Dr Craig Thomas Michigan State University Extension Dairy Educator Sanilac Huron Tuscola St Clair Lapeer Genesee Macomb Oakland amp Saginaw Counties How Milk Is Sold In The US Unit of sale ID: 716468
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Slide1
Overview of U.S. and
Michigan Dairy Industries
Dr. Craig ThomasMichigan State University Extension Dairy EducatorSanilac, Huron, Tuscola, St. Clair, Lapeer, Genesee, Macomb, Oakland & Saginaw CountiesSlide2
How Milk Is Sold In The U.S.
Unit of sale:
Dollars per hundredweight (cwt)1 cwt = 100 pounds1 cwt = 12.0 gallons (8.33 lbs/gal) 1 cwt = 45.44 liters1 cwt
= 45.36 kilograms
2Slide3
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 consumers3Slide4
How Milk Is Sold In The U.S.
~90% of total U.S. milk marketed
4Slide5
U.S. Dairy Farm Data
USDA 2011 U.S. data:
Total cows: 9.194 millionTotal 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 price: ~$20.14/cwt ($0.443/liter; $0.444/kg) Total milk income: ~$39.5 billion ($4,335/cow)
Average milk/cow per year: 21,525
lb
/cow (9,782 liter; 9,764 kg)
5Slide6
U.S. Dairy Farm Data
Apr-2012
9,272,0006Slide7
U.S. Dairy Farm Data
7Slide8
U.S. Dairy Farm Data
8Slide9
U.S. Dairy Farm Data
9Slide10
U.S. Dairy Farm Data
10Slide11
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 U.S. Dairy Farm Data11Slide12
U.S. Dairy Farm Data(total milk production)
12Slide13
U.S. Dairy Farm Data
(milk per cow)
13Slide14
U.S. Dairy Farm Data
(gross income per cow)
14Slide15
U.S. Dairy Farm Data
(gross income per cow)
15Michigan2004-2011#1 in gross income per cowSlide16
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 billionMichigan Dairy Farm Data16Slide17
Michigan Dairy Farm Data
17
22.4% increase since 1999Slide18
Michigan Dairy Farm Data
18
57.3% increase since 1998Slide19
Michigan Dairy Farm Data
19Slide20
~51,000
Cows
~73,000
Cows
~69,000
Cows
~46,000
Cows
~66,000
Cows
Michigan Total
366,000
Cows
~85% of Michigan dairy cows
a
re in 5 major milk shedsSlide21
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 billionMichigan Farm Data21Slide22
Michigan Farm Data
22Slide23
Michigan Farm Data
23Slide24
Michigan Farm Data
24Slide25
Milk Marketing in the U.S. & Michigan
Multiple component pricing
ButterfatProteinOther solidsProducer price differentialSomatic cell count adjustmentTotal component value
}
Wholesale finished dairy product prices
Cheese
Butter
NFDM
Dry Whey
converted to component prices
Co-op premiums (quality and/or volume)
Over-order premiums
Producer mailbox price
25Slide26
Currently there are 10
FMMO’s
in U.S.26Slide27
Milk Marketing in the U.S.
Classified Pricing
Class IVButterNFDM
Class I
Bottled Milk
Cultured Buttermilk
Eggnog
Class II
Ice Cream
Hermetically-Sealed Containers
Yogurt/Cottage Cheese
Pkg. Cream
Class III
Cheese
Cream Cheese
27Slide28
Milk Marketing in the U.S.
Component Values: butterfat, protein, other solids
Wholesale Cheese, Butter, NFDM, Whey Product Prices
Class Prices:
I, II, III, IV
Farm Price: Location, Component & SCC Adjustments
28Slide29
Federal Milk
Marketing Orders
(FMMO’s)Classified pricing: Price of milk based on various class utilizations.29Slide30
Milk Marketing in the U.S.
