After two years of low milk prices, Robert Cropp is optimistic that dairy farmers will have a better 2017.
Rural Viroqua dairy farmer Paul Buhr, who knows Cropp, hopes that he is correct.
“We are looking for a much improved year for dairy farmers,” said Cropp, professor emeritus with University of Wisconsin-Extension and UW-Madison. “Feed prices are lower and milk prices will be higher, which will improve margins — returns over feed cost. As of now it looks like milk prices could average about $2 per hundredweight higher than last year.”
The average price for the most recent month available was $19.30 in January, up from $16 in January 2016, Cropp said.
Cropp said he thinks 2017 milk prices will remain much more favorable than last year, with domestic sales of butter and cheese expected to continue to show growth, increased demand by China and other nations, and milk production in the European Union, New Zealand, Australia and Argentina expected to continue below year-ago levels for at least the first half of the year.
Cropp thinks most Wisconsin dairy farmers will be able to make a profit or at least break even in 2017, if his forecast turns out to be correct, because of much-improved milk prices and lower feed costs.
But he cautioned, “There is a lot of uncertainty and volatility in milk prices that result in a lot of price risk to dairy farmers. Dairy farmers can try to manage this price risk by using dairy futures and options or contracting milk prices with their milk plant.”
Cropp said he has lowered his price forecast some since mid-February. “We will have a better handle on this in a month or two as we see what milk production is doing and if dairy exports improve as we now think they will,” he said.
Buhr said he received about $19 per hundredweight for milk he delivered in January, and last year received an average price of about $16.15 per hundredweight. “I’d say break-even as far as replacing worn-out machinery and taking a living wage and running it like a business, would be about $18,” he said.
The Buhrs also raise and sell breeding stock. Paul is on the national board of Holstein Association USA, which says it is the largest dairy breed organization in
Buhr added that dairy farming traditionally has been a perfect example of the American dream. “The harder you worked, the better you did,” he said. But today “You have to be clever and capitalize on opportunities.”
Dairy farmers reinvested in their operations a few years ago when dairy prices were high, Buhr said. But those higher prices, lower interest rates and technology advances have contributed to milk production increases, he said. “The margins per cow will be smaller in the future,” he said.
Buhr said two major concerns for dairy farmers are exports — which could be affected if a trade war started — and where labor will come from if dairy operations expand. More dairy farmers are considering robotic milking operations, he said. “But that’s a large investment.”
“Feed prices are lower and milk prices will be higher, which will improve margins — returns over feed cost. As of now it looks like milk prices could average about $2 per hundredweight higher than last year.” Robert Cropp, UW-Extension
Source: Lacrosse Tribune
