Farmers looking for higher milk prices will have to wait awhile, according to Mary Ledman, an industry analyst with the Daily Dairy Report.
“The demand for milk is just not there, especially from China and Russia and that’s affecting markets,” she said during a State of the Dairy Economy and Market Update panel presentation Wednesday during Dairy Strong 2016: Rising Strong at Monona Terrace Community & Convention Center in Madison, Wis. “Milk prices will continue to stay low for at least the next six months.”
While demand is decreasing, European dairy farmers also now have the ability to produce as milk as they want, Ledman said. Closer to home, she recognized that Wisconsin farmers are producing more milk, too.
She also pointed out that while a lot of Wisconsin milk goes into cheese production, “many cheese buyers are sitting on their hands and not buying. There is more than 1.5 billion pounds of cheese in storage right now in the United States.”
All is not gloom and doom in the industry, however. Ledman said weather always remains an uncertainty and that it may affect milk production in Europe or New Zealand.
“There also remains a robust domestic demand for milk,” she said. “Butter prices are also high and we are importing it. Maybe we should be build more butter plants instead of just looking at cheese.”
Location, location, location: Bob Witt of Wells Fargo said farmers’ situation depends a lot on where they’re located. He has some clients in the southwest and California who continue to struggle, posting losses every three years.
“In the Midwest, most customers are doing well. They lost money in 2009, but since then they have made money,” Witt said. “It may not always be a lot, but you’re at least making money.”
Expansions still happening: David Rinneard of BMO Harris Bank said that while milk prices have fallen, clients haven’t given up their capital improvement plans.
“They’ve planned well and are thinking that maybe it’s time to invest in a robot or build a new barn,” he said. “A lot of what is enabling the expansions is the growing financial acumen that dairymen and dairywomen are showing. They’re making better decisions”
Labor woes: Having enough employees is a concern for many of Rinneard’s clients. He said farms not only compete with each other for workers, but also with other industries, such as construction and landscaping.
“There’s still a lot of optimism and enthusiasm for dairy farming in Wisconsin,” Rinneard said. “That’s great to see.”