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DAIRY OUTLOOK Hal Harris Clemson University. Southern Outlook Conference September 2001 Atlanta, GA. BFP/Class III 1997-2001. $18. 1997. $17.34. 1998. $17. How High. 1999. ?. $16. 2000. 2001. $15. $14. Dollars Per Hundredweight. $13. $12. $11. $10. $9. $8. Jan. Feb. Mar.

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Dairy outlook hal harris clemson university

DAIRY OUTLOOKHal HarrisClemson University

Southern Outlook Conference

September 2001

Atlanta, GA


BFP/Class III 1997-2001

$18

1997

$17.34

1998

$17

How High

1999

?

$16

2000

2001

$15

$14

Dollars Per Hundredweight

$13

$12

$11

$10

$9

$8

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Aver


BFP or Class III Milk Price versus the Support Price,

1970-2000

$19

$17

Support price

BFP/Class III price

$15

$13

Dollars Per Hundredweight

$11

$9

$7

$5

$3

Jan-70

Jan-72

Jan-74

Jan-76

Jan-78

Jan-80

Jan-82

Jan-84

Jan-86

Jan-88

Jan-90

Jan-92

Jan-94

Jan-96

Jan-98

Jan-00


Number of milk cows, 20 states, 1997-2001

1997

7840

1998

7820

1999

2000

7800

2001

7780

7760

Thousand Head

7740

7720

7700

7680

7660

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec


Number of milk cows, 20 states, 1997-2001

1997

7840

1998

7820

1999

2000

7800

2001

7780

7760

Thousand Head

7740

7720

7700

7680

7660

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec


Milk per cow, 20 states, 1997-2001

1700

1997

1998

1650

1999

2000

1600

2001

1550

Pounds

1500

1450

1400

1350

1300

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec


Total Milk Production, 1997-2001, 20 States

13000

1997

1998

12500

1999

2000

2001

12000

Million Pounds

11500

11000

10500

10000

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec


Milk feed price ratio

4.3

1999

4.17

4.09

2000

4.1

4

2001

3.85

3.9

3.84

3.73

3.67

3.65

3.7

3.61

3.59

3.5

3.4

3.39

Ratio

3.38

3.32

3.31

3.29

3.25

3.3

3.21

3.17

3.12

3.11

3.1

3.07

3.1

3.04

3.03

3.02

2.94

2.94

2.9

2.9

2.8

2.67

2.7

2.5

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec


Commercial Disappearance, Jan - May

Percent Change from 2000

Fluid

-0.1

NFD Milk

39.2

O Cheese

2.1

A Cheese

1.6

Butter

-5.7

All

1.6

-10

0

10

20

30

40

50

Percent Change


1998 Summary

Average BFP = $14.24 a record

Average all milk price = $15.46

Average number of cows 9,154,000 ;

-

1.1%

Milk per cow 17,189; + 1.9%

Total milk production 157.3 billion Lbs; +0.8%

Commercial disappearance 159.8 billion Lbs;

+2.3%

Imports 4.59 billion pounds; +41.2%


1999 Summary:

Average BFP = $12.86

Average all milk price= $14.38

Number of milk cows 9,156,000; +0.1%

Milk per cow 17,772; +3.4%

Total milk production 162.7 billion lbs; +3.5%

Commercial disappearance 164.9 billion lbs;

+3.2%

Imports 4.77 billion pounds; +4/0%


2000 Summary

Average Class III = $9.74

Average all milk price = $12.34

Average number of cows 9,210,000; +0.6%

Average milk per cow 18,204; +2.4%

Total milk production 167.7 billion Lbs; +2.7%

Commercial disappearance 169.2 billion lbs;

+2.3%

Imports 4.45 billion lbs;

-

6.8%


What is going on in 2001

July Class III = $15.46, $4.80 higher than July

2000 (July $10.66)

