This downturn seems worse
This year, 2018, may go down as one of the worst years in the history of the dairy industry. Milk prices were lower and feed prices were higher in 2009, but this extended period of low prices feels worse.
Maybe it’s because we thought we saw a light at the end of the tunnel. For a while it looked like milk prices would rebound, albeit slowly, and even hit the $17 per cwt mark. I even wrote about it a few weeks ago.
But then things changed. Tariffs from Mexico and China put downward pressure on markets. The average Class III futures price from now through the end of the year finished below $15 recently, the lowest that average has been since Class III contracts began trading. Much of that is due to uncertainty around where trade markets will end up.
Production has continued to climb, even though we thought it was slowing down earlier in the year. Processing facilities are at capacity or closing. Inventories are full, especially for whole milk powder (see Chinese tariffs).
Maybe this feels worse because we’re getting sick of the prolonged valleys in the milk price roller coaster. We experienced the highest of highs in 2014 and 2015. Producers paid down debt, they bought new equipment and built new office buildings. Those were the good times.
Producers aren’t even expanding. Bankers have put a halt to that, unless there is a solid contract in place for the additional milk. Even if you need a loan to fix inefficiencies on the dairy, you better have good credit and plenty of equity. Low prices have thwarted the entrepreneurial spirit that got the industry where it is today.
Maybe this feels worse because we’ve seen so many stories about dairy farmer suicides. You probably know someone who has taken their own life in lieu of finding a better solution to the dramatic economic situation. A number of these stories have hit the non-ag press. Many of my non-farmer friends have asked me about the situation. There is no escaping it.
And we see your angst. Virtually any post we put online on nearly any topic generates negative comments. We’ve seen that in the past, but it has been much worse this year. There is plenty of advice on how to fix the situation. Most blame large dairies and immigrant labor, and the unbridled growth of the industry over the past 30 years. Some of the criticism may be accurate, we’ve probably grown beyond our means. Some of the criticism, though, feels like venting. And that’s okay, too.
That brings me to an important question: By posting news about the malaise of the industry, are we contributing to your angst? We in the media have a responsibility to report the news, good, bad or indifferent. Even though we are passionate about this industry, we take unbiased reporting seriously. We know much of the news isn’t positive, but we want you to be informed. And when good news does come around every so often, we try to yell it from the mountaintops.
We know times are tough, and that much of the reason for why you are in the business position you are in is due to situations outside of your control. That makes it even harder. But we believe in your resiliency, and we know better days lie ahead. We’ll get there.
“Reprinted by permission of Farm Journal media, July 2018”