Dairy Outlook 2013

Marin BozicNorth Dakota Dairy Convention

Mandan, ND November 6, 2012

1) Who is this guy and how do you pronounce his name?

2) Taking a pulse of the U.S dairy sector3) The Big Mac(ro): Why is U.S. GDP growth

so slow?4) Long-term dairy dynamics: Global5) Long-term dairy dynamics: Local

Plan for today

How do you pronounce ‘Marin’?

Dairy Food Marketing Economist

• Funded by dairy check-off

• Located at the University of Minnesota, but covering 10-state area

• Research:• Risk Management• Price Analysis• Consumer Insights• Dairy Technology

Assessment

All-milk price: 2011-2012

Jan-1

1

Mar-11

May-11

Jul-1

1

Sep-11

Nov-11

Jan-1

2

Mar-12

May-12

Jul-1

2

Sep-12

$15.00

$16.00

$17.00

$18.00

$19.00

$20.00

$21.00

$22.00

$23.00

Milk Production: 2012 vs. 2011

Source: Daily Dairy Report

Weather Outlook (Feb-Mar-Apr 2013)

Source: http://www.cpc.ncep.noaa.gov/products/predictions/90day/

Weather OutlookMay-Jun-Jul 2013

Year-to-Year Changes in U.S. Milk Production

Jan-08

Apr-08Jul-0

8Oct-

08Jan-09

Apr-09Jul-0

9Oct-

09Jan-10

Apr-10Jul-1

0Oct-

10Jan-11

Apr-11Jul-1

1Oct-

11Jan-12

Apr-12Jul-1

2-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

Year-to-Year Changes in Milk Per Cow

Jan-08

Apr-08Jul-0

8Oct-

08Jan-09

Apr-09Jul-0

9Oct-

09Jan-10

Apr-10Jul-1

0Oct-

10Jan-11

Apr-11Jul-1

1Oct-

11Jan-12

Apr-12Jul-1

2-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

Difference in U.S. vs. InternationalCheese Prices

Is Inflation a Problem?

Growth vs. Deleveraging

Income over Feed Costs Margin: 2004-2012

Jan-0

4

Aug-04

Mar-05

Oct-05

May-06

Dec-06

Jul-0

7

Feb-08

Sep-08

Apr-09

Nov-09

Jun-1

0

Jan-1

1

Aug-11

Mar-12

Oct-12

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

The Kiwi Cycle(Change in Per Cow Milk Yield)

19771979

19811983

19851987

19891991

19931995

19971999

20012003

20052007

2009-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

New Zeland USA

Source: http://www.cgd.ucar.edu/cas/catalog/climind/soi5.gif

The Bottom Line

1) High feed costs will keep milk production in check. Exports may falter, providing additional domestic supply.

2) Some chance drought may stay with us.3) High volatility is the new normal, for several

years at least.4) Tune-in after lunch for farm bill update

Dairy Outlook 2013presented at the 2012 North Dakota Dairy Convention

Dr. Marin Bozicmbozic@umn.eduDepartment of Applied EconomicsUniversity of Minnesota-Twin Cities317c Ruttan Hall1994 Buford AvenueSt Paul, MN 55108

You may download this presentation at http://marinbozic.info/