Average number of cows Jan

June. 9,141,000; or

-

0.6%

Average milk per cow Jan

June. 9,183 pounds; or

1.0%

Total milk production Jan

June 83.9 billion lbs. ;

or

-

1.7%

Commercial disappearance Jan

May 1.6%


CME Grade AA Butter Prices, 1999-2001

$2.10

1999

$1.90

2000

2001

$1.70

$1.50

Dollars Per Pound

$1.30

$1.10

$0.90

$0.70

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec


CME 40# Cheddar Block Price, 1999-2001

$2.00

$1.90

1999

$1.80

2000

$1.70

2001

$1.60

Dollars Per Pound

$1.50

$1.40

$1.30

$1.20

$1.10

$1.00

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec


NFD Milk Western Price, 1999-2001

$1.0200

$1.0150

$1.0100

Dollars Per Pound

$1.0050

1999

$1.0000

2000

2001

$0.9950

$0.9900

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec


Why these dairy product prices are important
Why these dairy product prices are important?

  • Farm level milk prices based off of butterfat, protein, and other solids component values.

  • Component values based off of dairy product prices:

    - Butterfat price off of price of butter

    - Protein price off of price of cheese

    - Other solids price of price of dry whey

  • Class III price per 100 pounds is the sum of the butterfat, protein and other solids values in 100 pounds of milk


Other class prices
Other class prices:

  • Class IV: Butterfat value same as Class III and nonfat solids value based off of nonfat dry milk price.

  • Class II: Advanced Class IV plus $0.70 plus Class III butterfat value.

  • Class I: “Higher of” advanced Class III or Class IV skim value plus an advanced butterfat price plus a Class I differential that varies by market


Producers get paid
Producers get paid:

  • Price per pound of butterfat marketed

  • Price per pound of protein marketed

  • Price per pound of other solids marketed

  • Somatic cell count payment/deduct per 100 Lbs.

  • Producer Price Differential per 100 pounds

  • Other competitive premiums

  • The point: There are major differences in prices received among producers in a given market and between markets


What about the butter powder tilt
What about the Butter/powder tilt?

  • Support price $9.90 (3.67% butterfat test)

  • As of June 13th, CCC purchase prices:

    Butter: $0.6549 to $0.8548 (+$0.1999)

    NFD: $1.0032 to $0.90 (-$0.1032)


Federal order prices utilizations may 2001
Federal Order Prices (Utilizations May 2001)

Class:Upper MidwestAll Orders

I 21% 36%

II 3% 9%

III 75% 47%

IV 1% 8%


Movers of class i ii
Movers of Class I & II

  • Class I is the “higher of” skim milk value of Class IV or Class III, plus a Class I differential

  • Class II is the Class IV skim milk value plus $0.70

  • Question: Will nonfat dry milk price to and stay at the $0.90 support level?


The punch line what will we see for milk prices the remainder of this year and 2002
The punch line: What will we see for milk prices the remainder of this year and 2002?

  • The answer: It depends upon the weather.

  • Cow numbers are lower, but seem to be stabilizing

  • Replacement heifers are short on supply and high priced.

    - 3.6 million head July 1,2001, down 3%, and only 39 per 100 milk cows.

    - Changing dairy farm structure is impacting dairy replacement numbers

    - Dairy expansions limited by number of replacements and price of replacements


Other factors to consider
Other factors to consider:

  • Milk per cow is improving

  • Feed prices:

    - Milk feed price ratio will remain favorable (the ratio of pounds of 16% mixed dairy feed equal in value to 1 pound of whole milk. Considers alfalfa, corn and soybean prices.

    - High quality Alfalfa hay is short supply

    - combination of electrical power pressure and environmental pressures in the Pacific NW

    - Utilities paid farmers to idle land in Idaho (250,000 acres) and Washington (70,000 acres)

    - water cut-offs to protect fish habitats

    - However innovative rations without alfalfa

  • Slowing of demand growth


Chapter 3
Chapter 3

Administration Releases its “Farm Bill Principles”




Principles
Principles

  • Learn from Past Lessons

  • Recognized New Operating Environment

  • Expand Open Markets

  • Grow the Sector by Global Expansion

  • Compatible Farm & Trade Policy

  • Strengthen Global Leadership

  • Build on Diversity

  • Market Oriented Safety Net

  • Build Infrastructure


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