Importance of Dairy Exports

Importance of Dairy Exports

The May 2017 Central Milk Marketing Order “Marketing Service Bulletin” had an interesting retrospective on dairy exports’ importance to the US dairy industry. The bulletin compared the change in total exports volume and dairy product categories since about 2003. Dairy solids exports for 2016 were 14.2% of total US milk solids produced compared to 5% in 2003. The value of dairy exports increased to $7.2 billion in 2014 falling to $4.8 billion in 2016. The 2003 value of dairy exports was approximately $1 billion. This change is even more dramatic when it is noted that before 2003, the US was a net importer of dairy.

The bulletin also points out the important products that are exported as well as the primary importers of US dairy products. Mexico accounts for 25.2% of US dairy exports, Southeast Asia 13.9% and Canada 13.1%. Just over 25% each cheese and nonfat dry milk account for the 2016 export value of US dairy exports. But on a percentage basis only 5.2% of US cheese production was exported while 57% of nonfat dry milk and skim milk powder were exported. Cheese export volume increased by over 5.5X from 2005 to 2016 while nonfat dry milk volume is 2X larger.

Source: May 2017 Marketing Service Bulletin, Central Marketing Order

Source: May 2017 Marketing Service Bulletin, Central Marketing Order

Source: May 2017 Marketing Service Bulletin, Central Marketing Order

Source: May 2017 Marketing Service Bulletin, Central Marketing Order

Source: May 2017 Marketing Service Bulletin, Central Marketing Order

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MPP-Dairy Meetings Set

The 2014 Farm Bill changed dairy farm support programs to one that is insurance based, Margin Protection Program-Dairy (MPP-Dairy). The previous program, Milk Income Loss Contract (MILC), was replaced by MPP-Dairy. A sign up period is now underway for MPP-Dairy program participation in 2016 until September 30 at designated FSA offices.
Dairy farmers who have an interest in this program have an opportunity to learn more about MPP-Dairy. On Tuesday, September 8 at 1:00 P.M., Robert Tigner, UNL Extension Educator, will present new analysis as well as MPP-Dairy information at the Gage County Extension Office in Beatrice, Nebraska. A second meeting will take place September 9 at 1:00pm at the Cedar County Extension Office in Hartington, Nebraska.
MPP-Dairy is an insurance based 2014 Farm Bill program that allows dairy farmers an opportunity to protect against declines in the difference between a two month average US milk price and a two month average feed cost. The 2014 Farm Bill specifies how milk price and feed cost is determined and each is used to calculate a “US milk margin.”
Dairy Farmers can select margin coverage from $4 to $8 in 50ȼ increments. Farmers also choose the amount of historic milk production covered from 25% to 90% in 5% increments. MPP-Dairy premiums for 2016 have two tiers of cost, less than 4 million pounds of milk production covered and 4 million and above. Premiums must be paid either fully at coverage election time or 25% by February 1 with the remainder by June 1.
For more information call Robert Tigner, 308-345-3390 or email robert.tigner@unl.edu. Please call the Gage County Extension Office at 402-223-1384 to register for the Beatrice meeting. Please call the Cedar County Extension Office at 402-254-6821 to register for the Hartington NE meeting. The Nebraska State Dairy Association will be sponsoring lunch and refreshments at these workshops.

MPP-Dairy Update

MPP-Dairy Background
MPP-DAIRY calculates a two month average margin using the US All-Milk Price/cwt minus the cost of feed needed to produce 100 pounds of milk including the feed needed for dry cows and youngstock. The ration for the feed cost calculation includes corn, soybean meal and alfalfa. Milk, corn and alfalfa prices will be taken from the National Agricultural Statistics Service (NASS) monthly publication “Agricultural Prices” and averaged in two months periods. Soybean meal prices will come from the Agricultural Marketing Service (AMS) Central Illinois, Decatur, prices. Two month periods will include January-February, March-April and so on. Since 1997 this margin calculation has averaged $8.50, but since 2007 it has averaged $7.40 per cwt (Figure 1). Since MPP-Dairy is an insurance program and dairy producers choose their margin coverage level, an indemnity will be paid if the margin calculated falls below the coverage level chosen. So far only one period, March-April 15, has triggered a payment at the $8 coverage level, 49.5¢ per hundredweight.

Figure 1: Historic Dairy Margins using MPP-Dairy Formula

Dairy farmers may enroll for 2016 MPP-Dairy coverage, July 1-Sept. 30 2015, at local USDA offices. Participating farmers must remain in the program through 2018 and pay a $100 administrative fee each year. Producers have the option of selecting a different coverage level, margin amount and percentage of milk covered, during open enrollment each year. In addition to margin levels selected, MPP-Dairy payments are based on an operation’s historical production which will increase by 2.61% in 2016 if the operation participated in 2015. Producers must submit form CCC-782 for 2016, confirming their Margin Protection Program coverage level selection, to the local Farm Service Agency (FSA) office. If buying coverage above the $4.00/cwt. catastrophic level for 2016, dairy producers can either pay the premium in full at the time of enrollment, or pay a minimum of 25% of the premium by Feb. 1, 2016. The remainder of the premium will be due June 1, 2016.
USDA has an online resource available to help dairy producers decide their level of coverage. A web tool, available at http://www.fsa.usda.gov/mpptool, allows dairy farmers to quickly and easily combine their unique operation data and other key variables to calculate their coverage needs based on price projections. Producers can review historical data or estimate future coverage based on price projections. The web tool can be used on computer, mobile phone, or tablet. Soon a revised web tool will be released which will factor in more individual dairy farm information to more accurately project the possible MPP-Dairy impact for the dairy.

