Transcript Agricultural Price Forecast Update on Impact of Future Growth in Nevada Dairies Fallon, Nevada May 22, 2014 Michael Helmar [email protected] University of Nevada, Reno University Center for.

Agricultural Price Forecast
Update on Impact of Future Growth in Nevada Dairies
Fallon, Nevada
May 22, 2014
Michael Helmar
[email protected]
University of Nevada, Reno
University Center for Economic Development
Meeting the Needs of the New Plant
Nevada dairy
50
1,250
Dairy cows, ths (L)
Dairy cows (WMP plant)
Milk production, mil. lbs. (R )
Production (WMP plant)
40
1,000
30
750
20
500
10
250
2000
2005
Sources: USDA, UCED
2010
2015
2020
FAPRI Baseline
• Major factors in the outlook
– Global economy, political environment
– Global ag supply/demand balance
– Agricultural policies
– Energy needs and policies
– Technology/productivity
Emerging Economies Drive Global Growth
Real GDP, % change
10
8
6
4
2
0
World
Developed
Developing
Emerging
-2
-4
2000
2005
2010
Sources: IFS, IHS Global Insight forecast
2015
2020
Individual Markets Move Differently
Exchange rate index, 2005=100
140
120
100
80
World
China
Mexico
Eurozone
Japan
60
40
2000
2005
Sources: IFS, IHS Global Insight
2010
2015
2020
Interest Rates Could Spur Investment
Interest rates, %
8
3-month T-bill
AAA corporate bond
6
4
2
0
2000
2005
2010
Sources: IFS, IHS Global Insight forecast
2015
2020
Improved Supplies Ease Crop Prices
16
250
US Corn, $/bu (L)
14
US Soybeans, $/bu (L)
200
US Alfalfa, $/ton (R )
12
10
150
8
100
6
4
50
2
0
0
2000
2005
Sources: USDA, FAPRI
2010
2015
2020
Milk Prices Will Reflect Feed Costs
U.S. milk prices
22
4.00
All milk, $/cwt (L)
Retail, $/gal (R )
20
3.75
18
3.50
16
3.25
14
3.00
12
2.75
2000
2005
Sources: USDA, FAPRI-MU
2010
2015
2020
Growth Opportunity for Dairy Industry
U.S. dairy exports, $mil
6,000
5,000
Butter
Whey & other
Cheese
Fluid
4,000
3,000
2,000
1,000
0
2001
2003
2005
Source: International Trade Administration
2007
2009
2011
2013
Impacting the Nevada Price Outlook
• Major factors in the outlook for 2014
– Continuing drought
• Water storage
• Range and pasture conditions
– Hay acreage
– Fallon WMP plant and dairy herd expansion
– Fire season
– California
Weather, WMP Plant Influence Hay Outlook
Nevada forage prices
250
16
Alfalfa hay, $/ton (L)
Other hay, $/ton (L)
Private grazing fees, $/AUM (R )
200
14
150
12
100
10
50
8
2000
Sources: USDA, UCED
2005
2010
2015
2020
Drought Reduces Irrigated Acres, Number of Cuttings
Nevada hay acreage, ths
300
275
250
225
200
175
150
Alfalfa
125
Other hay
100
2000
Source: USDA
2002
2004
2006
2008
2010
2012
California Losing Alfalfa Acres
California hay acreage, ths
1,200
Alfalfa
1,100
Other hay
1,000
900
800
700
600
500
400
2000
Source: USDA
2002
2004
2006
2008
2010
2012
Worst Start in Years
Nevada range condition, 0=Very Poor, 25=Poor, 50=Fair, 75=Good, 100=Excellent
100
75
50
25
2010
2012
2014
0
WK1
2011
2013
2000-2010 avg
WK6
Sources: USDA, UCED
WK11
WK16
WK21
WK26
Milk Prices Start High, Will Fall With Feed Costs
All-milk price, $/cwt
22
California
Nevada
U.S.
20
18
16
14
12
10
2000
Source: USDA, FAPRI
2005
2010
2015
2020
Different End Use, Different Price
Nevada milk price, $/cwt
30
25
20
15
Class I (1)
10
Class IIIa (4a)
Difference
5
0
-5
2011
2012
Source: Nevada Dairy Commission
2013
2014
Profitability Expected to Return in 2014
Nevada dairy, $/cwt of milk sold
25
20
15
10
Other operating costs
Other feed costs
Purchased feed costs
Gross value of production
5
0
2000
2005
Sources: USDA, UCED
2010
2015
2020
Meeting the Needs of the New Plant
Nevada dairy
50
1,250
Dairy cows, ths (L)
Dairy cows (WMP plant)
Milk production, mil. lbs. (R )
Production (WMP plant)
40
1,000
30
750
20
500
10
250
2000
2005
Sources: USDA, UCED
2010
2015
2020
Wrap-Up: Mixed Bag
•
•
•
•
•
Global economy strengthening
Feed costs are declining
So far, milk prices are cooperating
California a major market for Nevada
Multi-year drought makes water shortage
more acute this year
• Dairy demand will boost hay needs
• Range conditions might not be adequate
Contact Information
This presentation can be accessed on the University
Center for Economic Development website at:
http://www.unr.edu/business/research-and-outreach/uced/food-and-agriculturalpolicy-research-institute-(fapri)
For more information or questions regarding this outlook
please contact Mike Helmar at:
[email protected]