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Dairy producers from all over the Midwest attended this year’s Central Plains Dairy Expo. (Michelle Rook, Special to Agweek)

Dairy farmers focused on policy and price at Central Plains Dairy Expo

Sioux Falls, S.D. — The dairy business has been challenging the last few years. Producers were tested with milk prices that fell below break-even levels and a safety net in the farm bill that did not catch many producers. That is why getting an adequate risk management program in place is a top priority for the industry as discussions start on the new farm bill.

Dairy producers attending the Central Plains Dairy Expo in Sioux Falls said they want Congress to restore the formula for the Margin Protection Program to the original levels in the 2014 Farm Bill to make it effective.

"The cost of production of 100 pounds of milk needs to be restored back to that formula which in the end was cut by 10 percent," said Marv Post, South Dakota Dairy Producers Association president.

He said they also want the Relative Feed Value of alfalfa included as part of the margin formulation to more adequately reflect feed costs.

Laurie Fischer, CEO of the American Dairy Coalition said since the cut was budgetary, they need the funding restored.

"There's not new money so we have to look at other areas within the farm bill to see where we can find those funds so we'll be able to have a better risk management protection program," she said.

An even more pressing issue for the dairy industry is the labor shortage, and many dairy farmers say it has become a crisis. Dairy groups are asking for the government to act on immigration as soon as possible and to provide an alternative to the H-2A visa program which only works for seasonal jobs.

"Our dairy workers run 24/7, 365 days a year. We need some kind of a guest worker program where people could come for two to three years or something like that and stay here and earn an income, pay taxes," said Steve Schlangen, chairman of midwest milk cooperative AMPI, Inc.

"We need reform to allow our immigrants to be legal," added Fischer. "Our peaceful immigrants that have been providing feed, food for the world and we need them."

She said few people realize the U.S. dairy labor force is 50-75 percent immigrant, and that includes production and processing.

Dairy group officials said they're hopeful for immigration reform yet this year, even with the laundry list of priorities in Congress such as health care. Fischer said they fear if the labor fix gets pushed into an election year it simply won't get done.

The dairy industry also has been working on the federal milk marketing orders and watching to see if California comes into the system.

"I think there's a big question around whether California farmers are going to go down that road and vote for something that allows handlers to de-pool especially after they said it was a non-starter," said Phil Plourd, Dairy Market Analyst and President of Blimling & Associates.

As far as the impact on the dairy industry in the Midwest, Plourd doesn't believe it will have a major impact on milk prices but said speculation is premature.

"And I think it's too early to tell what the impact would be for the Midwest or other areas," he said.

The market has been challenging for the past two years, but the outlook for milk prices is a bit more optimistic for 2017. Plourd said that's due in part to higher butter and cheese demand. In fact, cheese demand was up 3 percent the last two years. Plus, he said there is less competition from exporters like Europe.

"A year ago at this time, the price of cheese in Europe was not much more than a dollar per pound," he said. "Here in the U.S., we had milk powder trading at 70, 75 cents, 65 cents in some places in the world. So, I think that we're operating at a little higher base than we were a year ago, and I think that base is fairly stable."

Lower input costs also will help to lower break-even costs for dairy operations.

"You know everybody's excited about coming off of good crop years so we've had plenty of feed that makes cows milk good," said Greg Moes with MoDak Dairy of Goodwin, South Dakota.

That is leaving dairy producers like Moes and Post optimistic.

"The projections that we're seeing is 2017 is going to be better than 2016, so there's some money to be made," Post said.