Dairy Exports and Your Milk Check Dr. Marin Bozic Midwest Dairy
Expo November 30, 2011
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Presentation Outline 1)Whats going on? Putting U.S. Dairy
Exports in Perspective 2)What does it mean? Dairy Exports and Price
Volatility Dairy Exports and Price Level in the Long Run 3)What do
we do about it?
Market Value, mil USD (2011 Jan-Aug) Market Growth Rate (2011
over 2010) Mexico682.9355% Japan189.8150% Canada167.3710%
Philippines150.9426% China150.8641% World2,685.3731.8% USA
(domestic sales) Fluid milk14,456.46-1.8% Butter3,704.946.3%
Cheese33,880.002.5% Putting Dairy Exports in Perspective
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Who is exporting?
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FY 2010 Dairy Exports (mil USD) Wisconsin711.9920.6%
California705.6820.4% New York288.338.3% Idaho208.156.0% New
Mexico177.765.1% Minnesota152.974.4% Pennsylvania121.863.5%
Ohio60.041.7% Iowa58.951.7% South Dakota58.171.7% Other
States93.372.7% Unallocated793.5022.9% United
States3458.11100.0%
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Macroeconomic imbalances abroad Production fluctuation in
export competitors Demand shocks abroad Removal of price floors
Exchange rate fluctuations Exports and Volatility
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S D DD Quantity Price
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We must eliminate the possibility of diverting our milk
products into government warehouses during periods of low milk
prices. As long as we have a government price support system,
willing to purchase milk products off our domestic market when milk
prices are low, Price floors going away our industry takes the easy
way out and sells to the government. We thus leave our valued
worldwide customers high and dry, and they dont return when milk
prices turn better again. George Mueller, dairy farmer, in
Progressive Dairyman 11/1/2011
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Price Floors Case Study: 1. Dry Whey
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Price Floors Case Study: 2. Skim Dry Milk
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Weather and Yield Per Cow
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Demand Shocks Abroad
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Exchange rate fluctuations
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Power is in numbers and numbers are down
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Sec. Vilsack Ag Policy Principles Supporting sustainable
productivity Promoting vibrant markets Maintaining a strong safety
net Assistance quickly after disaster hits Programs to be simple
and understandable Safety net has to be accountable and justifiable
to everyone Source: Cheese Reporter, 10/28/2011, pg. 8
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Dairy Exports and Price Levels: A tale of two corn crops per
acreNorth DakotaIowa Direct Costs$289.94$300.13 Yield113 bu180 bu
Returns (before land costs) $146.47$297.57 Land Charge$65.20$215.00
Net returns$81.27$82.57
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Dairy Exports and Price Levels in the Long Run S D DD Quantity
Price
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Dairy Exports and Price Levels in the Long Run S D DD Quantity
Price
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It is not so much the level or the growth of dairy exports that
will boost milk prices, but uncertainty about the growth rate will!
Oceania milk supply growth rate?? EU milk quotas going away whats
the effect?? Chinese import controls?? But in the long run we are
all dead what will happen soon?
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Exports: You have to love them. The three most things that
matter in property: 1)Location 2)Location 3)Location The three
things why we should embrace dairy exports: 1)Volume 2)Volume
3)Volume
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U.S. Supply Situation With high feed prices, will the dairy
production shift back to Midwest? Best indicator is to see where
plants are being built/expanded, e.g. First District Litchfield, MN
Agropur - Hull, IA Leprino Greely, CO
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So, what do we do? Appreciate Influence Control New Market
Realities U.S. Affairs Your Farm Business
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How can Midwest compete in the world market? Whey? Ingredients?
What works as sustainable model for catastrophic risk insurance?
LGM? Margin Protection (FFTF)? Dairy Futures? What should we
research?
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Dairy Exports and Your Milk Check presented at Midwest Dairy
Expo 2011 Dr. Marin Bozic [email protected] Department of Applied
Economics University of Minnesota-Twin Cities 317c Ruttan Hall 1994
Buford Avenue St Paul, MN 55108 You may download this presentation
at http://marinbozic.info/Events/MDX11/ Exports.pptx
