
7
Minnesota
18,965
470,417
8.9
4.1
4.0
4.5%
8
Michigan
23,165
365,917
8.5
3.9
3.8
4.3%
9
New Mexico
24,840
328,583
8.2
3.7
3.7
4.2%
10
Washington
23,700
260,333
6.2
2.8
2.8
3.1%
6,620,750
72.0%
145.6
74.2%
66.2
66.0
196.245
89.2
Total
% U.S. Total
74.2%
1,2
NASS: Milk Production Report
3
NASS: Agricultural Prices
89.0
12
U.S. Dairy Farm Data
(milk per cow)
Top 10 U.S. Dairy States (milk per cow, 2011)
Milk/cow
Rank
State
(lbs./year)
Total Milk
Milk
Milk
Dairy Cows
Production
Per Cow
Per Cow
Cows
% of U.S. Total
(billion pounds)
(liters/year)
(kg/year)
Number of
1
2
1
New Mexico
24,840
328,583
3.6%
8.2
11,288
11,267
2
Washington
23,700
260,333
2.8%
6.2
10,770
10,750
3
Colorado
23,510
127,500
1.4%
3.0
10,684
10,664
4
Arizona
23,475
187,750
2.0%
4.4
10,668
10,648
5
California
23,435
1,769,917
19.3%
41.5
10,650
10,630
6
Michigan
23,165
365,917
4.0%
8.5
10,527
10,507
7
Idaho
22,940
578,417
6.3%
13.3
10,425
10,405
8
Texas
22,190
431,333
4.7%
9.6
10,084
10,065
9
Iowa
21,285
203,917
2.2%
4.3
9,673
9,655
10
Kansas
21,210
122,917
1.3%
2.6
9,638
9,621
196.245
89.2
89.0
Total
% U.S. Total
4,376,583
47.6%
1,2
NASS: Milk Production Report
3
NASS: Agricultural Prices
13
U.S. Dairy Farm Data
(gross income per cow)
Top 10 U.S. Dairy States (gross income per cow, 2011)
Rank
State
Milk/cow
Number of
All-milk price
Gross $/cow
(lbs./year)1
Cows2
($/cwt)3
($/year)
1
Washington
23,700
260,333
$20.62
$4,891
2
Michigan
23,165
365,917
$20.96
$4,857
3
New Mexico
24,840
328,583
$19.42
$4,825
4
Colorado
23,510
127,500
$19.97
$4,697
5
Arizona
23,475
187,750
$19.84
$4,650
6
Texas
22,190
431,333
$20.82
$4,617
7
Florida
19,105
118,500
$24.21
$4,605
8
New York
20,990
610,000
$21.43
$4,499
9
Kansas
21,210
122,917
$20.93
$4,439
10
Oregon
20,410
121,167
$21.35
$4,362
2,674,000
29.1%
$20.95
$4,644
Total
% U.S. Total
1,2
NASS: Milk Production Report
3
NASS: Agricultural Prices
14
U.S. Dairy Farm Data
(gross income per cow)
Top 10 U.S. Dairy States (gross income per cow, 2011)
Rank
State
1
Washington
2
Michigan
Milk/cow
Number of
All-milk price
Gross $/cow
(lbs./year)1
Cows2
($/cwt)3
($/year)
23,700
260,333
$20.62
$4,891
23,165
365,917
$20.96
$4,857
Michigan
2004-2011
#1 in gross income per cow
3
New Mexico
24,840
328,583
$19.42
$4,825
4
Colorado
23,510
127,500
$19.97
$4,697
5
Arizona
23,475
187,750
$19.84
$4,650
6
Texas
22,190
431,333
$20.82
$4,617
7
Florida
19,105
118,500
$24.21
$4,605
8
New York
20,990
610,000
$21.43
$4,499
9
Kansas
21,210
122,917
$20.93
$4,439
10
Oregon
20,410
121,167
$21.35
$4,362
2,674,000
29.1%
$20.95
$4,644
Total
% U.S. Total
1,2
NASS: Milk Production Report
3
NASS: Agricultural Prices
15
Michigan Dairy Farm Data
 USDA 2011 Michigan data:
 Total cows: 366,000
 Total dairy herds: 2,186 (average herd size = ~167 cows)
 Total milk production: 8.48 billion pounds (3.85 billion


liters; 3.85 billion kilograms)
Average milk price: ~$21.39/cwt ($0.471/liter;
$0.471/kilogram)
Total milk income: ~$1.813 billion
16
Michigan Dairy Farm Data
22.4% increase since 1999
17
Michigan Dairy Farm Data
57.3% increase since 1998
18
Michigan Dairy Farm Data
Average Dairy Herd Size
1995-2010
Michigan
U.S.
