Top Five 2018 Dairy Markets

Transcription

1 Top Five 2018 Dairy Markets Tiffany LaMendola 2017 Western Alfalfa & Forage Symposium 2810 Crossroads Drive, Suite 3900 l Madison, WI l l info@blimling.com 2017 Blimling and Associates, Inc. This report is prepared for the exclusive use of Blimling and Associates clients. Reproduction in part or in whole without permission is strictly prohibited. This information is carefully compiled, but not guaranteed to be complete or free from error; nor does it constitute a solicitation to buy or sell futures/options contracts. Futures and options trading involves risk. Contact a licensed professional for more information.

2 #1 It s all about the EU

3 In 2016 The Market Learned USA EU NZ EU milk production is.a big deal. 6.8x bigger than New Zealand and 1.6x bigger than the USA Imagine the headlines: New Zealand up 19% 3

4 EU Milk Still the Story Milk production increased +4.3% in September Strong growth expected to continue (weak y-o-y comparison helps) Milk prices at highest level since 2014 but how long will they hold? 4

5 A Sobering Look? 5

6 #2 US Milk Production (Oceania too)

7 US Milk: No Problem 7

8 Cow Power US herd at million head in October up 65,000 vs 2016 September/October the first month-to-month declines in a year 8

9 Varies By Region Texas has been in growth mode California in consolidation/contraction 9

10 NZ Piling On? Season got off to a wet, slow start No problems in sight now Improved milk prices at the farm 10

11 #3 Dairy Producer Margins

12 US Margin Not Terrible on Paper 12

13 But Regional Disparities 13

14 California Production Down Long-run, ongoing trends Consolidation A focus on productivity Diversification Environmental Labor Current conditions Lower milk prices California cow numbers down Margins Other income down 14

15 Diversification: Friend or Foe? Tree nuts, particularly almonds, widely viewed as a steady source of income to offset variable dairy returns Labor and environmental issues The lifestyle appeals too To water the trees or to water the corn? That s the question 15

16 Behind The Scenes Dairy producer cattle income is down considerably versus 2015 highs As much as $1 per hundredweight? 16

17 #4 Demand, Demand, Demand

18 US Demand Nothing Special Through September, we estimate US cheese use up by about 1% -- down from bigger numbers in 2016 and 2015 Fat no longer in favor? Butter use lackluster 18

19 Fluid Milk, Yogurt Slow Conventional fluid milk sales down 1.3% in 2016, still soft in 2017 Losing streak: seven years, 6.8 billion pounds Yogurt sales down by nearly 10% by some measures 19

20 Exports Holding Up 20

21 #5 Inventories

22 Plenty of Cheese 22

23 Plenty of Butter Too 23

24 WAY TOO MUCH Powder! EU Intervention program holds 800 million pounds of SMP US manufacturers stocks are at highest level since

25 Where are we at? Where are we going?

26 Powder: Prices Tumbling 26

27 Cheese: Coming Under Pressure? Prices elsewhere in the world have drifted lower US prices fluctuating within a range 27

28 Butter: Likely To Remain Volatile Prices in the US have been at elevated levels all year After surging in late summer, EU butter prices have recently slipped considerably Export potential for US? 28

29 Where To From Here? Bulls Peak demand season ends strong Economy spurs demand Export sales grow China? Milk production becomes fragile quicker than expected Bears Large inventories Lackluster demand EU milk production up NZ milk production up US milk production stays strong longer than expected 29

30 When Corn is Less Than $4 History says don t expect milk prices to be too high if corn is low Historically, $3.75 corn is equal to about $14.50 milk 30

31 Looking Ahead Futures currently project fair-to-midland 2018 California All Milk price Given relative feed prices and milk prices, margins tighter than other regions 31

32 A better way of doing business. Blimling and Associates 2810 Crossroads Drive Suite 3900 Madison, WI Dairy.com 3801 Parkwood Boulevard Suite 300 Frisco, TX Blimling and Associates, Inc. This report is prepared for the exclusive use of Blimling and Associates clients. Reproduction in part or in whole without permission is strictly prohibited. This information is carefully compiled, but not guaranteed to be complete or free from error; nor does it constitute a solicitation to buy or sell futures/options contracts. Futures and options trading involves risk. Contact a licensed professional for more information.