BISMARCK – Nearly 20 North Dakota dairy producers will receive some relief from lowpriced milk.
In May and June, the price of corn, soybeans and alfalfa was on the rise. At the same time, the price of milk went down as school let out for summer.
The narrowing margin between milk prices and the cost of feed triggered payments for producers enrolled in the 2016 Margin Protection Program for Dairy and paid for extra margin protections. The payment rate for May and June will be the largest since the program began in 2014, $11.2 million in financial assistance nationwide, according to the U.S. Department of Agriculture.
“It’s different for each producer, but certainly it’s helping to ease the pain, much like crop insurance,” said North Dakota Agriculture Commissioner Doug Goehring of the recent margin protection payments. “It makes a difference, but I’m not going to mislead you and say it makes a big difference.”
ADVERTISINGAs the end of the MPP enrollment period approaches on Sept. 30, USDA is urging dairy producers to evaluate their enrollment options for 2017. But since grain stockpiles are on the rise and prices have taken a serious hit, the same high feed price and low milk demand scenario is not likely to lead to margins being triggered again in 2017, Goehring said. “The corn and soybean market has just collapsed,” he said. “It has really taken the wind out of crop farmers’ sails, but it will help with feed.”
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The U.S. planted large corn and soybean crops, and production for the year is likely to be “phenomenal,” Goehring said, with about 15 billion bushels of corn expected and 4 billion bushels of soybeans. Global stockpiles also remain high.
“It will keep prices depressed awhile,” he said
Even when prices are low and farmers are struggling, the cost and return aren’t always appealing enough to buy up on crop insurance and margin protections, according to Goehring.
“It can be self-defeating,” he said.
“Conceptually, I would think smaller producers would be the ones buying up,” said Goehring, explaining they don’t have the same economies of scale as large operators. But there’s a question of whether they can afford it.
Goehring said he has not heard feedback from dairy producers on MPP but it could be a topic of interest at next week’s industry meeting.
With a drop in grain prices since the start of July, Goehring expects to see a slight rise in the price of milk in September. It will then be the grain farmers who suffer.
“At this point, they may need to harvest 20 percent more in production just to get close to July 1 (price points),” Goehring said of grain growers.
