November 8, 2016

Dairy Farmers Hope Milk Markets Are on the Mend

 |  By: Anna-Lisa Laca

Dairy farmers have been in survival mode for many months, plagued by a low milk price. According to Dan James of Farm Credit, farmers are cautiously optimistic the worst is behind them.

“We’re definitely back into some better milk prices,” he says. “In the future we’re looking at better margins due to feed costs.”

James says many large producers are using risk management tools to help “take the bumps out of the road.”

“Farmers are using futures contracts, contracting with co-op to level out the milk price and of course locking in as much feed as they can,” he says.

Dairy market analyst Tom Bailey of Rabobank says there is a lot to be bullish about in 2017. He says U.S. markets are positioned to improve although there could be cap to how high they can go because of global factors impacting stocks to use ratios. A shift in the domestic milk shed is also something he’s watching.

According to Bailey, milk production is starting to show a trend of dairy farmers moving in an Eastward direction. The most recent USDA milk production report showed a decline in California’s milk production and an increase in Wisconsin. Bailey says that while it’s not likely to happen, should factors that influence milk production stay just as they are today, Wisconsin could over time replace California as the nation’s largest milk producer.

The transient nature of large dairy farms isn’t a new trend, but James says they are seeing farms move to non-traditional dairy states.

“There’s been a lot of interest in Colorado but it’s very difficult to get there right now and there seems to be some interest in South Dakota,” he says noting that dairy relocation slowed down in the milk price downturn. That said, he feels producers are “cautiously optimistic” about the future of their industry.  

Learn more in the AgDay Dairy Report below: