Global milk demand is expected to grow 25 percent in next decade. Summer dairy income margins were mixed. Cold storage inventories saw a slight drawdown.
IFCN: Global dairy demand to grow 2.3 percent annually
Global demand for milk will grow at an annual rate of 2.3 percent through the next decade, according to the International Farm Comparison Network (IFCN) Dairy Research Network. Driven by increases in population and milk consumption per capita, IFCN’s 10-year dairy outlook estimates global milk demand will grow 25 percent by 2025.
“There will be 1 billion more consumers on this planet who will have a demand for milk products,” said Torsten Hemme, IFCN managing director. “Globally, each person will consume 13 kilograms (about 29 pounds) more in milk equivalent per year.”
Meeting that demand would be equivalent to multiplying the annual production of New Zealand by 8.5.
A key driver for the future milk supply will be prices sustainable to meet producer costs. IFCN estimates that global milk price will have to average $41 per 100 kilograms ($18.65 per hundredweight), a price level substantially higher than prices observed in 2015 and 2016.
Dairy farm numbers will continue to shrink, while herd sizes grow, according to the outlook. IFCN expects the world to have 121 million dairy farms in 10 years, a decline of 17.5 million farms from current estimates. However, milk-producing animal numbers, which includes cows and buffalo, are expected to grow to 405 million head, up from 370 million head in 2015. Milk production per farm is expected to increase 47 percent by 2025.
“The level of global milk supply will also keep growing, provided that the consumers still have positive preferences for milk and the political and overall economic situation is stable,” Hemme said.
Iowa-Nebraska dairy budgets improved in August
Iowa-Nebraska dairy margins moved above breakeven for most dairy systems in August, according to a monthly summary from Robert Tigner, a University of Nebraska Extension agriculture educator. Higher milk protein prices combined with lower feed costs to push margins into the black for three of four dairy systems that were analyzed.
Tigner calculates dairy budgets for two production levels (20,000 and 24,000 pounds of milk per cow per year) and two management systems (freestall and tiestall barns).
The Iowa-Nebraska August average milk price was $16.65 per hundredweight (cwt).
• The breakeven price for a freestall herd with a 20,000-pound production average was $15.72 per cwt.
• The breakeven price for a freestall herd with a 24,000-pound average was $14.14 per cwt.
• The breakeven price for a tiestall herd with a 20,000-pound production average was $17.23 per cwt, the only system with costs higher than the actual milk price.
• The breakeven price for a tiestall herd with a 24,000-pound average was $15.43 per cwt.
California Q2 2016 production costs remain well above milk prices
California second quarter (Q2) 2016 statewide milk production costs averaged $16.54 per hundredweight (cwt), down 76 cents (4.4 percent) from the same quarter a year earlier, according to the California Department of Food & Agriculture (CDFA). Including an allowance for management and return on investment, statewide total costs averaged $17.87 per cwt, down 87 cents from a year earlier.
Average “mailbox prices” paid to California producers averaged $13.13 per cwt in the Q2 2016, according to CDFA.
Compared to a year earlier, labor, herd replacement and total operating costs were up, but total feed costs declined nearly 11 percent.
Q2 2016 costs were highest in the North Coast region at $26.50 per cwt (total costs) and $28.30 per cwt (costs plus allowances). Lowest total costs ($15.53 per cwt) and costs plus allowances ($17) were in Southern California.
July U.S. cost of production higher
USDA’s monthly milk cost of production report showed feed costs rose in July, but were well below a year earlier.
July 2016 total operating costs averaged $13.88 per cwt of milk sold, with feed (purchased, homegrown and grazed feed for all dairy animals) making up about $10.96 per cwt. Based on USDA estimates, feed represented about 49 percent of total costs in July 2016.
Compared to a month earlier, July 2016 feed and operating costs were up 17 cents and 22 cents, respectively. Compared to a year earlier, feed and operating costs were down $1.50 and $1.55 per cwt, respectively.
In addition to feed, operating costs include expenses related to such things as veterinary and medicine, bedding, marketing, custom services, fuels and electricity and interest.
When adding costs related to allocated overhead, total costs averaged $22.51 per cwt in July 2016, up about 42 cents from June, but $1.52 per cwt less than July 2015.
Allocated overhead costs include expenses related to labor (both paid and opportunity costs for unpaid), capital recovery on machinery and equipment, opportunity costs of land (rental rate), and taxes and insurance.
U.S. milk prices averaged $16.10 per cwt in July 2016, up $1.30 from June, but 60 cents less than July 2015.
Cold Storage inventories see slight drawdown
USDA’s monthly Cold Storage report was released Sept. 23, reflecting volumes of dairy product inventories as of Aug. 31, 2016.
• Butter stocks were estimated at 322.2 million pounds, down 3 percent from July 31, 2016, but 52 percent more than August 2015.
• Total natural cheese stocks were estimated at 1.24 billion pounds, down 3 percent from July 2016, but up 6 percent from August 2015. American cheese stocks, at 744.5 million pounds, were down 3 percent from July 2016, but up 5 percent from August a year ago.
CWT 2016 export sales reach 675 million pounds milk equivalent
Another 13 bids to export nearly 2.3 million pounds of cheese were accepted under the Cooperatives Working Together (CWT) export assistance program for the week ending Sept. 23. Bids were accepted from Dairy Farmers of America, Northwest Dairy Association/Darigold and Tillamook County Creamery Association.
The year-to-date milk equivalent of dairy products exported through CWT topped 675 million pounds.
Farm Bureau Marketbasket: Fall retail milk prices down 10 percent
Lower retail milk prices helped reduce U.S. average food costs, according to the American Farm Bureau Federation’s Fall Harvest Marketbasket Survey.
The informal survey shows the total cost of 16 food items was $49.70, down $4.40 or 8 percent compared to a survey conducted a year ago. Of the 16 items surveyed, 13 decreased and three (bagged salad, apples and potatoes) increased in average price.
The farmer’s share of this $49.70 marketbasket would be approximately $8.45.
The price of a gallon of whole milk was $2.84, down 10 percent from a year ago. Price checks of alternative milk choices revealed one-half gallon of regular milk was $1.86, with one-half gallon of organic milk costing $4.26.
A total of 59 shoppers in 26 states participated in the latest survey, which was conducted in September.
Moody's rates DFA's $100 million preferred stock Baa3
Moody's Investors Service assigned a Baa3 rating to Dairy Farmers of America Inc.'s (DFA) $100 million Series C perpetual preferred stock. According to Moody’s, the positive rating outlook reflects continued good execution by management.
DFA, headquartered in Kansas City, Missouri, is the largest farmer-owned dairy marketing cooperative in the US. DFA reported revenue of $13.4 billion for the 12 months ending June 30, 2016. It marketed 62 billion pounds of milk in 2015, which accounts for roughly 30 percent of the total U.S. milk volume.
TruMoo turning to animation characters for fall promotion
Dean Foods will turn to popular animation characters to promote its TruMoo flavored milks later this fall.
Beginning Oct. 31, Poppy and Branch, characters from DreamWorks Animation's new comedy adventure, "Trolls," will be making an appearance on specially marked bottles of TruMoo Chocolate and limited-edition TruMoo Orange Scream milks.
As part of the promotion, consumers can visit TruMoo.com to enter codes found on specially-marked bottles of TruMoo milks to enter for a chance to win a Royal Caribbean DreamWorks Experience cruise as well as weekly "Trolls" prizes. 
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Dave Natzke
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