With help from cheese, milk prices finally improving
MADISON, Wis. -- After five years of low milk prices, dairy farmers are finally seeing a better market. In fact, values are back above break-even for some operations.
MADISON, Wis. - After five years of low milk prices, dairy farmers are finally seeing a better market. In fact, values are back above break-even for some operations.
Mark Stephenson is the director of dairy policy analysis with the University of Wisconsin-Madison. "We're about $1.30, $1.40 higher per hundredweight on milk than we were this time last year," Stephenson says. "So we've had a definite improvement."
On farm milk prices are following the somewhat stronger, but volatile cheese market. Stephenson says, "They've been up and down kind of testing the waters, but I think that most of the indicators are showing us that the supplies, the inventory of cheese products are being pulled down."
Allen Merrill, Midwest Dairy Association chairman and a Parker, S.D., dairy producer says domestic demand has been stronger for dairy products, which is helping. "Cheese is continuing to grow, it's a supporting part of the dairy industry, but overall dairy consumption is up," he says.
U.S. milk production per cow also has slowed and cow numbers are down 30,000 head so far this year versus 2018 because of herd liquidation and weather extremes. "We've had milk production that is actually slowed," Stephenson says. "It's been negative in some months and we've been flat basically for the first half of the year."
The lack of plant capacity in the Midwest also pressured prices, but has eased with lower milk production. Steve Maddox, is a Riverdale, Calif., dairy producer and vice president of Dairy Management Inc., the organization that oversees the national milk checkoff. "You had excess loads of milk and really the main drop was on the over order premiums we had here," he says. "Thank goodness, the over order premiums are starting to show up again. Milk prices are starting to go up."
With exports slowly rising, the outlook for 2020 is optimistic. "I think supply and demand is more in balance worldwide and I think it looks good for the next year or so," Maddox says. Stephenson also is predicting firmer prices for 2020. "I'm anticipating that next year will be as much as $1 higher over this current year," he says.
Those higher prices should put many dairy farmers in the black, as long as feed prices don't rise substantially. Merrill says dairy producers not only need higher prices, but lower costs to stay above break even.
"You know there's still a wide range of cost of production; every farm is different and those that are in that range and below, they're going to be OK," he says.
Dairy producers also are getting help from the new Dairy Margin Coverage program or DMC. More than 22,000 dairy farmers signed up for the risk management tool and the program and paid out more than $302 million in its first year. More than $300 million of payments have already gone out to U.S. dairy producers under the safety net system.
Chris Galen, senior vice president with the National Milk Producers Federation in Washington, D.C., says that is $300 million more than what farmers would have received under the former Margin Protection Program or MPP, according to an analysis of U.S. Department of Agriculture data. "So, this has been a very generous program, which is what we wanted when we worked with Congress back in 2018 to create this program in the 2018 Farm Bill," he says.
Galen says the stronger dairy safety net included dairy-quality alfalfa in the feed-cost calculation, which better reflected expenses and adjusted margins. Plus, farmers knew they would be receiving a payment when they signed up.
Wisconsin signed up the largest number of farmers, while California enrolled the highest production volume of any state.
Maddox says producers are satisfied with the program. "It's a great improvement. It's at least something and it's more gauged for the small farmers."
The 2020 signup for DMC began Oct. 7.