$12.74
$19.13$9.31Feb, 2009
$21.67
Aug, 2011
30Slide31
Dairy Farm Economics (MI)
Michigan Dairy Farm Business Analysis Summary (MDFBAS)
Annual financial data collected from ~150 dairy farms in MIFarms not randomly selectedHerd sizes vary from <50 cows to >2,000 cowsMust produce at least 50% of gross cash farm income from milk and dairy animal salesData sorted into three categories based on profitability: Low 25%, Average, High 25%31Slide32
MDFBAS Data (1995-2010)
~
30 to >2,000 cows32Slide33
MDFBAS Data (1995-2010)
+0.78 r
2 with ROA33Slide34
MDFBAS Data (1995-2010)
34
High 25%+3,600 lbs.vs. Low 25%Slide35
MDFBAS Data (1995-2010)
35
+$770 per cow/year$14.84$15.06$15.07Slide36
MDFBAS Data (1995-2010)
36Slide37
MDFBAS Data (1995-2010)
37Slide38
MDFBAS Data (1995-2010)
38Slide39
MDFBAS Data (1995-2010)
2011: $13,556/cow
~$4.96 billion total39Slide40
MDFBAS Data (1995-2010)
Average
= +6.1%Total = +104.4%40
High 25%
-$1,541
/cow
vs. Low 25%Slide41
MDFBAS Data (1995-2010)
41
$5,019$3,990$3,2482010Slide42
MDFBAS Data (1995-2010)
42
High 25%-$1,770/cowvs. Low 25%Slide43
MDFBAS Data (1995-2010)
43
34%28%25%2010Slide44
MDFBAS Data (1995-2010)
44
7.1%13.4%-0.1%-0.2%7.0%
12.1%
2010Slide45
MDFBAS Data (1995-2010)
Low 25%
Ave. = -0.1%Stdev = 3.1%Min = -8.1%Max = 6.0%High
25%
Ave. =
13.4%
Stdev
=
3.5%
Min = 6.5%
Max = 21.2%
Average
Ave. =
7.1%
Stdev
=
2.7%
Min = 0.4%
Max = 11.3%
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MDFBAS Data (1995-2010)
Assets – Liabilities = Net Worth
46Slide47
MDFBAS Data (1995-2010)
After accrual adjustments
47Slide48
MDFBAS Data (1995-2010)
Higher productivity & lower cost
48Slide49
MDFBAS Data (1995-2010)
Average
Ave. = $15.47Stdev = $2.21Min = $11.99Max = $20.18
Low 25%
Ave. =
$18.49
Stdev
=
$2.87
Min =
$15.39
Max =
$25.20
High 25%
Ave. =
$13.81
Stdev
=
$1.98
Min =
$11.02
Max =
$18.51
49
$18.35
$16.70
$15.32
2010Slide50
MDFBAS Data (1995-2010)
Average = +2.6%
Total = +39.3%50Slide51
MDFBAS Data (1995-2010)
Low 25%
Ave. = $0.99Stdev = $1.26Min = -$1.69Max = $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
51Slide52
MDFBAS Data (1995-2010)
52Slide53
MDFBAS Data (1995-2010)
53Slide54
MDFBAS Data (1995-2010)
Average =
+3.6%Total = +55.9%
54Slide55
MDFBAS Data (1995-2010)
55Slide56
USDA
Milk:Feed Ratio Data
56Slide57
57
USDA
Milk:Feed Ratio DataSlide58
58
~45% higher
variationUSDA Milk:Feed Ratio DataSlide59
MDFBAS Data (1995-2010)
59Slide60
MDFBAS Data (1995-2010)
60Slide61
MDFBAS Data (1995-2010)
61Slide62
2012
Dairy OutlookSlide63
2012 Dairy Market Outlook
2011 Class III prices
: $15.77 (-$2.60 vs. 2011)At 45th percentile of historic (2007-present) Class III pricesppd’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 weakCurrent prices absolutely dependent upon maintaining exportsU.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%)Slide64
2012 Dairy Market Outlook
2012 Outlook
: tremendous pressure to increase milk produc-tion with declining profit marginsCow 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.Slide65
2012?
“Prediction is very
difficult, especially if it is about the future.”-Neils Bohr65Slide66
The End