“Last year, we had record dairy prices and profits,” he says.
He was getting paid over $20 per hundredweight (cwt.) for milk. Now, the price is around $15/cwt. That is still above the lows of $9/cwt in 2008-09, he says.
Voelker, a director on the Iowa State Dairy Association board, says his operation was able to pay off some debt with the higher milk prices last year.
Other producers used the money to make their farms more efficient, says Larry Shover, a dairy farmer from Delhi and president of the Iowa State Dairy Association.
Prices were high because China, the world’s largest dairy product buyer, overbought dairy products, Shover explains. Now they are correcting the situation.
In addition, Australia and New Zealand were in droughts last year. That meant more international customers turned to the United States for their dairy needs.
However, Australia and New Zealand are out of a drought and have increased production. That has meant more global supply and lower prices, explains Mark Stephenson, director of Dairy Policy Analysis at the University of Wisconsin-Madison.
Russia, the second largest dairy buyer, has reduced their demand due to trade sanctions and issues with the value of their currency. Stephenson says that means U.S. dairy prices are near the higher end of global dairy prices.
Export sales account for 15-16 percent of the milk supply of the United States, he says. Domestic demand for dairy has been strong.
“Butter is leading the way back up,” Shover says. Domestic butter consumption is up, and he says cheese is following butter demand.
Shover credits some of the recent research and news touting the health benefits of milk and butter.
Around the United States, Stephenson says most of the country processors are running at full capacity, especially in the Midwest, Northeast and parts of the Southeast.
“The West is a different story,” he says.
Stephenson says the drought in California is limiting dairy production, with feed supplies tight due to the lack of water.
Meanwhile, “we have an oversupply (of milk) in Iowa,” Shover says.
The closing of milk processing in Kalona, Iowa, means more milk is being produced in Iowa than remaining processors can handle.
Shover and Voelker say they are shipping milk from their farms to Minnesota or Wisconsin to be processed.
While milk prices have dropped this year, so have feed costs.
Shover says 60 to 65 percent of milk production costs are related to feed.
Voelker, who buys protein and some hay, says the recent break in soybean meal prices has helped to reduce feed costs on his farm.
The current feed prices are below the high set in 2012-13, but still above the historical levels, Stephenson says.
Overall U.S. cattle numbers are also affecting dairy farms.
Stephenson says many dairy producers are taking advantage of higher beef prices and being a little more aggressive in culling animals on the farm.
Voelker says Holstein bulls are bringing high prices. Normally, they are priced under heifers at the sale barn, but now they are bringing more money.
Despite the small cattle numbers and high beef prices, there is a good supply of heifers for replacements on dairy farms.
Voelker and Shover credit the trend of sexing semen — so farmers can select for a male or female calf — as factor for plenty of replacement heifers.
Looking ahead, Shover says the world demand for dairy is expected to increase.
He says improving the lock and dams on the Mississippi River could help Midwest producers take advantage of that higher demand.
In addition, the dairy industry is working to develop new methods, ranging from increasing the shelf life of various dairy products to new products such as Fairlife. Fairlife, a premium milk product Coca-Cola has invested in, is filtered milk that contains 50 percent more protein and 30 percent less sugar than regular milk and is lactose-free.
Shover says there are plans to develop more plants that can process milk into dairy products that cater to specific age groups around the world.
He was getting paid over $20 per hundredweight (cwt.) for milk. Now, the price is around $15/cwt. That is still above the lows of $9/cwt in 2008-09, he says.
Voelker, a director on the Iowa State Dairy Association board, says his operation was able to pay off some debt with the higher milk prices last year.
Other producers used the money to make their farms more efficient, says Larry Shover, a dairy farmer from Delhi and president of the Iowa State Dairy Association.
Prices were high because China, the world’s largest dairy product buyer, overbought dairy products, Shover explains. Now they are correcting the situation.
In addition, Australia and New Zealand were in droughts last year. That meant more international customers turned to the United States for their dairy needs.
However, Australia and New Zealand are out of a drought and have increased production. That has meant more global supply and lower prices, explains Mark Stephenson, director of Dairy Policy Analysis at the University of Wisconsin-Madison.
Russia, the second largest dairy buyer, has reduced their demand due to trade sanctions and issues with the value of their currency. Stephenson says that means U.S. dairy prices are near the higher end of global dairy prices.
Export sales account for 15-16 percent of the milk supply of the United States, he says. Domestic demand for dairy has been strong.
“Butter is leading the way back up,” Shover says. Domestic butter consumption is up, and he says cheese is following butter demand.
Shover credits some of the recent research and news touting the health benefits of milk and butter.
Around the United States, Stephenson says most of the country processors are running at full capacity, especially in the Midwest, Northeast and parts of the Southeast.
“The West is a different story,” he says.
Stephenson says the drought in California is limiting dairy production, with feed supplies tight due to the lack of water.
Meanwhile, “we have an oversupply (of milk) in Iowa,” Shover says.
The closing of milk processing in Kalona, Iowa, means more milk is being produced in Iowa than remaining processors can handle.
Shover and Voelker say they are shipping milk from their farms to Minnesota or Wisconsin to be processed.
While milk prices have dropped this year, so have feed costs.
Shover says 60 to 65 percent of milk production costs are related to feed.
Voelker, who buys protein and some hay, says the recent break in soybean meal prices has helped to reduce feed costs on his farm.
The current feed prices are below the high set in 2012-13, but still above the historical levels, Stephenson says.
Overall U.S. cattle numbers are also affecting dairy farms.
Stephenson says many dairy producers are taking advantage of higher beef prices and being a little more aggressive in culling animals on the farm.
Voelker says Holstein bulls are bringing high prices. Normally, they are priced under heifers at the sale barn, but now they are bringing more money.
Despite the small cattle numbers and high beef prices, there is a good supply of heifers for replacements on dairy farms.
Voelker and Shover credit the trend of sexing semen — so farmers can select for a male or female calf — as factor for plenty of replacement heifers.
Looking ahead, Shover says the world demand for dairy is expected to increase.
He says improving the lock and dams on the Mississippi River could help Midwest producers take advantage of that higher demand.
In addition, the dairy industry is working to develop new methods, ranging from increasing the shelf life of various dairy products to new products such as Fairlife. Fairlife, a premium milk product Coca-Cola has invested in, is filtered milk that contains 50 percent more protein and 30 percent less sugar than regular milk and is lactose-free.
Shover says there are plans to develop more plants that can process milk into dairy products that cater to specific age groups around the world.
Source: IllinoisFarmersToday
