2013-14 Dairy Outlook: Indiana Perspectives

Nicole Olynk Widmar and Mike Schutz Purdue University

2013 in Review

Purdue University is an Equal Opportunity/Equal Access institution.

Purdue University is an Equal Opportunity/Equal Access institution.

DAIRY COW INVENTORY

US Total, Monthly Thou Head 9280 9260 9240 9220 Avg.

2007-11 2012 9200 9180 9160 9140 JAN MAR MAY JUL SEP NOV Livestock Marketing Information Center Data Source: USDA-NASS 07/22/13 Last official numbers released by USDA-NASS was for February 2013.

All data points following are LMIC estimates. 2013

Source:http://future.aae.wisc.edu/ Purdue University is an Equal Opportunity/Equal Access institution.

8/14/13

?

Slaughter Dairy Cows Managing US Herd Size?

With tight margins and high cull cow values … what next???

2006 2007 2008 2009 2010 2011 2012 2013 310 290 270 250 230 210 190 170 150 Jan Feb Mar Apr May Jun Livestock Marketing Information Center Data Source: USDA-NASS Jul Aug Sep Oct Nov Dec Purdue University is an Equal Opportunity/Equal Access institution .

08/15/2013

Production per Cow in Indiana

2007 2008 2009 2010 2011 2012 2013 2000 1950 1900 1850 Very high digestibility of drought stressed forages?

Or are cow numbers significantly underestimated?

1800 1750 1700 1650 1600 1550 Jan Feb Mar Apr May Jun Livestock Marketing Information Center Data Source: USDA-NASS Jul Aug Sep Oct Nov Dec Purdue University is an Equal Opportunity/Equal Access institution .

10/16/2012

MILK PRODUCTION

US Total, Monthly Bil Pounds 18.0

17.5

17.0

16.5

16.0

15.5

15.0

14.5

14.0

JAN MAR MAY Livestock Marketing Information Center Data Source: USDA-NASS JUL SEP NOV 07/22/13 Avg.

2007-11 2012 2013

Indiana State Trends

Grade A Herds Grade B Herds

Farms

Cows

Milk Production

Production/cow

June 1997

1875 1104

2979

140K

186M

1380

June 2000

1668 786

2454

148K

198M

1400

June 2006

1392 324

1716

166K

277M

1670

June 2012

1240 163

1403

176K

307M

1745

June 2013

1216 130*

1346

~175K

328M

~1874

Change ‘97 to ‘13

- 35% - 88%

- 55%

+25%

+76%

+36%

*Annual decline in Manufacturing Grade herds driven by state code changes to SCC limit of 750,000 cells/ml (same as Grade A), and requirement of running hot water in milk house.

(Dairy Program, IBOAH & Indiana Ag. Statistics)

MILK PRODUCTION FORECASTS

US Total, Quarterly Bil. Pounds 54 52 50 48 46 44 42 JAN-MAR APR-JUN Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC JUL-SEP OCT-DEC 07/22/13 Avg. 2008 012 2013 2014

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Source:http://future.aae.wisc.edu/ 8/14/13

US RANGE AND PASTURE CONDITION

Percent Poor and Very Poor, Weekly Percent 65 60 55 50 45 40 35 30 25 20 15 May Jul Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC Sep G-NP-30 08/13/13 Avg.

2007-11 2012 2013

Purdue University is an Equal Opportunity/Equal Access institution.

Source:http://future.aae.wisc.edu/

Purdue University is an Equal Opportunity/Equal Access institution.

Source:http://future.aae.wisc.edu/

BUTTER IN COLD STORAGE

End of the Month Mil. Pounds 350 300 250 200 150 100 JAN MAR MAY Livestock Marketing Information Center Data Source: USDA/NASS JUL SEP NOV 07/23/13 Avg.

2007-11 2012 2013

BUTTER PRICES

Grade AA, CME, Monthly $ Per Pound 2.00

1.90

1.80

1.70

1.60

1.50

1.40

1.30

1.20

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Livestock Marketing Information Center Data Source: USDA-AMS, Dairy Market News 08/02/13 Avg.

2007-11 2012 2013

TOTAL CHEESE IN COLD STORAGE

End of the Month Mil. Pounds 1,175 1,125 1,075 1,025 975 925 875 JAN MAR MAY Livestock Marketing Information Center Data Source: USDA/NASS JUL SEP NOV 07/23/13 Avg.

2007-11 2012 2013

CHEDDAR CHEESE PRICES

40 Pound Block, CME, Monthly $ Per Pound 2.20

2.10

2.00

1.90

1.80

1.70

1.60

1.50

1.40

1.30

1.20

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Livestock Marketing Information Center Data Source: USDA-AMS, Dairy Market News 08/02/13 Avg.

