Outline o Global Dairy Overview o U.S Milk Production o Dairy Product Production, Stocks, Trade o Outlook 2
Global Milk Production: Select Countries (in billion pounds) In Billion Pounds 21 67 216 333 83 17 23 27 Source: USDA FAS 53 159 48 21 Source: USDA FAS 11
(Billion Pounds) Global Milk Production: Select Countries 300 200 100 0 2010 2017 Source: USDA FAS 4
(Million Pounds) Milk Production: AU&NZ, AR&BR, EU,US 4,000 Year-over-year Change 3,000 2,000 1,000 - Jan 14 Jun Jan 15 Jun Jan 16 Jun Jan 17 Jun (1,000) (2,000) Source: Daily Dairy Report 5
YOY Change in Milk Production: US/EU/Oceania YOY Change in Global Milk Production 4,500 European Union New Zealand USA 3,500 2,500 1,500 500 (500) (1,500) Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul 2014 Source: USDA FAS 6
Global Dairy Product Production and Exports Trade Production SMP WMP Butter Cheese 0 5 10 15 20 25 30 35 40 45 Billion Pounds Source: USDA FAS 7
(Million Lbs.) (Million Lbs.) Global Dairy Product Production and Exports Butter Cheese 12,000 Production Exports 25,000 Production Exports 10,000 20,000 8,000 15,000 6,000 10,000 4,000 2,000 5,000 - India EU 28 U.S. N.Z. - EU 28 U.S. Aus N.Z. Source: USDA FAS 8 16
(Million Lbs.) (Million Lbs.) Global Dairy Product Production and Exports Nonfat Dry Milk Whole Milk Powder 4,000 Production Exports 3,500 Production Exports 3,500 3,000 3,000 2,500 2,500 2,000 2,000 1,500 1,000 1,500 1,000 500 500 - U.S. EU 28 India N.Z. Aus - NZ China EU 28 Brazil Arg. Source: USDA FAS 9 17
U.S. and Regional Milk Production
U.S. Milk Production U.S. WPI Milk 90 (30-day Production month) 20,000 18,000 16,000 14,000 12,000 10,000 Source: USDA 11
U.S. Milk Production Data WPI Milk 90 (30-day Production month) U.S. Dairy Cows (in million head) WPI 90 (30-day Production month) U.S. Milk Per Cow (30-day month, in lbs.) 9.5 2,000 9.4 1,950 1,900 9.3 1,850 9.2 1,800 1,750 9.1 1,700 Source: USDA 12
TX CO UT KS IA SD NM MI MN AZ IN VA OH PAIL WI ID NY VT WA FL OR CA TX NM CO UT KS SD MI AZ IA MN IN NY PA OH IL WI VT VA FL WA ID CA OR U.S. Milk Production: Key States 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% September YOY Change in Milk Production 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% September September YTD Change YOY Change in Milk in Production Milk Production 13
Pennsylvania Pennsylvania U.S. WPI Milk 90 (30-day Milk Production Production month) Pennsylvania U.S. WPI Milk 90 (30-day Production Milk month) Per Cow (30-day month, in lbs.) 1,000 950 900 850 800 750 700 650 600 1,900 1,800 1,700 1,600 1,500 535 533 530 528 525 523 520 Pennsylvania U.S. WPI Milk 90 (30-day Production Dairy month) Cows (in thousand head) o PA Overview o Milk Production YTD Sept up 1.8% o Dairy Herd Stable at 525,000 Source: USDA 14
(Percent) More Butterfat 2010 2016 4.10 4.00 3.90 3.80 3.70 3.60 3.50 3.40 3.30 3.20 CA ID MI MN NM NY PA SD TX WI U.S. 15
($/Cwt) 2016 All Milk Price @ 3.5% BF $17.00 $16.00 $15.00 $14.00 $13.00 CA MI AZ ID NM PA U.S. Avg MN TX WI NY SD VT 16
