Muscoda - “The last two years have been darn tough in the dairy business,” Pete Hardin, editor and publisher of The Milkweed, told members of the Scenic Central Milk Producers Cooperative last week at their annual meeting in Muscoda.
“Buyers are playing one seller against another and organic farms are losing their markets,” the keynote speaker said.
In regard to that market segment, Hardin said the U.S. Department of Agriculture is doing an “impossibly poor job” of regulating the imports of so-called organic grain. Boatloads of grain grown in Turkey, Romania and Ukraine are flooding into the United States as organic and “all they have to do is have a piece of paper” saying their grain is organic. He objects to the fact that there’s no oversight here about the standards that grain was grown under.
That influx boosts the organic grain supplies here, undercuts U.S. organic grain producers and has helped create a flood of organic milk, he said. “I don’t care if it’s organic or conventional milk, the old saying holds true that ‘cheap corn makes cheap milk’.”
The other thing that is helping create the downtrend in the organic milk market, said Hardin, is that the USDA has “totally dropped the ball” in regulating organic dairies. Some operations with 3,000 or 5,000 cows cannot possibly meet the organic standards requiring cows to get fresh pasture as a substantial part of their diet, he said.
These governmental failures are playing out on organic farms across the country, he said.
In the conventional dairy markets, Hardin said New York, Michigan and Pennsylvania are bracing for a glut of milk during this spring’s “flush” season. Permission has been granted by federal authorities for milk dumping in these regions in the coming months.
In addition, cull cow and calf prices are down from the lofty heights they reached in mid-2015, which doesn’t help the bottom line when cows need a “change of career.” It also means that farmers are probably not going to cull that cow that is border-line in her productivity because the price they’ll get for her is not great, he said. That adds to the extra production that the market doesn’t need right now.
In addition, with cheap corn being the by-word in conventional corn markets as well, the same old saw rings true. “Cheap corn is going to mean cheap milk.”
The export market for U.S. dairy products is in turmoil too, Hardin said. Mexico has been the largest export destination for U.S. non-fat dry milk products and cheese but the country “is tired of being called names” and is looking elsewhere for dairy products.
It is also the largest export destination for U.S. corn and a similar situation exists there as Mexican buyers have begun looking to South American nations for their corn supplies.
In the United States we have seen 2 percent growth in retail cheese consumption, which is a good thing for the dairy markets. Consumers here are now up to 36 pounds of cheese consumed per person per year and butter and whole milk are gaining in popularity with consumers.
Organic whole milk consumption grew 16-18 percent last year, he said. But growing “non-GMO” products are taking away some of the luster and sales from organic products as consumers turn to them.
In their dairy products, Hardin said “for sure consumers don’t want Posilac” – the rbST product used on cows to enhance their production.
As farmers look to the future of their dairy operations, he encouraged them to consider using bulls with the A2A2 genetic makeup for production of beta-casein.
Beta-casein makes up about 30 percent of all milk proteins and mainly exists in milk in two forms – A1 and A2. The two differ in one amino acid but that small change in structure seems to affect how people can digest their dairy. Many consumers who think they are lactose (milk sugar) intolerant may really be reacting digestively to this A1 protein in the milk, studies have shown.
Cows with the A2A2 genetic makeup can only produce the one kind of beta-casein in their milk. Though there isn’t currently a market premium for it, Hardin sees this as a coming opportunity in the dairy industry for farmers who structure their herds’ genetics in that direction. He sees a future for A2 milk, especially in the infant formula market and sees big opportunities for that in China, where the infant formula market is booming as the country relaxes its one-child rule.
Aim for components
He also encouraged farmers to aim for better butterfat and protein content in their milk as that will be the “price driver in the dairy industry for the next 10 years. Aim for thicker milk.” That may mean selecting different breeds of cattle, like Jerseys, Jersey crossbreds, or selecting Holstein genetics on the basis of their higher components. Either way it should also mean feeding the herd in such a way that their production of components is as high as possible.
In his advice to producers, Hardin encouraged them to manage their debt carefully because he sees a coming credit crunch for agriculture – especially grain farmers who have been hammered with low commodity prices and high expenses for several years.
Hardin, who has been writing about the dairy industry for decades, noted that there are some medium and large dairy cooperatives “with serious debt problems” and he foresees more mergers and consolidations as they try to work through these problems.
One of his greatest frustrations, Hardin said, is that the USDA, under Sec. Tom Vilsack, approved the importation of beef from countries that have foot and mouth disease – Brazil, Argentina and Namibia. He called this decision “foolishness” and criticized Vilsack for that decision.
“If the United States were to get a foot and mouth outbreak, we would lose all of our dairy exports, as well as semen, cattle, cheese, beef and pork exports. It would also hit grain producers too since the users of the grain for feeding livestock would no longer need it.”
Changing gears, Hardin said that in Wisconsin after the Civil War, several state leaders looked around at the region – with good towns and railroads – but with virgin timber supplies dwindling and with the wheat belt gone by, and decided this land would be good for dairy farming.
“Hoard and other visionaries saw that this land would be ideally suited for a dairy industry. I think this is the single greatest economic development project in U.S. history, and there’s still plenty of room for improvement,” he said. “There are plenty of opportunities in the dairy industry.”
But Hardin added that the industry must be careful as it faces groundwater degradation that has come in some regions of the state with large dairy farms. “Thirty-four percent of all tested rural wells are contaminated with e coli or nitrates,” he said, “and many of the state’s CAFO permits have expired.”