Number of Cows
200
175
150
125
100
75
50
Year
19
Michigan Total
366,000 Cows
~85% of Michigan dairy cows
are in 5 major milk sheds
~51,000 Cows
~69,000 Cows
~66,000 Cows
~73,000 Cows
~46,000 Cows
Michigan Farm Data
 USDA Michigan data:




Total farms (all types): 55,000 (2009)
Land in farms: 10,000,000 acres (4.05 million hectares)
Average value per acre: $3,750 ($1,518/hectare)
Average milk price (2011): ~$21.39/cwt ($0.471/liter;
$0.471/kilogram)
 Total milk income (2011): ~$1.813 billion
21
Michigan Farm Data
22
Michigan Farm Data
Michigan crops acreage, production, price, and value, 2008
Crop
Unit
Harvested
Harvested
Value of
Acres
Acres
Production
Price
Production
(1,000 acres)
(hectares)
(x 1,000)
(USD)
(million USD)
Corn
bushels
2,140
866,027
295,320
$3.60
$1,063.2
Hay
tons
1,020
412,779
2,633
$153.00
$401.9
Soybeans
bushels
1,890
764,856
69,930
$9.20
$643.4
Dry beans
cwt
195
78,914
3,607
$38.00
$137.1
bushels
710
287,327
48,990
$5.65
$276.8
Potatoes
cwt
42.5
17,199
14,875
$10.50
$156.2
Sugar beets
tons
136
55,037
3,903
$36.00
$140.5
Oats
bushels
60
24,281
3,960
$3.30
$13.1
Barley
bushels
10
4,047
460
$3.25
$1.5
Maple syrup
gallons
405
163,898
105
$41.00
$4.3
Peppermint
pounds
0.8
324
36
$28.00
$1.0
Spearmint
pounds
1.5
607
90
$15.00
$1.4
Fruits & nuts
109
44,111
NA
$363.3
Vegetables
105
42,492
NA
$239.1
6,668
2,698,444
NA
$3,447.0
Wheat
Principal crops
23
Michigan Farm Data
Michigan commodities ranked first in U.S. agriculture, 2008
Item
Unit
Quantity
Percent of
(x 1,000)
U.S.
Beans, dry black
cwt
1,691
57.8%
Beans, dry cranberry
cwt
108
76.6%
Beans, dry small red
cwt
425
52.1%
Blueberries
pounds
110,000
31.5%
Cherries, tart
pounds
165,000
77.0%
Cucumbers (for pickles)
tons
189.1
33.4%
Other herbacious perennials
pots
21,125
14.6%
Geraniums (seeds and cuttings)
pots
22,172
36.4%
Grapes, Niagara
tons
22.0
36.4%
Impatiens
flats
1,932
22.3%
Petunias
flats
1,476
19.8%
Squash
cwt
1,320
19.7%
24
Milk Marketing in the U.S. & Michigan
 Multiple component pricing
Butterfat
Protein
}
+
+ Other solids
+ Producer price differential
+ Somatic cell count adjustment
=
Total component value
=
Producer mailbox price
Wholesale finished
dairy product prices
• Cheese
• Butter
• NFDM
• Dry Whey
converted to
component prices
+ Co-op premiums (quality and/or volume)
+ Over-order premiums
25
Currently there are 10 FMMO’s in U.S.
26
Milk Marketing in the U.S.
Classified Pricing
Class I
Bottled Milk
Cultured
Buttermilk
Eggnog
Class II
Ice Cream
Hermetically-Sealed
Containers
Yogurt/Cottage Cheese
Pkg. Cream
Class III
Class IV
Cheese
Cream Cheese
Butter
NFDM
27
Milk Marketing in the U.S.
Wholesale Cheese,
Butter, NFDM, Whey
Product Prices
Component Values:
butterfat, protein,
other solids
Class Prices:
I, II, III, IV
Farm Price: Location,
Component & SCC
Adjustments
28
Federal Milk Marketing Orders (FMMO’s)
Classified pricing:
Price of milk based on
various class utilizations.
29
Milk Marketing in the U.S.
