U.S. Dairy Policy: Major Overhaul Needed Peter Vitaliano Vice President, Economic Policy and Market Research National Milk Producers Federation
U.S. Milk Prices and Costs of Production, 2006-2010 $25 Sources: USDA/NASS & USDA/ERS through Jan-11 All-Milk Price From Feb-11 , NMPF & CME Group futures as of 2/10/2011 $20 Dollars per Hundredweight of Milk $15 Feed Costs $10 Effective Price Support Level Hired Labor Costs $5 Direct Energy Costs Other Operating Costs $0 Jan- Mar May Jul Sept Nov Jan- Mar May Jul Sept Nov Jan- Mar May Jul Sept Nov Jan- Mar May Jul Sept Nov Jan- Mar May Jul Sept Nov 06 07 08 09 10
U.S. DAIRY TRADE BALANCE, 1996-2010 14% Exports 12.8% Imports 12% 11.0% Total Milk Solids, % of U.S. Production 9.8% 10% 9.3% 8.3% 9.3% 7.6% 8% 5.7% 5.0% 5.2% 5.5% 6% 5.1% 4.5% 4.4% 3.7% 4% 3.6% 3.9% 4.0% 4.2% 4.2% 4.4% 4.5% 4.6% 4.4% 4.5% 4.1% 3.4% 2.9% 2.7% 2.9% 2% 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
World Market Export Shares Change: 2009/2008 2007 2008 2009 (%) (tms) New Zealand 23.1% 20.6% 26.8% 6.3% 38% European Union 25.4% 25.6% 25.9% 0.3% 7% United States 15.1% 17.2% 13.7% ‐ 3.4% ‐ 15% Australia 7.7% 7.6% 8.0% 0.5% 12% Argentina 2.8% 3.0% 3.5% 0.5% 22% All Other 25.8% 26.1% 22.1% ‐ 4.1% ‐ 11% Total 100.0% 100.0% 100.0%
Foundation for the Future • Replace price support and MILC programs • Implement two new programs triggered based on price- cost margins: - Dairy Producer Margin Protection Program - Dairy Market Stabilization Program • Reform Federal Milk Marketing Order pricing
Shell Corn Soybean Alfalfa Total milk DAIRY ENTERPRISE FEED COSTS Corn Silage Meal Hay Total marketed, Moisture : 14% 65% 12% 15% Feed cost milking @ Prices: $5.92 $59.8 $352 $121 (Dec, 2010) Shrink = 68.85 DM CONSUMED ($/bu) ($/ton) ($/ton) ($/ton) Cost/lb DM 10% lb./day Category # Head (lb./day) ‐‐‐‐‐ (percent of total dry matter) ‐‐‐‐‐‐ consumed ($/day) (lb./day) Milk Cows: Milking Cows 819 47.1 32.7% 34.0% 12.1% 21.2% $0.109 $4,604 56,388 Hospital Cows 17 40.0 32.7% 34.0% 12.1% 21.2% $0.109 $81 0 Dry Cows 164 24.0 5.0% 50.0% 15.0% 30.0% $0.100 $434 0 Total Milk Cows 1,000 Replacements: Heifers expected to calve within 1 year 394 23.0 5.0% 50.0% 15.0% 30.0% $0.100 $999 0 Other heifers 500 Pounds and Over 203 15.0 10.0% 50.0% 15.0% 25.0% $0.103 $344 0 Heifer calves under 500 Pounds 203 7.0 25.0% 45.0% 15.0% 15.0% $0.110 $172 0 Total Replacement Heifers 800 Total Herd 1,800 $11.76 per cwt. $6,634 56,388 Reduced Form: Feed cost per cwt. of milk = 1.192 X Price of corn per bu. + 0.00817 X Price of soybean meal per ton + 0.0152 X Price of alfalfa hay per ton (Uses following formula to estimate price of corn silage: Price of corn silage per ton = 10.1 X Price of corn per bushel)
Milk Price, Feed Costs, and Margins, 2000-2010 $25 All-Milk Price Feed Costs Milk-Feed Margin $20 Average Milk-Feed Margin Dollars per cwt., at averae bf. test $15 $10 $5 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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