Five years is not long in cattle breeding time. But, it can seem like a long time on the business side of dairy farming when you’re losing more money with each successive month. What the dairy industry will be in five years was on the mind of one Wisconsin Milk House member when he posted the question “Where do you see the dairy industry in five years?”. It obviously was on many members’ minds as there were 364 comments, the most ever for a Milk House post. This article attempts to capture the input from the over 11,000 dairy producers members of The Milk House on dairying in 2023 (Read more: Introducing The Milk House – Dairy Breeder Networking on Facebook).
The Current Scenario
The ever-increasing over-production in the United States dominated the responses to the question. This situation in the US follows the recent EU, New Zealand and Australia low farm gate prices, the re-balancing of supply with demand and ultimately an adverse effect on farm numbers and dairy farmers lives in those countries. The global oversupply of milk, especially skim powder, is on the minds of everyone these days. Let’s hear what Milk House members see for the next five years in dairying.
Real Facts For The Next Five
Milk House members agreed that the following items would define the next five years:
- The US decline in total herd numbers (now at about 40,000) and the increase in herd size (currently at 234 milking cows) will continue. USDA is predicting more total cows and even more total production in 2018. Things will not get better soon.
- The cost of production (COP) will continue to rise, and herds over $15-16/cwt will be forced to eat up reserves or to go into debt.
- Respondents see a wider margin now between farm gate price and in-store price than existed when farm gate prices were high in 2014. They question if farmers are being taken advantage of.
- Immigration, animal welfare and environmental laws will have a significant impact over the coming years. Drought and rainfall is always a significant factor for the dairy farming industry.
- Farms are exiting the business and hurting service providers and local communities.
- Out-sourcing of some services (i.e. cropping) is being tried by some farms but with that option comes a hefty bill, and it may mean that farm labour is not being fully utilized.
- Government support last time (buy-out program) to help dairy farmers did not get the public’s support. Such government support programs have only been short-term solutions.
- And finally, morale amongst dairy people is low. It is perhaps at an all-time low. Some respondents openly shared that they are seriously considering exiting the dairy industry. Change is needed!
Milk House members listed both immediate and five-year challenges:
- Often farmers blame each other (i.e. small vs large) for creating the current situation of over-production and low prices. Respondents said farmers find themselves at the mercy of their financial institutions and their processor. And many commented that the focus is on blaming and not on finding solutions for the next five years. The truth is that solutions are needed immediately.
- The respondents with the most concern about the current over-supply and low farm gate price were farming from Eastern to Mid-West USA. Producers commented on the high cost of equipment and automation and losing over $2+ per CWT. Only 75% of current Mid-West herds are expected to be in the industry in five years. Since 1992 70% of US dairy herds have exited the dairy industry at an even pace.
- Many respondents did not feel that their farmer directed organizations are showing leadership to address the current situation and ‘thinking-outside-the-box’ for five years from now.
- Within the respondents, there was disagreement about whether their marketing coops had their backs. They wondered if coop directors adequately represent the farmer members and if the coops are fulfilling their mandates. Consumer education by the coops was said to have not returned benefit. It was mentioned that the ‘milk for health’ concept will be slow to catch on and may take more than five years to have a significant effect.
- Respondents mentioned that discussions are about the ’average’ herd without allowing for consideration of individual herd circumstances. Remote farms, especially ones under 200 milking cows, are facing significantly increased costs for milk transport and all other services.
- A government cheap food / cheap milk policy, a lack of consumer and politician awareness of agriculture, trade policies and financial support of foreign producers by their governments were all mentioned as significant challenges outside US producers’ control.
- A couple of respondents wondered if dairy would go the route of pork and poultry industries where the corporations supply the cows and feed, and farmers provide the labor and facilities and are paid on a monthly per cow basis. That possibility was viewed negatively by most respondents.
- One respondent identified that after producing milk products, there are 32 byproducts that must be made use of in American or that are put on the world market. Often at the global level, there is an excess already, and so the world price is low.