2007-11 2012 2013

June 2013 exports were 2 nd highest month ever, totalling $596 million



(2 nd to May 2013) totalling $631 million * Fiscal year 2013 up 9% from previous period

Purdue University is an Equal Opportunity/Equal Access institution.

Purdue University is an Equal Opportunity/Equal Access institution.

Purdue University is an Equal Opportunity/Equal Access institution.

Milk Price

Purdue University is an Equal Opportunity/Equal Access institution .

25 23 21

$

19 17 15 13 11 9

2006

Milk Class Prices (8/15/2015)

Class I Class IV CME Futures Class II USDA High Class III USDA Low

2007 2008 2009 2010 2011 2012 2013 2014

Livestock Marketing Information Center Data Source: USDA/NASS Purdue University is an Equal Opportunity/Equal Access institution .

8/15/2013

October 2013 Milk – as of 8-8-13

• 25% chance less than $17.30

• 25% changes more than $19.25

Most likely price at maturity: $18.16

Source: Jim Hilker's Market Outlook & Probabilistic Price Forecasts for Grain & Livestock; Michigan State University, https://www.msu.edu/~hilker/ Purdue University is an Equal Opportunity/Equal Access institution.

December 2013 Milk – as of 8-8-13

• 25% chance less than $15.77

• 25% changes more than $18.15

Most likely price at maturity: $16.75

Source: Jim Hilker's Market Outlook & Probabilistic Price Forecasts for Grain & Livestock; Michigan State University, https://www.msu.edu/~hilker/ Purdue University is an Equal Opportunity/Equal Access institution.

February 2014 Milk – as of 8-8-13

• 25% chance less than $15.03

• 25% changes more than $17.61

Most likely price at maturity: $16.05

Source: Jim Hilker's Market Outlook & Probabilistic Price Forecasts for Grain & Livestock; Michigan State University, https://www.msu.edu/~hilker/ Purdue University is an Equal Opportunity/Equal Access institution.

25 23 21

$

19 17 15 13 11 9

2006

Milk Class Prices (8/15/2015)

Class I Class IV CME Futures Class II USDA High Class III USDA Low

2007 2008 2009 2010 2011 2012 2013 2014

Livestock Marketing Information Center Data Source: USDA/NASS Purdue University is an Equal Opportunity/Equal Access institution .

8/15/2013

Policy: What the US Dairy Industry fears the Dairy Title of the US Farm Bill will look like coming out of conference:

MILC

• Payment thus far:

– Jan 11.8 ¢/cwt – Feb 52.5 – March 75.5

– April 69.9

– May 74.2

– June 21.87

– July (projected less than 10 ¢/cwt) – likely last payment of the year Purdue University is an Equal Opportunity/Equal Access institution.

Milk Price Outlook

• Lower milk prices • LOWER feed prices • Building stocks – especially butter and cheese – 24% increase in butter stocks over a year ago – 8% higher total cheese stocks – Holiday baking season is upcoming … helping butter and cheese prices • Extremely strong export markets – Nonfat dry milk powder up 23% in May over a year ago; 7% increase year-to-date • Increase in cow numbers in 18 of 23 dairy states (mostly East) • *Increase* in production for US and traditional dairy states – How much production/cow and how much cow number growth?

Mike Schutz [email protected] Nicole Olynk Widmar [email protected]

Purdue University is an Equal Opportunity/Equal Access institution .

30

NONFAT DRY MILK PRICES

Central and East, Monthly $ Per Pound 1.80

1.70

1.60

1.50

1.40

1.30

1.20

1.10

1.00

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Livestock Marketing Information Center Data Source: USDA-AMS, Dairy Market News 08/02/13 Avg.

2007-11 2012 2013

Purdue University is an Equal Opportunity/Equal Access institution.

Source:http://future.aae.wisc.edu/ 8/14/13

Fluid milk sales by category 1800 1600 1400 1200 1000 800 600 400 200 0 Livestock Marketing Information Center Data Source: USDA/NASS Purdue University is an Equal Opportunity/Equal Access institution.

Whole Organic Reduced Low Skim Flavored Fat Reduced

CLASS III MILK PRICES

FMMO, Monthly $ Per Pound 22.00

21.00

20.00

19.00

18.00

17.00

16.00

15.00

14.00

13.00

12.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Livestock Marketing Information Center Data Source: USDA-AMS, Dairy Market News 08/02/13 Avg.

2007-11 2012 2013

CLASS IV MILK PRICES

FMMO, Monthly $ Per Pound 19.50

18.50

17.50

16.50

15.50

14.50

13.50

12.50

11.50

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Livestock Marketing Information Center Data Source: USDA-AMS, Dairy Market News 08/02/13 Avg.

2007-11 2012 2013