12 Progressive Dairyman Issue 12 • August 11, 2011

PD MIDWEST MAIN PC

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INGREDIENTS: Most calf feeds are deficient in essential fatty acids. Adding NeoTec4 ensures your calves are getting everything they need for optimal performance. NeoTec4 has considerable peer-reviewed research and is quickly becoming a standard ingredient in calf diets. Make sure your calf nutrition program includes NeoTec4.

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MARKET WATCHMARKET WATCH RATE OF PRODUCTION GROWTH SLOWingMILK

A wise dairy analyst once noted that the U.S. dairy industry’s ability to produce milk is like a train – acceleration and braking take a while. � e June U.S. Department of Agriculture (USDA) Milk Production report supports this view, as June was the 17th consecutive month that U.S. milk production was more than the same month of the prior year. Production in June was 16.528 billion pounds, equal to 117 additional tanker loads of milk per day. � e rate of increase over June 2010 was 1.1 percent, continuing a slow shrinking trend. September 2010 production, the peak year-over-year comparison so far in this production cycle, was 3.3 percent and the comparison has dropped each month since then. While milk production continues to increase overall, the rate of growth is slowing.

Production increased over last June in 14 of the 23 largest milk-producing states – 10 in the West and four in the East. Eighteen of the top 23 states had increases in cow numbers, with fi ve of them (Washington, Idaho, California, Arizona and Texas) adding more than 10,000 cows each. An increasing national dairy herd appears to be

Elvin Hollon Director, Fluid Marketing/Economic Analysis for DFAehollon@dfamilk.com

the main driver for milk production growth in coming months. Production per cow of 1,795 pounds was only 0.2 percent over last year, and well below the 10-year trend of 1.5 percent. June weather was conducive for milk production across the United States, so the minimal milk-per-cow growth may be due to poor feed quality or tight margins that constrained spending.

� e rest of the world is also increasing milk production. European Union milk production has increased 2.8 percent for the fi rst four months of 2011 as compared to the same time period in 2010. � e Oceania region (which includes New Zealand and Australia) ended the most recent milking season on a strong note. � e current forecast for the upcoming milk season is for stronger growth in that part of the world.

Feed costs remain at high levels. Using the Milk Income Loss Contract’s feed prices as a proxy for a national feed ration and inputting future prices for corn, soybeans and hay for the remaining months of the year yields an average feed cost of $11.50 per hundredweight for July – December 2011. If these costs

U.S. Total9,198 +331,808 +0.4%50,439 +1.3%

98,860 101.7%

Legend

Number of cows(in thousands)

Milk per cow(Q4 monthly avg.)

(in lbs.)Total milk

production (quarter)

(in millions of lbs.)

Year-to-date milkproduction (total)(in millions of lbs.)

Percentage of year-to-date production versus previous year-to-date

Quarterly change(in thousands)

Annual percentchange

Annual percentchange

90% 100% 110%

become a reality and milk prices cannot keep pace, this may curtail milk production.

Globally, dairy product prices have declined slightly during the past few weeks. � e latest USDA international price recap shows that all commodity prices, except for cheese, have shown some decline. � e recent weakness in global prices may refl ect a “wait and see” attitude from dairy buyers as to what milk production does around the world before committing to additional purchases, and they are willing to hold minimal amounts of inventory

in the meantime.U.S. prices have not experienced

much of a decrease yet as hot summer weather has increased uncertainty over grain prices and cut into milk production in some parts of the country. Until the weather eff ect is fully measured, we may avoid the current world price slowdown. However, if domestic milk production increases signifi cantly, we should expect prices to weaken. PD

Issue 12 • August 11, 2011 Progressive Dairyman 13

GLOBAL DAIRY PRODUCT PRICES HAVE DECLINED East Coast Region

2,245.1 -51,638 -0.8%

11,157.5 -1.5%22,088.5 100.1%

Midwest Region2,963 +11,732 -1.1%

15,571 -1.0%30,600 99.8%

Vermont135 NC

1,595 +2.0%653 +0.5%

1,289 101.3%

Virginia96 +1

1,528 -2.4%445 -1.3%

884 100.6%

Wisconsin1,266 NC1,741 -1.6%6,684 -1.2%

13,133 99.8%

Florida118 +1

1,671 +0.1%598 +2.7%

1,222 106.4%

Georgia79 -1

1,577 -1.0%378 -1.0%

758 100.9%

North Carolina45 NC

1,722 +0.3%235 +2.6%

465 104.5%

Maryland52 -1

1,591 +0.6%251 -3.1%

504 97.7%

New Jersey8 NC

1,484 NC36 NC

71 97.3%Delaware5 NC

1,549 +7.7%23.5 -2.1%

47.8 99.6%

Connecticut18.5 NC1,639 -1.6%

92 -4.2%

184 97.9%

Massachusetts13 -1

1,471 -3.9%58 -10.8%

116 91.3%

Rhode Island1.1 NC

1,499 -3.8%5 -3.9%

9.7 99.0%

South Carolina16 NC

1,525 -2.2%74 -5.1%

149 93.1%

Alabama11 NC

1,229 -8.9%41 -8.9%

84 93.3%

Mississippi14 -1

1,295 +6.0%55 -12.7%

114 90.5%

Louisiana18 -1

1,117 +2.7%61 -7.6%

130 97.7%

Illinois98 NC

1,645 -0.4%489 -3.4%

970 97.3%

Indiana170 -1

1,738 -0.5%896 +0.1%

1,761 101.1%

Iowa207 -2

1,785 +1.6%1,121 -0.8%

2,214 100.2%

Kansas122 NC

1,792 +0.6%663 +4.9%

1,304 105.5%

Nebraska57 NC

1,752 +4.5%303 +1.0%

593 100.5%

South Dakota93 +2

1,709 NC482 NC

942 99.4%

North Dakota19 -1

1,527 -1.8%88 -11.1%

176 91.2%

Michigan364 +2

1,965 -1.3%2,170 +0.4%

4,233 101.3%

Minnesota471 NC

1,608 -3.4%2,297 -3.2%

4,542 97.8%

Missouri96 +1

1,298 +1.5%378 -3.6%

732 96.6%

New York610 NC

1,777 +0.2%3,288 +0.2%

6,463 101.9%

Ohio268 -2

1,615 -4.0%1,313 -5.1%

2,604 97.1%

Pennsylvania543 NC

1,662 -1.6%2,737 -1.2%

5,377 99.4%

New Hampshire14.5 -1

1,682 +1.4%74 -5.1%

148 96.7%

Maine32 NC

1,566 +1.3%152 +1.3%

299 101.7%

West Virginia10 NC

1,319 NC40 NC

79 100.0%

Kentucky77 +1

1,267 -3.6%296 -6.0%

585 95.7%

Tennessee49 -1

1,426 -1.2%212 -8.6%

428 94.3%

Arkansas12 NC

1,099 -3.1%40 -7.0%

78 92.9%