Dairy Outlook 2014Dr. Marin Bozic

Minnesota Dairy Statistics: 2013 vs. 2012

2012 2013(p) Percent Change

Dairy Cows 465,000 465,000 0.0%Dairy Farms 4,079 3,808 -6.6%

Cows Per Farm 114 122 7.0%Milk per Cow 19,505 19,737 1.2%

Milk Per Cow (per day) 53.3 54.1 1.2%

Total Milk Production 9,071 mil lbs 9,177 mil lbs 1.4%Mailbox Price $19.47 $19.50 0.2%

Gross Dairy Farm Cash Revenue

$1,757,140,000

$1,817,737,000 3.0%

In Focus: Minnesota Dairy Herds By Size

FMMO 30 Dairy Statistics: 2013 vs. 2012

2013 YTD 2012 Percent Change

Class PricesClass I Price $20.35 $19.26 5.7%Class II Price $19.06 $16.64 14.6%Class III Price $17.81 $17.44 2.1%Class IV Price $18.66 $16.01 16.6%

Utilization Class I 10.6% 12.4% -1.8%Class II 2.7% 5.4% -2.7%Class III 85.5% 78.6% 6.9%

Class IV 1.1% 3.5% -2.4%

Class I Utilization Across Time and Space

-2,500-1,500

-500500

1,5002,5003,5004,5005,5006,500

Annu

al G

rowt

h in

the

U.S.

Milk

Pro

duct

ion

(Mil

LBs)

2001

2003

2005

2007

2009

2011

2013

-5050

150250350450550650

Annu

al G

rowt

h in

the

U.S.

Milk

Per

Cow

(Lbs

)

Commercial Disappearance

Q1-Q3 Year-on-Year Growth

(Million Lbs)Stocks

(Days of Consumption)

Product (Mil lbs)

2013 Q1-Q3 2013 2001-2013 2013 2001-

2013

Butter 1,356 27 35 31 39

American Cheese 3,310 87 49 53 51

Other Cheese 5,147 120 115 21 18

Total Cheese 8,457 207 164 -- --

NFDM 1,210 -233 49 34 32

Dairy Sales: Fluid Milk

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

136138140142144146148150152154

Daily

U.S

. Flu

id M

ilk

Sale

s (ro

lling

12-

mon

th a

vg.,

mil

lbs)

Fluid Milk Sales in 2013 projected 1.5 billion lbs (2.8%) lower than in 2012.

In Focus: Greek Yogurt

Product 2013 YTD (mil lbs)

Volume Change (mil lbs)

Total Yogurt 2,394 83.5

Greek Yogurt 748 247.6

• Greek yogurt volume up 49.5% vs 2012. • Greek yogurt market share 31%, up from

22.5% last year.• Drinkable Yogurts up 10% over 2012. • The number of new drinkable yogurt product introductions increased from 31 in 2011 to 115 in 2012.

Source: DMI, Multi-Outlet Retail Milk, Cheese and Yogurt Sales Snapshots, September, 2013

Dairy Exports

• Dairy exports equivalent to 58 days of U.S. milk production.• Dairy exports keep 1.4 million U.S. cows busy throughout the year.

New Zealand Drought Propelled U.S. Dairy Exports

New Zealand Drought Propelled U.S. Dairy Exports

Source: USDEC Dairy Outlook 2014

New Zealand Production Shocks U.S. Dairy Exports Risks

Feed Costs On the Decline

$0

$50

$100

$150

$200

$250

$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00$9.00

Alfalfa Hay Corn

Alfa

lfa H

ay $

/ton

Corn

for G

rain

$/b

u

20+ Percent Chance Corn Will Fall Below $4.00/bu

Milk Production To Rebound

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-1

2Jul

-12Oct-

12Jan

-13Ap

r-13

Jul-13

Oct-13

-10.0%-5.0%0.0%5.0%

10.0%15.0%

Milk Production Growth: California and Texas

California Texas

Milk Production To Rebound

Source: USDEC Dairy Outlook 2014

Class III milk price 50-75 cents lower, with a chance of meatballs

Forward Income over Feed Costs Margins Look Excellent

China Imports will either Make or Break the Market in 2014

Source: USDEC Dairy Outlook 2014

Market Still Expected to Be Tight

Source: USDEC Dairy Outlook 2014

What does this all mean for Minnesota?

My forecast is for 2014 Minnesota mailbox milk price to be $19.10, with more downside risk than upside potential - with 80% confidence I predict it will be between $17.00 and $20.00.

YearMailbox

Milk Price

2008 18.68

2009 13.03

2010 15.75

2011 19.99

2012 19.35

2013 19.51

U.S. Dairy Policy Outlook

The Critical Two Questions:For Democrats: Is No Deal better than Raw Deal?

For Republicans: Can they get more after the elections?

Dairy Outlook 2014

Midwest Dairy ExpoSt Cloud, MNDecember 4, 2013

Dr. Marin Bozicmbozic@umn.eduDepartment of Applied EconomicsUniversity of Minnesota-Twin Cities317c Ruttan Hall1994 Buford AvenueSt Paul, MN 55108

Photo Credits:Title Slide: Orange Patch Dairy, Sleepy Eye, MNCredits Slide: Zweber Family Farms, Elko, MN