“Prices are down from last year,” said the couple’s son, also named Eric, as he tended to the family’s 320-cow dairy herd. “It all depends on exports (of U.S. dairy products), I guess,” he said of milk prices.
“Last year was good, and the year before that was all right,” Nelson said. But with lower milk prices this year, he added, dairy producers will have to be creative in financing any improvements they plan to make.
At least prices aren’t as low as they were in 2009, which Nelson described as “a really bad year.”
Milk producers have become accustomed to ups and downs in prices in the past several years, said Steve Huntzicker, University of Wisconsin-Extension agriculture agent for La Crosse County.
“The dairy markets have always fluctuated,” Huntzicker said. “I’m not sure the fluctuations have been as steep as we’ve seen over the last five to seven years. Which makes it real unpredictable and unstable for dairy producers.”
Dairy farmers had a “very productive year” in 2014 because of strong prices, Huntzicker said. “A lot of producers took advantage of that,” he said. “It was an opportunity to catch up from lean years.” Some invested in new equipment or equipment upgrades, something that may be less common this year.
But Huntzicker said he doesn’t think last year’s higher prices resulted in much dairy herd expansion in the area.
At current prices, he said, “It’s borderline right now as to whether they are or aren’t” making money. “Each operation is a little different.”
Most area dairy producers grow much of the feed that their livestock eat, Huntzicker said.
Although milk prices have fallen from last year’s record levels, they probably will increase in the second half of 2015, said Bob Cropp, professor emeritus with UW-Extension and UW-Madison.
The Wisconsin all-milk average price has been declining ever since it peaked at $26.60 per hundredweight last September, Cropp said. Prices averaged $16.85 for the month of February and probably will decline a little more through April, he said. But Cropp anticipates increases after that, and at this point forecasts an average price of about $18.50 for the month of December.
The average price for the entire year was $20.30 in 2013, a record-high $24.62 in 2014 and Cropp thinks the average price for 2015 will be about $17.50.
Milk prices have fallen because U.S. production rose 3.5 percent during the last half of 2014 and 2.4 percent for the entire year and continues to increase; and because exports of U.S. dairy products have fallen sharply since reaching record highs during the first half of 2014, Cropp said.
Exports are down, he said, because major milk-producing countries that export had increases in milk production, world demand slowed mainly because China (the world’s largest importer of dairy products) cut purchases sharply after building up inventories in the first half of 2014, and Russia banned dairy imports from the United States and European Union in retaliation for sanctions imposed against Russia after it invaded Ukraine.
“The U.S. wasn’t exporting to Russia anyway, but Russia is a big market for EU butter and cheese exports,” Cropp said, which meant the European Union had to find other markets for its dairy products.
The result of all of this, Cropp said, was to push world prices lower than U.S. prices, making U.S. dairy products not competitive on the world market.
Cropp said milk prices are expected to improve during the last half of 2015 because of more exports as China comes back into the market (but probably not as strong as last year), as Russia is to lift its ban on imports by August; and because world milk production is expected to slow.
“Milk prices will be much lower than the record prices last year, but with lower feed prices it will not be disaster like the very depressed milk prices in 2009,” Cropp said. “Dairy farmers will have lower profit margins; profit margins were a record last year.”
Cropp said it’s important to note that Wisconsin dairy farmers lost a lot of equity with the very depressed milk prices in 2009, followed by the summer 2012 drought that pushed feed prices to record highs from the fall of 2012 to the summer of 2013.
“Farmers needed good milk prices in 2014 to recover from what they lost,” he said.
“Last year was good, and the year before that was all right,” Nelson said. But with lower milk prices this year, he added, dairy producers will have to be creative in financing any improvements they plan to make.
At least prices aren’t as low as they were in 2009, which Nelson described as “a really bad year.”
Milk producers have become accustomed to ups and downs in prices in the past several years, said Steve Huntzicker, University of Wisconsin-Extension agriculture agent for La Crosse County.
“The dairy markets have always fluctuated,” Huntzicker said. “I’m not sure the fluctuations have been as steep as we’ve seen over the last five to seven years. Which makes it real unpredictable and unstable for dairy producers.”
Dairy farmers had a “very productive year” in 2014 because of strong prices, Huntzicker said. “A lot of producers took advantage of that,” he said. “It was an opportunity to catch up from lean years.” Some invested in new equipment or equipment upgrades, something that may be less common this year.
But Huntzicker said he doesn’t think last year’s higher prices resulted in much dairy herd expansion in the area.
At current prices, he said, “It’s borderline right now as to whether they are or aren’t” making money. “Each operation is a little different.”
Most area dairy producers grow much of the feed that their livestock eat, Huntzicker said.
Although milk prices have fallen from last year’s record levels, they probably will increase in the second half of 2015, said Bob Cropp, professor emeritus with UW-Extension and UW-Madison.
The Wisconsin all-milk average price has been declining ever since it peaked at $26.60 per hundredweight last September, Cropp said. Prices averaged $16.85 for the month of February and probably will decline a little more through April, he said. But Cropp anticipates increases after that, and at this point forecasts an average price of about $18.50 for the month of December.
The average price for the entire year was $20.30 in 2013, a record-high $24.62 in 2014 and Cropp thinks the average price for 2015 will be about $17.50.
Milk prices have fallen because U.S. production rose 3.5 percent during the last half of 2014 and 2.4 percent for the entire year and continues to increase; and because exports of U.S. dairy products have fallen sharply since reaching record highs during the first half of 2014, Cropp said.
Exports are down, he said, because major milk-producing countries that export had increases in milk production, world demand slowed mainly because China (the world’s largest importer of dairy products) cut purchases sharply after building up inventories in the first half of 2014, and Russia banned dairy imports from the United States and European Union in retaliation for sanctions imposed against Russia after it invaded Ukraine.
“The U.S. wasn’t exporting to Russia anyway, but Russia is a big market for EU butter and cheese exports,” Cropp said, which meant the European Union had to find other markets for its dairy products.
The result of all of this, Cropp said, was to push world prices lower than U.S. prices, making U.S. dairy products not competitive on the world market.
Cropp said milk prices are expected to improve during the last half of 2015 because of more exports as China comes back into the market (but probably not as strong as last year), as Russia is to lift its ban on imports by August; and because world milk production is expected to slow.
“Milk prices will be much lower than the record prices last year, but with lower feed prices it will not be disaster like the very depressed milk prices in 2009,” Cropp said. “Dairy farmers will have lower profit margins; profit margins were a record last year.”
Cropp said it’s important to note that Wisconsin dairy farmers lost a lot of equity with the very depressed milk prices in 2009, followed by the summer 2012 drought that pushed feed prices to record highs from the fall of 2012 to the summer of 2013.
“Farmers needed good milk prices in 2014 to recover from what they lost,” he said.