Income Over Feed Key States Regional Dairy Production Margin (in $ per cwt.) Regional Dairy Production Margin (in $ per cwt.) $12 $9 $6 $10.88 $6.40 $6.74 California $9.14 $7.15 $7.85 $8.70 $8.35 $18 $15 $12 $9 $14.35 $9.84 $9.42 Wisconsin $11.95 $10.33 $10.18 $10.34 $10.92 $3 $6 $3 $0 2014 2015 2016 J/F17 M/A M/J J/A Sep $0 2014 2015 2016 J/F17 M/A M/J J/A Sep Regional Dairy Production Margin (in $ per cwt.) Regional Dairy Production Margin (in $ per cwt.) $18 $15 $12 $9 $6 $3 $14.50 $8.87 $7.97 New York $10.60 $8.77 $8.09 $9.48 $9.90 $15 $12 $9 $6 $3 $12.42 $7.84 $8.09 Idaho $10.52 $8.59 $9.06 $9.07 $9.61 $0 2014 2015 2016 J/F17 M/A M/J J/A Sep $0 2014 2015 2016 J/F17 M/A M/J J/A Sep 17
Dairy Products Production, Stocks and Trade
U.S. Cheese Production & Stocks WPI 90 (30-day month) Total Cheese Production 1,060 1,040 1,020 1,000 980 960 940 920 900 880 19
American Cheese Production & Stocks WPI 90 (30-day month) WPI 90 (30-day month) American Cheese WPI 90 (30-day month) American Cheese Stocks (in million lbs.) 430 900 420 410 800 400 390 700 380 600 370 360 500 350 400 Source: USDA 20
Cheddar and Mozzarella Production WPI 90 (30-day month) WPI 90 (30-day month) Cheddar Cheese WPI 90 (30-day month) Mozzarella 330 320 310 300 290 360 350 340 330 280 320 270 260 250 240 310 300 290 230 280 Source: USDA 21
Global Cheese Prices Weekly World Cheese Price Title (in USD per lb.) $2.00 Oceania German (Edam) CME Block $1.60 $1.20 $0.80 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Source: Daily Dairy Report 22
Cheese Exports and Imports U.S. WPI 90 (30-day month) Exports U.S. Cheese (30-day month, (in million & in Curd lbs.) million lbs.) Exports U.S. WPI 90 (30-day month) Imports U.S. Cheese (30-day month, (in& million in Curd lbs.) million lbs.) Imports 80 60 50 60 40 30 40 20 10 20 0 Source: USDA 23
Butter Production & Stocks U.S. Butter Production U.S. Butter Stocks (in million lbs.) 200 180 350 160 140 300 120 250 100 80 200 60 150 40 20 100 0 50 Source: USDA 24
Global Butter Prices Weekly World Butter Prices (in USD per lb.) $3.90 German CME GDT $3.40 $2.90 $2.40 $1.90 $1.40 $0.90 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Source: Daily Dairy Report 25
Butter & Milkfat Exports and Imports U.S. WPI Butter 90 (30-day - Imports month) U.S. Butter &(in million Milkfat lbs.) Exports WPI 90 (30-day month) WPI 90 (30-day month) U.S. Butterfat Imports 10 9 8 7 6 5 4 3 2 1 0 16 14 12 10 8 6 4 2 0 Source: USDA 26
NDM/SMP Production & Stocks U.S. NDM and SMP Production WPI NDM 90 (30-day & SMP month) WPI 90 (30-day month) U.S. Manufacturers' Stocks of NDM (in million lbs.) 250 350 200 300 250 150 200 100 150 50 100 50 0 0 Source: USDA 27
Metric Tons EU Stocks = 1/3 of U.S. Production 300,000 Cumulative SMP Offered into European Intervention 250,000 200,000 150,000 100,000 50,000 0 J F M A M J J A S O N D 2016 2015 2017 Source: Daily Dairy Report 28
Nonfat Dry Milk Global Prices World International Weekly Price SMP for Price SMP (in USD per lb.) $1.75 NDPSR eq SMP Oceania German GDT $1.50 $1.25 $1.00 $0.75 $0.50 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Source: USDA 29
