The Protein Whey to Success in U'S' Dairy

1
The Protein Whey to Success in U.S. Dairy!

• Cam Thraen
• OSUE State Specialist, Dairy Markets and Policy
• Thraen.1_at_osu.edu
• Department of Agricultural, Environmental
  Development Economics

2
Todays Topics - Markets

• Milk Price Outlook
• What is holding up the U.S. Milk Price?
• U.S. Dairy Cycle
• Margins on farms
• The milk price without a Whey forward
• International demand for milk protein
• Price Update next 6 months

3
Todays Topics - Policy

• Hot button issues in Dairy
• To rBst or not to rBst
• Consumerism or Retailer Margins...?
• Whats a producer to do?
• Federal Milk Marketing Order Reform
• Financial impact
• The 2008 Farm Bill whats in it for Dairy?

4
Cows and Yields U.S.
Yield growth 1.6 / yr Herd growth .5 / yr
5
A new model for U.S. Production?
6
Income over Feed Cost is excellent
7
Ohio Income over Feed Cost
8
Price responds to growth
9
Which way forward?
10
World Agricultural Outlook Board

• NDM prices should remain relatively strong
  despite increased production as world supplies
  are expected to remain tight through much of
  2008.
• For 2008 the all milk price will be in the range
  17.70 to 18.60 per cwt.
• My Web forecast 18.19 C3 and 19.56 (Sept
  22,08 March 1,08)

11
Todays Topics - Policy

• Hot button issues in Dairy
• To rBst or not to rBst
• Consumerism or Retailer Margins...?
• Whats a producer to do?
• Federal Milk Marketing Order Reform
• Financial impact
• The 2008 Farm Bill whats in it for Dairy?

12
rBst What are the key points

• Fact A growing number of retailers and
  manufacturers are refusing to accept milk from
  cows treated with rBst.
• Fact Dairy producers earn a dollar premium by
  participating in the Federal Milk Marketing
  Order, such as FO33. This is expected to average
  3.00 cwt in 2008.
• Fact A retailer not accepting rBst milk will
  make it difficult if not impossible for a dairy
  farmer to participate in the FO and receive the
  premium.
• Fact A dairy farmer will have calculate the
  income foregone by dropping the use of rBst and
  continuing to collect the FO premium against the
  income retained with rBst and the loss of the FO
  premium.

13
What are the likely dollars
Calculations based on rBst use _at_ 50, rBst cost
of 5.75 per treatment, days in use 245, mailbox
price 16 cents per pound, feed and management
cost 7.3 cents per pound of milk, rBst response
8.3 pounds cow per day (58-66/d).
14
Todays Topics - Policy

• Hot button issues in Dairy
• Federal Milk Marketing Order Reform
• FO language loop-holes closed over the period
  January 2000 to June 2006.
• The cost of these loop-holes a calculated 204
  million / 24 cents on every hundredweight
  shipped.

15
Todays Topics - Policy

• Hot button issues in Dairy
• The 2008 Farm Bill whats in it for Dairy?
• Extension of the MILC program
• Possible Federal Order pricing changes