Got milk? Squeeze on Dairy Farmers Eases

Pasquale’s Pizzeria in Downtown Rochester Was Filled With Dairy Farmers. They came to enjoy free pizza as a thank you for all the hard work they put into cheese, that absolutely essential pizza ingredient. The mood is upbeat — and for good reason. The price of milk per hundredweight is on the rise. “With prices lingering in the $14 to $15 range earlier this spring, finally now in the middle of the summer, futures are showing a good upswing,” said Paul Daley. 

He milks about 1,000 cows on a farm between nearby Byron, Minn., and Pine Island, Minn., and has been doing that for three decades. He said milk looks like it could reach $18 per hundredweight or more this fall. Daley said prices haven’t looked that good since 2014. “Maybe it’s some light at the end of the tunnel, and we can start making a profit,” he said.

Dairy Industry has had Highs and Lows

Daley said the industry has had highs and lows for years, but that the last few years have been especially tough. Everyone at the pizza place agrees that low milk prices combined with trade wars have created a lot of uncertainty for dairy producers.

For southeast Minnesota dairy farmers, the weather added to the pain of a difficult global milk market. A series of major blizzards dumped feet of snow on the region, collapsing barns and creating other unexpected headaches and bills. Now, a wet spring and early summer have complicated planting corn and soybeans to feed their herds.

But the long run of low milk prices has abated, for now. 

“In economics, we have a saying that the best cure for low prices are low prices,” said Marin Bozic, a professor of applied economics at the University of Minnesota. 

He said there are multiple factors giving dairy farmers a boost. Years of unprofitable milk prices forced some dairy farmers out of business, reducing supply. Higher feed costs have also contributed to this trend. 

Meanwhile, population growth has increased demand for milk products. 

Bozic said there’s another important factor on the other side of the globe. “New Zealand was a major source of increased milk production in the last two decades,” he said.

Milk production there has peaked, Bozic said, because there’s less land available for big new dairy productions. “Their milk production is not going to grow at the rate we have seen historically because after all, New Zealand is an island,” he said.

At the same time, U.S. dairy farmers are getting a windfall in the form of insurance payments stemming from a difficult market, which provides a financial cushion. 

At Pasquale’s pizza party, Margaret Johnson was juggling her 10-week-old son Jacob and a plate full of pizza and garlic rolls. She and her husband, Michael, milk 600 cows near Fountain, Minn. She said it’s been a relief to see some good news coming out of the markets recently. “With the slump we’ve been in, people are just hoping to come up for air — to feel a little relief and not so much stress,” she said. 

But even if these higher milk prices lead to more cash for her family’s operation, a lot of that money is spent already. Johnson said they have a lot of delayed expenses to catch up on, like repairing and upgrading equipment. Johnson said the big question facing dairy producers is whether milk prices will remain high enough and long enough to cover those delayed expenses and make operations profitable again. 

“That’s what’s disappointing about this slump that we’ve been in is that people are not looking to expand their business or expand their business,” she said. “They just need to catch up on things they weren’t able to do.”

Keep up to date on current industry news here.

Source: MRPRnews