Dairy Farmers Aren’t Helping Milk Prices
Across the country dairy farmers continue to struggle with low milk prices. While tariffs and trade issues are certainly weighing on the market, farmers aren’t helping milk prices either.
According to USDA, U.S. milk production climbed 1.8% in May, marking the 41st month of production increases (if February 2017 is adjusted for leap year). Cow numbers continued to climb as well, up 71,000 over a year ago and up 2,000 from April 2017.
Brian Doherty of Stewart Peterson, says these kinds of statistics and the promise of cheap feed into the fall are reasons he can’t get too bullish on milk prices.
“Producers are hurting, but I don't know if there's been enough pain in that industry to say we're contracting,” he told AgDay host Clinton Griffiths on Tuesday. “There’s a gray area when producers either make a little money or lose a little money, but they're not losing enough to contract. So, you do what you do best, you produce more.”
While added volume makes sense on a micro level because it’s only way you can increase your milk check in a meaningful way, on a macro level it makes things worse.
“When you add all your farms together, obviously you get the macro [perspective], which is just too much production to be absorbed and consequently [we] get these languishing prices,” Doherty said. “You [will] get rallies along the way but you're also subject to sell offs. Now, that's what really concerns me.”
There are an estimated 9.393 million cows now on U.S. dairy farms, according to USDA. While Wisconsin lost 78 farms in May alone, cows aren’t leaving the system because there’s really no incentive to send them for beef.
This isn’t a large verses small farm issue either. According to Mike North of Commodity Risk Management Group farmers continue to increase milk production per cow—adding to the volume overfilling already full processing plants.
Still, Doherty says farmers should see some milk price relief after the first quarter of 2019.
“I’m not bearish on dairy,” he said, “but I am cautious.”