Profit is possible for dairy
BISMARCK, N.D. — Providing an outlook on milk prices would require one slide — one "ugly" slide — Jim Salfer told attendees at the North Dakota Dairy Convention.
Salfer, a regional extension educator based in St. Cloud, Minn., with the University of Minnesota Extension Service, spoke Jan. 24 at the convention held at the Ramada Inn in Bismarck, N.D., on factors driving milk prices and profit in the future. In the short-term, the outlook is bleak, he said.
Milk prices in the next five to seven years are likely to range from $17 to $19, Salfer said. There may be one year among them where prices go above $19. But for 2018, the price likely will stay below $17, he predicted.
There is a de facto quota due to processing capacity that holds back prices from rising, Salfer explained. And there are additional challenges. While consumption of fat — think butter or cheese — are now "in," there aren't as many popular uses for the non-fat components of milk.
The future of trade also is a complicating factor for dairy prices. Mexico and Canada are big buyers of U.S. dairy, which increases the importance of the ongoing negotiations into the future of the North American Free Trade Agreement. And the new Trans-Pacific Partnership, signed by 11 countries after the U.S. pulled out of an earlier agreement, may complicate trade relationships with other countries.
But that doesn't mean there aren't opportunities for profitability.
Salfer suggests focusing on costs. High-profit farms tend to be ones that do a better job of controlling input costs, he explained. Visit with nutritionists to see if there is anything that can be cut from a ration to save money. For instance, inputs may be added in good times to increase production, but when times aren't so good, producers don't think of cutting those expenses out.
He also suggests taking care of transition cows, negotiating better prices and growing high-quality forages to help cut feed costs.
Farms that can consistently produce milk at costs under $17 will be able to make a profit, he said.
For some farms, there may be options beyond cutting costs. Niche markets can bring in more money. The organic market is well-established, but Salfer said he is not aware of any organic companies taking on new farms. But for farms with the "right people, right personalities," on-farm processing can work, he said. Others might consider expanding into selling beef.
Some farms might consider branching out into other areas dependent on their strengths: custom harvesting, custom raising heifers, on-farm shops.
"Look in the mirror and say, 'What am I really good at that I can supplement some of my income?'" he said.
A 'stellar' year
The one-day convention was organized by Amber Boeshans, along with producers from the North Dakota Milk Producers Association. Boeshans is the executive director of the North Dakota Livestock Alliance and does farmer relations for the Midwest Dairy Association.
"This has been a stellar year," she said, noting the new exhibitors onhand for the 51st convention, as well as farmers who haven't been at the convention in years. "As you can see, the room is full."
Salfer's price discussion was only one of several topics covered at the convention. Other speakers focused on nutritional and health management. Keynote speaker Kostas Voutsas, assistant professor of business at Dickinson State University, discussed ways to have better relationships with coworkers and family members on the farm, with a focus on conversing with people across generations, personalities and management styles.
Also on the schedule was a panel with retailers and grocers. Boeshans said that was an important way for farmers to learn about how the businesses that sell their products are looking at and adjusting to the new consumer.
"We want them coming back for more," she said.
Boeshans said no one would leave the convention hungry. Bessy Best, of Sterling, N.D., along with Cass Clay and Dean's brought "goodies," including cheese, yogurt, milk and ice cream, she said.
"To feel the enthusiasm in this room — it's a wonderful feeling," she said.