2LaMendola Alfalfa Symposium 2017symposium/2017/power... · Futures and options trading involves...
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© 2017 Blimling and Associates, Inc. This report is prepared for the exclusive use of Blimling and Associates’ clients. Reproduction in part or in whole without permission is strictly prohibited. This information is carefully compiled, but not guaranteed to be complete or free from error; nor does it constitute a solicitation to buy or sell futures/options contracts. Futures and options trading involves risk. Contact a licensed professional for more information. 2810 Crossroads Drive, Suite 3900 l Madison, WI 53718 l 800-726-9928 l [email protected] Top Five 2018 Dairy Markets Tiffany LaMendola• 2017 Western Alfalfa & Forage Symposium
Transcript of 2LaMendola Alfalfa Symposium 2017symposium/2017/power... · Futures and options trading involves...
©2017BlimlingandAssociates,Inc.ThisreportispreparedfortheexclusiveuseofBlimling andAssociates’clients.Reproductioninpartorinwholewithoutpermissionisstrictlyprohibited.Thisinformationiscarefullycompiled,butnotguaranteedtobecomplete or freefromerror;nordoesitconstituteasolicitationtobuyorsellfutures/optionscontracts.Futuresandoptionstradinginvolvesrisk.Contacta
licensedprofessionalformoreinformation.
2810CrossroadsDrive,Suite3900l Madison,WI53718l800-726-9928l [email protected]
Top Five2018 Dairy Markets
TiffanyLaMendola•2017WesternAlfalfa&ForageSymposium
#1It’s all about the EU
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In2016TheMarketLearned…
• EU milk production is….a big deal.• 6.8x bigger than New Zealand and 1.6x bigger than the USA• Imagine the headlines: New Zealand up 19%
EU NZUSA
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EUMilkStilltheStory• Milk production increased +4.3% in September• Strong growth expected to continue (weak y-o-y comparison helps)• Milk prices at highest level since 2014…but how long will they hold?
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ASoberingLook?
#2US Milk Production
(Oceania too)
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USMilk:NoProblem
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CowPower• US herd at 9.400 million head in October – up 65,000 vs 2016• September/October the first month-to-month declines in a year
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VariesByRegion• Texas has been in growth mode• California in consolidation/contraction
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NZPilingOn?• Season got off to a wet, slow start• No problems in sight now• Improved milk prices at the farm
#3Dairy Producer Margins
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USMarginNotTerrible onPaper
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But…RegionalDisparities
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• Long-run, ongoing trends• Consolidation• A focus on productivity• Diversification• Environmental• Labor
• Current conditions• Lower milk prices• California cow numbers down • Margins• Other income down
CaliforniaProductionDown
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• Tree nuts, particularly almonds, widely viewed as a steady source of income to offset variable dairy returns
• Labor and environmental issues
• The lifestyle appeals too• To water the trees or to
water the corn…? That’s the question…
Diversification:FriendorFoe?
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BehindTheScenes• Dairy producer cattle income is down considerably versus 2015 highs• As much as $1 per hundredweight?
#4Demand, Demand,
Demand
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USDemandNothingSpecial• Through September, we estimate US cheese use up by about 1% --
down from bigger numbers in 2016 and 2015• Fat no longer in favor? Butter use lackluster
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FluidMilk,YogurtSlow• Conventional fluid milk sales down 1.3% in 2016, still soft in 2017• Losing streak: seven years, 6.8 billion pounds• Yogurt sales down by nearly 10% by some measures
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ExportsHoldingUp
#5Inventories
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PlentyofCheese
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PlentyofButterToo
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WAYTOOMUCHPowder!• EU Intervention program holds 800 million pounds of SMP• US manufacturers’ stocks are at highest level since 2009
Where are we at?Where are we going?
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Powder:PricesTumbling
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• Prices elsewhere in the world have drifted lower
• US prices fluctuating within a range
Cheese:ComingUnderPressure?
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• Prices in the US have been at elevated levels all year
• After surging in late summer, EU butter prices have recently slipped considerably
• Export potential for US?
Butter:LikelyToRemainVolatile
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WhereToFromHere?
Bulls• Peak demand season ends
strong • Economy spurs demand• Export sales grow
• China?
• Milk production becomes fragile quicker than expected
Bears• Large inventories• Lackluster demand• EU milk production up• NZ milk production up• US milk production stays
strong longer than expected
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WhenCornisLessThan$4…• History says don’t expect milk prices to be too high if corn is low• Historically, $3.75 corn is equal to about $14.50 milk
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LookingAhead• Futures currently project fair-to-midland 2018 California All Milk price • Given relative feed prices and milk prices, margins tighter than other
regions
Abetterwayofdoingbusiness.BlimlingandAssociates
2810CrossroadsDriveSuite3900
Madison,WI53718608.249.5030
www.blimling.com
Dairy.com3801Parkwood Boulevard
Suite300Frisco,TX75034214.442.5928
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©2017BlimlingandAssociates,Inc.ThisreportispreparedfortheexclusiveuseofBlimlingandAssociates’clients.Reproductioninpartorinwholewithoutpermissionisstrictlyprohibited.Thisinformationiscarefullycompiled,butnotguaranteedtobecompleteorfreefromerror;nordoesitconstituteasolicitationtobuyorsellfutures/optionscontracts.Futuresandoptions
tradinginvolvesrisk.Contactalicensedprofessionalformoreinformation.
