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Dairy Exports and Your Milk Check

Dairy Exports and Your Milk Check. Dr. Marin Bozic Midwest Dairy Expo │ November 30, 2011. Presentation Outline. What’s going on? Putting U.S. Dairy Exports in Perspective What does it mean? Dairy Exports and Price Volatility Dairy Exports and Price Level in the Long Run

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Dairy Exports and Your Milk Check

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  1. Dairy Exports andYour Milk Check Dr. Marin Bozic Midwest Dairy Expo │ November 30, 2011

  2. Presentation Outline • What’s going on? • Putting U.S. Dairy Exports in Perspective • What does it mean? • Dairy Exports and Price Volatility • Dairy Exports and Price Level in the Long Run • What do we do about it?

  3. Dairy Exports as Percentage of U.S. Milk Supply

  4. 2010 Composition of U.S. Dairy Exports (by value) Fluid & Soft Products (5%) Dairy Consumer Goods (12%) Other Dairy Commodities (6%) Butter (5%) Lactose (7%) Cheese (18%) Milk Powders (28%) Dry Whey (19%)

  5. Who is buying?

  6. Who is buying?

  7. Putting Dairy Exports in Perspective

  8. Who is exporting?

  9. Who is exporting?

  10. Exports and Volatility • Macroeconomic imbalances abroad • Production fluctuation in export competitors • Demand shocks abroad • Removal of price floors • Exchange rate fluctuations

  11. Exports and Volatility Price S D′ D Quantity

  12. Price floors going away • “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, our industry takes the easy way out and sells to the government. We thus leave our valued worldwide customers high and dry, and they don’t return when milk prices turn better again.” George Mueller, dairy farmer, in Progressive Dairyman 11/1/2011

  13. Price Floors Case Study: 1. Dry Whey

  14. Price Floors Case Study: 2. Skim Dry Milk

  15. Weather and Yield Per Cow

  16. Demand Shocks Abroad

  17. Exchange rate fluctuations

  18. Power is in numbers… …and numbers are down

  19. 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

  20. Dairy Exports and Price Levels: A tale of two corn crops

  21. Dairy Exports and PriceLevels in the Long Run Price D′ S D Quantity

  22. Dairy Exports and PriceLevels in the Long Run Price D′ S D Quantity

  23. But in the long run we are all dead… what will happen soon? • 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 – what’s the effect?? • Chinese import controls??

  24. Exports: You have to love them. The three most things that matter in property: Location Location Location The three things why we should embrace dairy exports: Volume Volume Volume

  25. 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

  26. So, what do we do? Appreciate New Market Realities Influence U.S. Affairs Control Your Farm Business

  27. What should we research? • 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?

  28. Dairy Exports and Your Milk Check presented at Midwest Dairy Expo 2011 Dr. Marin Bozic mbozic@umn.edu 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

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