In my meetings with our group publisher Barb Sweet, I heard the same subject come up again and again: dairy prices. During our time spent together at Ag Progress Days – hosted by Penn State University – she would say those words with a slight scowl on her face and a touch of doom and gloom.
So it was no surprise when we saw the USDA Economic Research Service Farm Sector Income and Finances Report (http://ers.usda.gov/topics/farm-economy/farm-sector-income-finances/highlights-from-the-2015-farm-income-forecast.aspx) in late August. According to the report, U.S. milk prices are expected to drop 29 percent this year (forecasted from $49.3 million to $35.0 million). The steep declines in corn prices coupled with an uptick of the dairy cow population are main factors, the report said.
And it’s happening across the board. Livestock receipts are projected to drop more than 9 percent along with farm assets values (down 3.5 percent). But despite the lower forecasts, U.S. Secretary of Agriculture Tom Vilsack remains – as expected – optimistic.
“The American agriculture success story is not celebrated often enough,” he said in a statement pointing to U.S. farmers seizing on new opportunities in new markets. “At the same time, markets continue to expand for locally grown food, a market valued at $11.7 billion last year…”
While government officials are somewhat positive, some say this is the beginning of an agricultural bubble burst fueled by the corn ethanol mandate and drought complications. For instance, Forbes contributor Thomas Landstreet opined that land values in states that predominately grow corn (Iowa, Indiana and Illinois) have reached their apex as the EPA is proposing to cut the mandate, thus causing a major retraction in long-term price levels.
In the Northeast region, dairy remains the question mark for 2016. With wholesale milk prices coming down from the highs of late last year, more earnings fluctuations in that category are expected, Farm Credit East said in a statement.
“Many producers are now re-evaluating their risk management strategies in light of the current severe price declines. The greatest risk management tool, however, remains smart management and cost control,” noted Farm Credit East in its 2014 Northeast Dairy Farm Summary. “By investing in property, livestock and equipment in 2014, Northeast producers are entering the current downturn better prepared for what may come next.”
As the year nears its close, the dairy world will face some challenges. However, these times borne opportunity. What are you doing/have you done in preparation for a projected down season? What’s your take on the macroeconomic ramifications? We want to hear from you! Feel free to email mfreeze@GrandViewMedia.com. Let’s keep the conversation going.
Cover Photo: egal/istock