- However, respondents always came back to the current farm gate price being below the COP. They need to survive today, or they will not be in the industry in five years.
Responding Milk House members brought forward numerous ideas when it came to opportunities for positioning the industry and individual farms for 2023, five years from now:
- Most respondents saw great potential for new or current milk products to assist in making a successful industry in five years. Products identified were: butter; yoghurts; cheeses; a2 milk; full-fat milk; natural; organic; byproducts as ingredients; and more.
- Specialized, focused and well-managed farms were thought by respondents to be the most likely to be in the best position for being viable and sustainable in five years.
- From a genetic perspective, high component yielding cattle were suggested as being the route to follow as more and more milk is processed into the product and transporting water is an unnecessary cost. Since there is a considerable excess of skim powder and just a slight amount over the demand there is for butter, it could be that the ideal cow for production and health would be 1.5% higher for fat % than protein % (i.e. 4.5% F & 3.0% P or 5.3% F & 3.8% P)
- Practising top management was often mentioned as the key to a farm being in the industry in five years’ time. Automated on-farm data capture and the use of that data from cows, calves and heifers along with financial data was mentioned as being necessary.
- A few respondents mentioned that they are considering processing their own milk, with a focus on local customers. It was recognized that this is not for everyone and is often location dependent.
- Supply Management was often mentioned, and it got both support and ‘it is not for America’ comments. Setting a base period to determine a herd’s supply allocation was mentioned as being problematic. The Canadian Supply Management Model of producing for domestic needs was thought by some to be worthy of consideration.
- The Milk House members mentioned one price for domestic milk and a lower price for export milk as worthy of consideration.
- One respondent put forward that the US must find its own solution to both current and five years hence relative to supply, demand and pricing. “We cannot depend on there being a global crisis or a global animal health issue to solve our problems.”
- Respondents mentioned that, immediately, there must be more collaboration amongst industry stakeholders to find both short and longer-term solutions to the volume of milk produced in the USA.
Two Milk House members from the USA provided comments that may assist US dairymen as they plan for the industry and their farm five years from now:
Kirt Sloan (Idaho) – “The industry is like a wagon train circled and angry … only, pointing the guns at each other inside the circle. The time is coming that unless we focus our attention united against the forces that attack us … the dairy industry will be like Custer’s last stand … picked apart and over-run by a large group bent on destroying our way of life and efforts to feed a growing hungry world. … The fight is not against big dairies … the fight is against regulations that set the stage with capitalized requirements that require more cows to pay for them. The environmental groups that say they like small farms are driving the regulations that put small farms out of business.”
Jack Britt (North Carolina) – “Forecasting is difficult. Just 3-4 years ago we had the highest prices and largest income over feed costs ever. If we have a severe shortage of water in the west and southwest, we could see a swing from the current oversupply. If we have a bad crop year, we could see a change. The real question to ask is “How resilient is your dairy operation?”. It is not how large or small that puts a farm out of business, it is how resilient the operation is in times of change. Price per CWT is critical, but resilient farms of all sizes can survive. What is your plan? Do you have one?”
Things that can challenge a dairy operation’s resilience could include: 1) over investment in equipment; 2) owned equipment that is only used one to two months a year and otherwise sits idle; 3) expensive facilities that are not fully utilized; 4) heifers that calve for the first time at 27 months; 5) cows that are dry for four months; 6) excessive road time for equipment and labor to move crops from fields miles away from the farm; 7) rough use of equipment causing excessive repair bills; 8) excessive number of sick calves or cows that run up vet bills and require more farm staff care; 9) poorly arranged facilities requiring more labor to carry out farm chores; and many more.
The Bullvine Bottom Line
Dairy people, the world over, have done an excellent job of applying methods and technology over the past quarter-century. At the farm level, the focus has been on getting more and more milk. In many countries, production has outpaced demand. A viable and sustainable future at the industry level needs to be given priority and must be planned for now. Vision, leadership and inclusion must be on everyone’s radar screen.
It is up to every producer to make their operation resilient. Is your operation resilient?