$21.67
Aug, 2011
$19.13
$12.74
$9.31
Feb, 2009
30
Dairy Farm Economics (MI)
 Michigan Dairy Farm Business Analysis Summary (MDFBAS)
 Annual financial data collected from ~150 dairy farms in MI
 Farms not randomly selected
 Herd sizes vary from <50 cows to >2,000 cows
 Must produce at least 50% of gross cash farm income from

milk and dairy animal sales
Data sorted into three categories based on profitability:
Low 25%, Average, High 25%
31
MDFBAS Data (1995-2010)
Number of Cows
400
272.6
No. Cows
300
200
198.7
157.3
100
0
Low 25%
Ave.
High 25%
Dairy
~30 to >2,000 cows
32
MDFBAS Data (1995-2010)
Milk Sold Per Cow
25,000
Lbs. Milk
22,345
20,700
20,000
18,812
15,000
Low 25%
Ave.
High 25%
Dairy
+0.78 r2 with ROA
33
MDFBAS Data (1995-2010)
High 25%
+3,600 lbs.
vs. Low 25%
34
MDFBAS Data (1995-2010)
Average Milk Price
$16.00
+$770 per
cow/year
$14.84
$14.73
$15.06
$14.93
$15.07
$14.96
Low 25%
Ave.
High 25%
$/cwt
$14.00
$12.00
$10.00
Dairy
35
MDFBAS Data (1995-2010)
36
MDFBAS Data (1995-2010)
Total Crop Acres
1,000
Acres
750
878
696
605
500
250
0
Low 25%
Ave.
High 25%
Dairy
37
MDFBAS Data (1995-2010)
Percent of Cash Farm Income
Milk Income
100%
80%
80.2%
81.9%
82.8%
Low 25%
Ave.
High 25%
60%
40%
20%
0%
Dairy
38
MDFBAS Data (1995-2010)
Average Farm Assets
$12,000
$10,509
$10,071
$9,032
$/cow
$8,000
$4,000
$0
Low 25%
Ave.
High 25%
Dairy
2011: $13,556/cow
~$4.96 billion total
39
MDFBAS Data (1995-2010)
Average = +6.1%
Total = +104.4%
High 25%
-$1,541/cow
vs. Low 25%
40
MDFBAS Data (1995-2010)
Average Farm Liabilities
$4,000
$3,779
$3,083
$3,000
$/cow
$2,679
$2,000
$1,000
Low 25%
Ave.
High 25%
Dairy
2010
$5,019
$3,990
$3,248
41
MDFBAS Data (1995-2010)
High 25%
-$1,770/cow
vs. Low 25%
42
MDFBAS Data (1995-2010)
Debt:Asset Ratio (Ending)
100%
Debts:Assets
80%
60%
40%
38%
32%
29%
Ave.
High 25%
20%
0%
Low 25%
Dairy
2010
34%
28%
25%
43
MDFBAS Data (1995-2010)
Return on Assets (market)
20%
13.4%
12.6%
7.1%
6.7%
Percent ROA
10%
0%
-0.1%
-0.1%
-10%
-20%
Low 25%
Ave.
High 25%
Dairy
2010
-0.2%
7.0%
12.1%
44
MDFBAS Data (1995-2010)
Low 25%
Ave. = -0.1%
Stdev = 3.1%
Min = -8.1%
Max = 6.0%
Average
Ave. = 7.1%
Stdev = 2.7%
Min = 0.4%
Max = 11.3%
High 25%
Ave. = 13.4%
Stdev = 3.5%
Min = 6.5%
Max = 21.2%
45
MDFBAS Data (1995-2010)
Net Worth Change
$1,600
$1,200
$/cow
$908
$800
$518
$400
$0
($76)
($400)
Low 25%
Ave.
High 25%
Dairy
Assets – Liabilities = Net Worth
46
MDFBAS Data (1995-2010)
Net Farm Income (per cow)
$1,200
$1,058
$/cow
$800
$645
$400
$0
($10)
($400)
Low 25%
Ave.
High 25%
Dairy
After accrual adjustments
47
MDFBAS Data (1995-2010)
Operating Expense Ratio
100%
Operating Expense Ratio
86.7%
76.3%
75%
71.2%
50%
25%
0%
Low 25%
Ave.
