Multiple Component Pricing

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Wheres The Milk?
Craig Alexander Cornell Program on Dairy Markets
and Policy Cornell Conference on Dairy
Market and Product Research March 2000
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Outline

• National trends
• State and Regional
• Farm Structure
• Costs, Prices, Returns
• Issues

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US Production Consumption
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1999 Milk Production
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Change since 1998
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Top 10 States (1999)Change since 1998
Production
Cows
Milk/cow
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Change since 1994 Total Pounds
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Percent Change 1994-1999
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Top 10 States (1999)Change since 1994
Production
Cows
Milk/cow
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1999 Production Per Cow Annual Average
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Top 10 Production StatesMilk/cow
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U.S. County Milk Production
Source USDA-AMS
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Milk Supply by Supply Locations (240 supply
points - 1995)
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Western States Production
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Western States Production California
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Upper Midwest and Northeast
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New York Milk Production
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Pennsylvania Milk Production
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NY Change by County1993-1998
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PA Change by County1993-1998
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NY Change by County1993-1998
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PA Change by County1993-1998
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Number of Farms in the U.S.
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Number of Cows per Farm
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New York Numbers of Dairy Farms and Milk
Production
NY Farms - 60 US Farms - 74
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NY Farm loss by Herd Size
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NY Production Share by Herd Size
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Share of Milk ProductionIn 200 Cow Herds
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Change in Share of Production in Herds w/ 200
Cows
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Large is where the growth is

• Since 1993 US production
• UP 12.1 Billion lbs
• lt 200 cow herds lost 15.7
• gt 200 cow herds gained 27.8

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What about Costs and Returns?
Source USDA
Gross Returns 1998
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Northeast Residual Milk Supplies(Regional
Production - Consumption)
Changing relative production and consumption can
have impacts on premiums
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Upper Midwest Residual Supplies ( Regional
Production - Consumption)
Premiums have been high in Upper Midwest markets
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Variable Costs
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Net Cash Return
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Net ReturnIncluding all Economic Costs
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So -- where are we headed?
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Movement of Centroids
1930
Milk Production
1930
1998
Population
1998
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What about Future?

• Trends would say milk continues to move west.
• Population forecasts suggest that centroid is
  starting to head south.
• Major re-structuring occurring in Midwest and
  Northeast
• Good sales growth and good milk prices has not
  significantly slowed structural change

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Farm Structure Math
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What about Future?

• West (particularly CA)
• Will costs of water and environmental compliance
  slow them down
• Low feed prices help them
• Huge plant expansion in cheese
• Midwest
• Relatively high pay prices but aging plants
• Lower cost of some items
• Northeast
• Higher costs but apples and apples (our large
  vs. their large) cost comparison important
• Benefit of order structure and large markets

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In Summary

• Open Space?
• Pace of change has seemed to quicken
• Northeast producers and handlers must keep
  sharpening the saw

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