Dairy in the West: A Fast Forward

Transcription

1 Dairy in the West: A Fast Forward Katelyn McCullock Economist American Farm Bureau katelynm@fb.org 1

2 What is the Western Dairy Model? Smaller Land Footprint Harnessing Economies of Scale Purchased Feed Inputs Significant Rise through the mid-2000s 2

3 Rise of Dairy in the West (Select States) Cows (1000s) The West Upper Midwest Source: USDA NASS, Compiled by LMIC 3

4 $25 Net Cash Receipts for Dairy and Dairy Products, Real Dollars, 1980 to 2016 $20 Billion Dollars $15 $10 $5 $0 Source: USDA ERS 4

5 10 Year Look Back Vs. Today Last 10 Years: Tumultuous Feed/Milk Price Cycles Large Consolidation Financing: Special Assets Rise of Exports Today Feed/Milk Price Cycles Stronger Balance Sheets: 2009 vs 2017 Better Risk Management Tools LGM-Dairy (2010) MPP (2014) 5

6 Agenda: Regulations Economic Drivers Future Game Changers 6

7 Regulations: 7

8 Regulations: Not All Bad Right to Farm (State Level) 2 Western States: ID (2011), NM (2016) 10 States Total Farm Protections (State Level) 3 Western States: MT (1991), WY (2015 and 2016),UT (2012) 11 States Total Four States : ND, IA, MO, and NC have both 8

9 Regulations Endangered Species Waters of the US (withdrawn?) Labor Laws Immigration Nutrient Management Trade Restrictions/Standards Labeling Animal Welfare Standards Environment 9

10 Labor and Immigration 2015 Survey 34% of Farms with Immigrant Labor 79% of the Milk Produced use Immigrant Labor 51% of total labor on dairies. Source: Dr. David Anderson, Texas A&M University Estimates for 50% Loss of Immigrant Labor 45% increase in Retail milk 1 million cows removed from production 24 billion in lost milk production 10

11 Trade: Wild Card 40% 35% 30% 25% 20% Value of Dairy Exports Dairy Exports Mexico Canada $ Billions 15% 10% 5% 0% Source: USDA FAS 11

12 Economic Drivers Milk-Feed Ratio Conventional Wisdom Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12 Jul-13 Jan-15 Jul-16 Source: USDA NASS 12

13 Ever-Changing Feed Landscape 13

14 Operating Expenses (Highest to Lowest) Maine Pennsylvania Oregon Vermont Tennessee New York Washington Kentucky Virginia California Ohio Michigan Illinois Missouri Iowa Indiana Minnesota Texas Wisconsin Florida Kansas Georgia Idaho Feed Costs: All States 50% California 86% Source: USDA ERS 14

15 Dollars per Acre $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 U.S. Ag Land Values, Source: USDA NASS 15

16 10 Year Land Value Change, Source: USDA NASS 16

17 Relative Land Values For 2016 US National Average: $4090/Acre Source: USDA NASS 17

18 Urban Pressure California : Urbanization increases 1.1 million acres. Prime Farmland lost: 1.0 million acres. Urban Populations Closer California Still Top State in Cows/Production 18

19 Jan 1 Dairy Herd Inventory, % -22% -6% -47% 1% 8% VT -8% 20% 3% -1% 43% NH -10% -14% 30% MA -26% 2% -5% RI -27% 0% -4% 11% CT 0% -2% 7% -10% 11% 35% -38% NJ -38% 36% -13% -23% -39% DE -29% MD -22% -39% -6% 12% -50% -4% -68% -12% -100% to -50% 11% -59% -46% -50% to 0% 29% 0% to 25% -60% 26% to 100% -50% -6% -37% Source: USDA NASS, LMIC 19

20 Heifer Replacements, Percent Change -8% -7% 22% -4% 0% 13% 29% -2% VT 2% -3% -3% 0% -10% NH 0% -40% -1% MA 0% -3% -17% 13% 0% RI 0% 10% 4% 0% -5% CT 12% 0% -9% -19% 0% -20% NJ -3% DE 5% 30% 22% 72% -20% MD 4% -8% 0% 40% 4% -20% 0% 33% 0% -13% 0% -100% to -4% -4% to 0% 0% to 10% 10% to 73% 0% Source: USDA NASS, LMIC 20

21 10, 20, 30 years 39% of milk was produced West of the Rockies in 2016 Lowest since 2003 Other Western States increasing 1% drop in CA = 2.8% Increase in ID 21

22 Mil. Head Data Source: USDA/NASS Livestock Marketing Information Center MILK PRODUCTION vs. MILK COW INVENTORY AVERAGE ANNUAL INVENTORY, U.S. Inventory Production 22 Bil. Pounds

23 Boom Factors Land Values Water Availability Ease of Doing Business Feed Costs 23

24 10, 20, 30 years Industry Consolidation Larger Farms/Less Farms Continued Tight Margins Enterprising Investment Partnerships Emphasis on Professionals Increased Reliance on Risk Management Trade Map 24

25 Questions Katelyn McCullock Economist American Farm Bureau Federation 25