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Guessing the Big Dairy Events of 2015

09 December 2014

Ohio State University

A watchful eye should be on prices and export demand next year, while domestically, the new protection programme will be key, says a markets and policy expert looking through his crystal ball.

Describing the Margin Protection Programme, announced this autumn/fall, as a "watershed event", Associate Professor Cameron Thraen, University of Ohio, Department of Agricultural, Environmental and Developmental Economics also sees US dairy exports as significant.

US Milk production and dairy exports have increased significantly over the last decade, with an increase in milk production of 34 billion pounds. 

This is between 2003 and 2014, during which time dairy exports have increased by 25.7 billion pounds. 

2015 - Will world markets drag down US dairy prices? How will the new margin policy fare?

“Dairy exports were 4 percent of milk production in 1996’s 154 billion pounds, and now this figure is 15.5 per cent of 2014’s 204 billion pounds," said Professor Thraen. 

“This increased export demand accounts for 75 per cent of the growth in U.S. milk production.”

Global milk prices will subsequently soften US milk prices as higher supply in Europe and Oceania clash with Russian import bans. 

This will "slow down" the dairy boom of the last decade, he added. 

With the recent rise in dairy exports, the number of cows and production rates on dairy farms in the U.S. have increased significantly over the last decade, Professor Thraen said.

In 2001, the average number of cows per dairy farm in Ohio was 61, while in 2014 this number reached 96. Additionally, milk production per Ohio dairy farm in 2001 was 1 million pounds, while in 2014 this number reached 1.9 million pounds. In Ohio in 2014, there were an estimated 267,000 milk cows for a total milk production of 5.4 billion pounds, resulting in $1.3 billion in gross revenue from the sale of milk, a record for Ohio, Professor Thraen said.

“These Ohio numbers reflect what is happening at a national level,” he said. “Nationally, the number of milk cows at the end of 2014 is approaching 9.3 million head, and production is gaining speed, reflecting strong equity building on dairy farms after difficult financial periods in 2009 and in 2012.”

Also currently impacting the U.S. dairy industry is the passage of the U.S. Agricultural Act of 2014, better known as the farm bill, and the new voluntary Dairy Margin Protection Program (MPP), or dairy safety net, in the legislation, Thraen said.

“For the first time in the history of U.S. dairy policy, dairy farmers will have a program that allows them to take a stake in their own national safety net policy,” he said.

“For the first time they are given the opportunity to individually select a level of financial support and to pay a modest amount for their selection."

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