PONTIAC, Ill. — This spring has brought ups and downs for Don Mackinson, a fourth-generation dairy farmer. Happily, milk prices are finally going up, but the rain keeps coming down.
“Milk prices are a little better with components and premiums right now,” said the central Illinois farmer.
But continued rain is causing frustrations and worry on the cropping side of the farm.
“We have no hay in and only 50 acres of 800 acres of corn planted,” he said on May 24.
He took advantage of a rainy Livingston County Friday to go to his grandchild’s kindergarten graduation.
“I can’t do anything else,” he said as thunder clapped with the next storm rolling in.
Mackinson works in partnership with family members operating a 150-head dairy herd, with a full-time employee and a part-time employee.
“I’ve been farming for 45 years,” he said, noting that retirement is something he’s thinking about when the timing is right. His family has been farming near Pontiac, Illinois, since 1865.
Will it last?
Mackinson is encouraged by recent milk prices. The base price for Class I milk is $17.07 per hundredweight (cwt) for June 2019, which is an increase of 65 cents/cwt from May, according to the USDA’s advanced prices and pricing factors data released May 22.
This continues a trend noted in Wisconsin in February. The Wisconsin all milk price for February was $16.30/cwt, according to the USDA National Agricultural Statistics Service. This was 10 cents higher than January’s price and 70 cents higher than last February’s price. In Iowa, the February price this year was $1.40/cwt, up from year-ago averages.
The question for dairy farmers is if the increase in milk prices can be sustained.
Last year an increase in milk prices encouraged producers, but the trade disruption ended that trend, and farmers are worried about whether this year’s rise in prices will continue, said Alan Bjerga, senior vice president of communication for the National Milk Producers Federation.
“The biggest challenge now is having the fifth year of low prices,” Bjerga said.
The industry typically experiences a three-year price cycle, and “farmers can budget for that,” he said. The last time of sustained higher milk prices was in 2014.
Prices have clung to low levels much of the time from 2014 to 2019, bringing consolidation and structural changes in the industry, Bjerga said. Last year it seemed like the cycle was changing, but trade turbulence ended that.
Trade disruption payments
As trade wars exasperated low milk prices, Mackinson looks forward to hearing details about the new trade disruption payments announced last month by Secretary of Agriculture Sonny Perdue.
The National Milk Producers Federation, which advocates for dairy producers and the cooperatives they own, estimates that producers lost at least $2.3 billion in revenue through March due to higher tariffs against U.S. dairy, Bjerga said.
“Dairy farmers have been harmed substantially by disrupted markets” in the ongoing tariff battles, NMPF president and CEO Jim Mulhern said, and he hopes the USDA will use the full range of tools available “to assist milk producers who have experienced a prolonged downturn in prices because of the tariff conflicts.”
In positive trade news, Mexico — the No. 1 destination for U.S. dairy products including cheese — lifted tariffs on U.S. dairy products.
“We hope this develops momentum to pass the United States-Mexico-Canada Agreement,” Bjerga said.
While trading relationships look stronger in North America, the issues with China continue. The lack of an agreement there creates uncertainty.
“We are looking for predictability,” Bjerga added.
New program helps
Nearly 3,000 dairy farms folded in the U.S. in 2018, a 6.5% decline, according to U.S. Department of Agriculture figures. Wisconsin lost nearly 700 in the last year — almost two a day.
But Mike Hutjens, University of Illinois animal health science professor emeritus, said things are starting to look a little brighter in the last couple of months, with milk prices going up and funding assistance to dairy farmers being announced. The USDA has tweaked things with the new Dairy Margin Coverage program to help dairy farmers with marketing.
The program should help dairy farmers with less than 200 cows, which is really a “sweet spot” for the size of many dairy farms in Wisconsin, Minnesota and other parts of the Midwest, Hutjens said.
“That will make it a little better,” said Mackinson, president of the Illinois Milk Producers’ Association.
This new voluntary program, created by the 2018 Farm Bill, replaces the margin protection program for dairy, which many farmers said wasn’t effective in offering the help needed. The new safety net, operated by the USDA’s Farm Service Agency, provides financial protection to dairy producers when the difference between the all-milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer, said Lauren Moore, USDA spokesperson.
Farmers can sign up for the new program starting June 17 with retroactive coverage to Jan. 1; payments will start soon after enrollment, she said.
With this program, there is “guarded optimism in the dairy industry,” Bjerga said. It will help with price stability, he said.
Hutjens, who interacts with dairy farmers across the country on speaking engagements, said he sees a mixed bag of circumstances in the dairy industry today. While speaking at a dairy seminar in Phoenix in mid-May, Hutjens met dairy farmers struggling to survive. He said herds with several thousand cows are failing.
Further, farmers are struggling with the wet spring. In Illinois, only about 23% of farmers had their corn planted in mid-May, a crop that is an integral part of cattle feeding. At the same time, there was significant winter kill of alfalfa in parts of the Midwest, so feed stock is a concern, Hutjens said.
However, with higher milk prices now and the current upward trend, the potential help of the new dairy margin coverage program and the assistance of the trade disruption payments, “the last two months the mood has been better among dairy farmers,” Hutjens said. “In the last 60 days things are more favorable.”
He also notes research showing that milk fat “is not evil anymore” is bringing more consumers to rediscover dairy, including real butter. Attention is drawn to the health benefits of dairy during June — Dairy Month.
Mackinson also gives a positive nod to dairy product marketing. He has a taste for new milk flavors from Prairie Farms, including strawberry, peanut butter caramel and premium chocolate.
From an economic standpoint, dairy farmers are more hopeful than they’ve been since 2014, said Bjerga, however, he cautions, “it is fragile.”