Looking back and ahead
2019 will be an easy year to forget, many (maybe most) Wisconsin farmers will tell you.
From the cropping standpoint it was all about the weather. Too much rain at the wrong time and even today in late December there are many fields of corn still standing unharvested and it’s easy to find harvested acreage with deep ruts left by the tractor and combine.
The much discussed low producer milk prices left many dairy farmers with little or no extra money to fix machinery, build or remodel buildings and, in some cases, even paying basic farm and family expenses. A major result of what many call the “dairy dilemma” was the exit of farmers from the cow milking business: sometimes getting an outside job, sometimes switching enterprises to beef, cropping or whatever and sometimes retiring and selling out.
In 2018 there was a decrease of 638 dairies in the state to a total of 8110 licensed dairies at year end. By August of this year another 449 had closed. At the first of this month, the total number of dairies operating in the state stood at 7337 after dropping every month.
Finally and at long last – after four years of gloomy milk prices – a bit of sun has begun to shine on dairying as the milk price has taken a major upswing in recent months. Consider: The Wisconsin all milk price for October 2019 was $20.50 per hundred according to the latest USDA/NASS agricultural prices report. This was 60 cents higher than last month’s price and $2.70 higher than last October’s price. This is the first time the Wisconsin price has exceeded $20.00 since December 2014, the record milk price year.
For comparison purposes, the highest ever all-milk price of $25.50 was recorded in April 2014 and is the reference price often (and wrongly) used as a normal milk price. The all-milk price for the past 5 year period was $22.34 (2014); $15.80 (2015); $14.87 (2016); $16.17 (2017) and $14.40 (2018).
Hopes are that the all-milk price average will approach the $20 range in coming months, but the challenges are imposing:
- Falling consumption of fluid milk as the traditional breakfast cereal meal continues to lose popularity as younger consumers “eat on the run” or switch to a different menu.
- Plant-based drinks continue to grow in popularity.
- Dairy exports remain unsettled.
- Milk production keeps growing.
- The result is more milk than the market can absorb, thus resulting in depressed producer prices.
The short term may well see somewhat higher milk prices on the producer end but higher prices may spur dairy expansion at all herd levels. Many producers have told me they plan to expand as soon as the money is there. The result will be even more milk.
The Dean Foods bankruptcy bothers me although the industry has said relatively little. It seems expected that the big co-op DFA , who is owed millions of dollars by Dean Foods, will buy Dean. If so, DFA must then find a market for the milk Dean Foods was unable to sell. Or take in less milk.
New milk plant
Meanwhile, a huge cheese/whey dairy processing plant that can receive 8 million pounds of milk per day is being built in Michigan. The plant is a joint effort among Glambia, DFA and Select Milk Producers who already own a similar type plant that processes 14 million pounds of milk per day in New Mexico (Southwest Cheese LLC). Cheese and the dairy ingredient demand are real value products, owners say.
The new Michigan plant will absorb the milk from the fast growing Michigan milk production that has been moving to other Midwest processing plants (including in Wisconsin) in recent years – thus opening up processing space when needed.
Down the road
Long term it would seem that dairy producers will continue to face the historic ups and downs of milk pricing. There is no reason to believe dairy expansion will slow down. The already big herds will get bigger (if you can milk 1000 cows, why not 1500?) and the small farms who want to add a son/daughter to the operation must get bigger to provide for another family.
Something that has been done successfully several times in the state is sharing facilities between farm families. One dairy barn, a calf facility, a dry cow unit operated in a joint partnership or ownership milking a combined herd – thus enjoying the advantages of being bigger while retaining individual ownership.
A guesstimate of the long term – continued expansion of milk production but maybe with the addition of more shared operations and/or more small and specialized production or marketing operations.
I don’t foresee a major move to milk supply management or a guarantee that small farms will remain in business just because they have been milking cows for several generations.
Several years ago it seemed that exporting our dairy products was the answer to the demand challenge, but it didn’t turn out that way or did it? The U.S. Dairy Export Council recently reported that our export volume declined by 14% in the first half of 2019 mainly due to lost sales to China. At the same time time they reported that the overall value of U.S. exports hit $2.95 billion – up for the third straight year with cheese exports up 4% (the highest since 2014).
A guesstimate: the new USMCA agreement (replacing NAFTA) is finally signed by Congress, a China deal will be made (they really need dairy), and Japan is buying. It appears the export factor will thrive.
A few “for sures” we’ll see in dairying in coming months are: cows will give more milk; herds will get bigger; technology will be more technical; and manure, animal rights and the environment will remain challenges. And, management will get even better.
Here are a few ad headlines from a recent national dairy magazine: Greater feed efficiency; Performance edge; New generation; Now you can; Better for everyone and on and on. All are devoted to more milk, less labor, more profit. None to producing less milk with more labor and more time.
It has been a difficult year for many Wisconsin farmers with the forever rains along with the stories in print, TV and on social media of dairy families selling their cows. And, I’m not sure if non-farmers much care as everyone has their own life challenges. But farming is different. You know it and I know it.
Let's look forward to an uplifting, prosperous and successful 2020.
Happy New Year!
John Oncken is owner of Oncken Communications. He can be reached at 608-572-0747, or e-mail him at email@example.com.