1. Farm and Risk Management TeamCooperative Extension – Ag and Natural ResourcesDairy Price Risk ManagementMilk Market OutlookLast Update: Mar. 1, 20051
2. Monthly Basis2
3. Q: What’s a Good Price?A: It All Depends…..
3
4. Outlook InformationMilk Production Report
Issued by NASS (USDA’s National Agricultural Statistics Service) mid-month covering previous month
Milk cow numbers, Milk per cow, and total milk production
Monthly data for 20 selected states representing about 85 % of U.S. milk production
Quarterly data for all states4
5. NASS Milk Production Report: January ‘055
6. Milk Cows and Milk per Cow6
7. Outlook Information (Cont.)Milk/Feed Price Ratio
Pounds of 16% dairy ration equal in value to one pound of milk
Published around the first of the month as part of NASS monthly Agricultural Prices
Dairy Product Stocks
Commercial and government-held inventories of butter, cheese (by category) and NDM
Published as part of NASS monthly Cold Storage Report7
8. 8
9. 9
10. 10
11. 11
12. Outlook Information (Cont.)Dairy Product Production
Monthly factory production of all major dairy products, U.S. and major states
Published by NASS around the first of the month for second preceding month
Dairy Product Prices
Weekly prices and weights used to calculate all Federal Order Class prices
Covers Butter, Block and Barrel Cheddar Cheese, Nonfat Dry Milk, and Dry Whey
Issued by NASS Friday am; covers week ending the previous Saturday
12
13. US Production of Major Manufactured Dairy Products, Jan-Dec 2004 v. Year Earlier13
14. 14
15. 15
16. Chicago Mercantile Exchange (CME) Cash or Spot MarketsGrade A butter (MWF)
Block and barrel cheddar cheese (M-F)
Grade A and extra-grade nonfat dry milk (M-F)
Auction markets – bids and offers with sale when a bid is filled or an offer is accepted
Reported price changes with a sale, an unfilled bid, or an uncovered offer
Thin markets: sales represent only a small fraction of production
Reference markets: prices for off-market contractual sales tied to CME prices16
17. Outlook Information (Cont.)Commercial Disappearance
Imputed consumption – includes “pipeline” stocks as well as sales
Published quarterly by USDA’s Economic Research Service
Retail Dairy Prices
Prices and price indices for major dairy products; national and regional
Published monthly by Bureau of Labor Statistics (BLS)
17
18. Change in Commercial Disappearance, Jan-Oct ‘04 v. Year Earlier18
19. 2000 and 2001 are USDA Forecasts19
20. Sources of Outlook InformationHard Copies:
Dairy Market News
Includes up-to-date information on all important outlook indicators
Issued weekly on Friday. $50 annual subscription or access free at:
http://www.ams.usda.gov/dairy/mncs/weekly.htm
NASS Reports
Subscribe to individual reports(varying subscription charges and release dates) or access free at:
http://www.usda.gov/nass/20
21. Sources of Outlook InformationInternet Sites
U-W Madison, Dept. of Ag. And Applied Econ.
http://www.aae.wisc.edu/future/
Links to all contracts and exchanges
Charts and tables updated daily as new info released
Includes excellent interactive tutorial on futures and options trading
Downes-O’Neill Dairy Team
http://www.dairy.nu/
Very quick access to current futures and options quotes
Includes market analysis; daily summaries and forecasts21
22. Sources of Outlook InformationInternet Sites (Cont.)
Penn State University – Ken Bailey
http://www.aers.psu.edu/dairyoutlook
Long-range price forecasts
Good links to all USDA reports
Weekly market analysis
National Program for Integrated Dairy Risk Management Education and Research
http://www-agecon.ag.ohio-state.edu/faculty/cthraen/idmer/Default.htm
Not an outlook site, but contains a wealth of educational materials on risk management in general and futures and options specifically22
23. Consensus(??) Milk Price Outlook - 2005 Dairy Cow Numbers: Milk/Feed Price ratio: Stocks: Cheese Butter Product Prices: Cheese Butter Nonfat Dry Milk Total Milk Supply: Commercial Use Other??? 23