High 25%
Dairy
Higher productivity & lower cost
48
MDFBAS Data (1995-2010)
Low 25%
Ave. = $18.49
Stdev = $2.87
Min = $15.39
Max = $25.20
Average
Ave. = $15.47
Stdev = $2.21
Min = $11.99
Max = $20.18
High 25%
Ave. = $13.81
Stdev = $1.98
Min = $11.02
Max = $18.51
2010
$18.35
$16.70
$15.32
49
MDFBAS Data (1995-2010)
Average = +2.6%
Total = +39.3%
50
MDFBAS Data (1995-2010)
Low 25%
Ave. = $0.99
Stdev = $1.26
Min = -$1.69
Max = $3.06
Average
Ave. = $2.53
Stdev = $1.05
Min = $0.29
Max = $4.36
High 20%
Ave. = $3.17
Stdev = $1.16
Min = $0.75
Max = $5.17
51
MDFBAS Data (1995-2010)
52
MDFBAS Data (1995-2010)
Top Ten Michigan Dairy Farm Cash Expenses
1995-2010 (Ave.)
40.0%
Top 10 = 90.2%
Red = 66.0%
Blue = 24.2%
$/cwt
30.0%
20.0%
10.0%
0.0%
Expense
53
MDFBAS Data (1995-2010)
Average = +3.6%
Total = +55.9%
54
MDFBAS Data (1995-2010)
Annual average feed prices used in the USDA milk:feed ratio.
Annual Ave.
Corn Price
Annual Ave.
Annual Ave.
Annual Ave.
Soybean Price Alfalfa Hay Price 16% Dairy Feed
1
Annual Ave.
Purchased Feed
Income Over
Expense (Ave.)
Feed Cost ($/cwt)
($/cwt)2
Year
($/bu)
($/bu)
($/ton)
($/cwt)
1998
$2.20
$5.93
$94.93
$4.74
$7.69
$4.35
1999
$1.89
$4.58
$83.03
$4.03
$7.39
$3.59
2000
$1.86
$4.73
$84.55
$4.06
$5.99
$4.20
2001
$1.89
$4.43
$102.74
$4.42
$7.52
$4.39
2002
$2.13
$4.93
$101.65
$4.68
$5.52
$4.18
2003
$2.27
$6.08
$93.70
$4.80
$5.74
$4.31
2004
$2.47
$7.56
$95.22
$5.20
$7.82
$4.33
2005
$1.96
$5.95
$103.56
$4.71
$7.49
$4.66
2006
$2.28
$5.65
$108.55
$5.06
$5.86
$4.14
2007
$3.38
$7.74
$130.92
$6.80
$9.04
$6.92
2008
$4.78
$11.31
$162.50
$9.19
$7.30
$6.22
2009
$3.75
$10.05
$124.00
$7.29
$4.70
$5.10
2010
$3.83
$9.97
$116.33
$7.20
$6.98
$5.27
Correlations
0.79
0.71
0.85
0.82
0.40
1
Cost per hundredweight of 16% protein dairy feed.
2
Cost per hundredweight of milk produced (from Michigan Dairy Farm Business Analysis Summary database).
55
USDA Milk:Feed Ratio Data
56
USDA Milk:Feed Ratio Data
57
USDA Milk:Feed Ratio Data
~45% higher
variation
58
MDFBAS Data (1995-2010)
59
MDFBAS Data (1995-2010)
60
MDFBAS Data (1995-2010)
61
2012
Dairy Outlook
2012 Dairy Market Outlook
• 2011 Class III prices: $15.77 (-$2.60 vs. 2011)
• At 45th percentile of historic (2007-present) Class III prices
• ppd’s should be normal for 2011 (~$1.00/cwt)
• Commercial disappearance: +1.0% (Jan-Feb)
• Very strong export market (~13% of U.S. total milk solids production)
• Domestic dairy consumption very weak
• Current prices absolutely dependent upon maintaining exports
• U.S. milk output: +3.2% last seven months (2X vs. trend)
• Cow numbers: 9.272 M (up 112K since 1/2011 despite above trend cull
rate for last 25 of 26 months!)
• Milk per cow: above trend last 5 consecutive months (+2.7%)
2012 Dairy Market Outlook
• 2012 Outlook: tremendous pressure to increase milk production with declining profit margins
• Cow numbers and milk per cow likely to continue growing as producers
seek to meet debt payments.
• Milk prices to continue below average for foreseeable future.
• If any problems develop in dairy export market we could see a repeat of
2009.
2012?
“Prediction is very
difficult, especially if it
is about the future.”
-Neils Bohr
65
The End