Margin Protection Program-Dairy 2016 Sign Up

The note below is from a news release posted by USDA’s Farm Service Agency. It discusses the open enrollment period for MPP-Dairy that began 1 July 15. This program is intended to assist in managing margin risk for diary producers. The margin calculation is not for an individual dairy farm but does allow  some measure of insurance against steep in margin as dairy producers experienced in 2009.

“2016 Enrollment Open of MPP-Dairy

Producers have the option of selecting a different MPP-Dairy coverage level during open enrollment each year. So far in 2015, only dairy farmers “buying-up” coverage at the $8.00/cwt. level have received any indemnity payments, partially offsetting premium costs.

In addition to margin levels selected, MPP-Dairy payments are based on an operation’s historical production. A dairy operation’s historical production will increase by 2.61% in 2016 if the operation participated in 2015.

USDA has an online resource available to help dairy producers decide which level of coverage will provide them with the strongest safety net under a variety of conditions. The enhanced Web tool, available at www.fsa.usda.gov/mpptool, allows dairy farmers to quickly and easily combine their unique operation data and other key variables to calculate their coverage needs based on price projections. Producers can also review historical data or estimate future coverage based on data projections. The secure site can be accessed via computer, mobile phone, or tablet, 24 hours a day, seven days a week.

Producers must submit form CCC-782 for 2016, confirming their Margin Protection Program coverage level selection, to the local Farm Service Agency (FSA) office. If buying coverage above the $4.00/cwt. catastrophic level for 2016, dairy producers can either pay the premium in full at the time of enrollment, or pay a minimum of 25% of the premium by Feb. 1, 2016.

For more information, visit FSA online at www.fsa.usda.gov/dairy for more information, or stop by a local FSA office.”

May 2015 Milk Production

This from the most recent US Milk Production report, USDA:

“May Milk Production up 1.4 Percent
Milk production in the 23 major States during May totaled 17.2 billion pounds, up 1.4 percent from May 2014. April revised production at 16.6 billion pounds, was up 1.8 percent from April 2014. The April revision represented an increase of 3.0 million pounds or less than 0.1 percent from last month’s preliminary production estimate.
Production per cow in the 23 major States averaged 1,990 pounds for May, 11 pounds above May 2014. This is the highest production per cow for the month of May since the 23 State series began in 2003.
The number of milk cows on farms in the 23 major States was 8.63 million head, 72,000 head more than May 2014, and 4,000 head more than April 2015.
May Milk Production in the United States up 1.4 Percent
Milk production in the United States during May totaled 18.4 billion pounds, up 1.4 percent from May 2014.
Production per cow in the United States averaged 1,971 pounds for May, 15 pounds above May 2014.
The number of milk cows on farms in the United States was 9.31 million head, 58,000 head more than May 2014, and 3,000 head more than April 2015.”

Dairy product change 2009-2014

5-Year Milk & Dairy Product Changes

US milk production in 2014 was 16.7 billion pounds, 8.8%, greater than 2009. Increased 2014 cheese production used 13.8 billion pounds of that milk. In the past 18 years year over year milk has increased 14 of 18 years. The four declines occurred in 1993, 1996, 2001 and 2009.

USDA recently published “Dairy Products 2014 Summary” which the Central Federal Milk Market Order (FMMO) administrator used to compare the change of US dairy product production over the past 5 years. The US is divided into three geographic regions, the Atlantic region includes state bordering the Atlantic Ocean plus Pennsylvania and West Virginia, the Central region from OH to AL to TX to ND and the West region consists of the states located in the Mountain and Pacific Time zones. US milk production increased 8.8% during the 5 year period with the Atlantic region up 6.7%, the Central region up 8.3% and the West region up 10.4%.

US cheese production rose 13.7% for the 2009-14 period. All three regions had increased cheese production, Atlantic +5.1%, Central + 11.3% and the West region +19%. The Central region accounted for 44.2% of 2014 while the West region produced 43.4% of 2014 US cheese production. Both the Atlantic and Central regions lost cheese market share, just under 2%, to the West region.

US butter production rose 18.1% from 2009-14. The Atlantic region production rose 28%, the Central 13.9% and the West 19.7%. US yogurt production rose 23.9% from 2009-14 with the Atlantic region seeing the largest percentage increase, 53.7%. US ice cream production declined 10.4% from 2009-14. The Central region which produces 55% of US ice cream lost 3.8% while the Atlantic region which has a 20% market share lost 19.6%. Over 2/3 of nonfat dry milk (NFDM) is produced in the Western region and increased 4.9% in total production from 2009-2014.