NDM/SMP Exports WPI 90 (30-day month) WPI 90 (30-day month) U.S. NDM/SMP Exports WPI 90 (30-day month) U.S. NDM/SMP Exports: YTD Sept 180 500 2016 2017 160 140 400 120 100 300 80 60 200 40 20 100 0 0 All Rights Reserved 30
U.S. Production: Whey and WPC 25-49.9% U.S. Whey Powder Production U.S. Whey U.S. WPC Whey Powder WPC WPI Powder 90 (50-89.9% Production (30-day(Human) month) Protein) (Food Grade) WPI 90 (30-day month) U.S. U.S. WPC WPC (25-49.9% (50-89.9% Protein) 100 95 90 85 80 75 70 65 60 55 50 22 20 18 16 14 12 10 Source: USDA 31
U.S. Stocks: Whey and WPC 25-49.9% Dry U.S. WPC Whey WPC U.S. WPI US Lactose (50-89.9% Milk Powder (Food 90 Lactose (30-day Production Supply Stocks (Human) Protein) month) Whey (Food Grade) Inventory Stocks (30-day( (in month, million in lbs.) million lbs.) WPC (25-49.9%) Stocks WPC U.S. WPC (25%-49.9% (25-49.9% WPC U.S. WPI Lactose 90 (50-89.9% (25.5 Lactose (30-day Stocks - 49.9%) month) Protein) Inventory Stocks (30-day( (in month, million in lbs.) million lbs.) (in million lbs.) 125 45 100 30 75 15 50 0 Source: USDA 32
U.S. Stocks: WPC 50-89.9% and WPI WPC WPC Stocks (50%-89.9% WPI (50-89.9%) 90 of (30-day American - 89.9%) month) WPC (50-89.9% U.S. WPC Protein) Stocks Inventory Cheese Stocks Stocks (30-day (in month, million in lbs.) million lbs.) (in million lbs.) WPI Stocks U.S. WPC WPC U.S. WPI Lactose WPI 90 (50-89.9% Lactose WPI 90 (30-day Inventory Stocks 90 month) Protein) (30-day (in month, million in lbs.) million lbs.) (in million lbs.) 60 30 25 40 20 15 20 10 5 0 0 Source: USDA 33
Dairy Markets Outlook
Cheese and Butter Price Outlook Cheese Prices (in USD per lb.) Butter Prices (in USD per lb.) Futures 11/15/17 Forecast 5 year avg $2.75 Futures 11/15/17 Forecast 5 year avg $1.90 $1.70 $2.50 $2.25 $1.50 $2.00 $1.30 Nov-17 Feb-18 May Aug Nov $1.75 Nov-17 Feb-18 May Aug Nov Source: Daily Dairy Report 35
NDM and Whey Price Outlook NFDM Prices (in USD per lb.) Whey Prices (in USD per lb.) Futures 11/15/17 Forecast 5 year avg. Futures 11/15/17 Forecast 5 year avg $1.50 $0.60 $1.30 $0.50 $1.10 $0.40 $0.90 $0.30 $0.70 Nov-17 Feb-18 May Aug Nov $0.20 Nov-17 Feb-18 May Aug Nov Source: Daily Dairy Report 36
Class III Outlook Class III Milk (in USD per cwt.) $20 Futures as of 11/15 Forecast 5 Yr. Avg. $18 $16 $14 $12 NOV 17 FEB MAY AUG NOV 37
Class IV Outlook Class IV MIlk (in USD per cwt.) $18 Futures as of 11/15 Forecast 5 Yr. Avg. $16 $14 $12 NOV 17 FEB MAY AUG NOV 38
Key Points o Global milk production is growing, largely due to greater YOY output from Europe and the United States. o U.S. dairy herd is large and feed is cheap but YOY U.S. milk production is growing at a slower rate. The ability to grow will depend upon available processing capacity. o The have s vs. have nots 39
Key Points o Dairy product price convergence will reduce import opportunities to the United States o Global dairy product demand improving watch China and Mexico o Weak Euro/strong US$ and ample production will create export challenges for U.S. products o 2018 could be a more challenging year in terms of profitability, which could set up an interesting farm bill 40