«The first quarter of next year will stink but I’m not about to write off next year to bad prices.»
Hardin, who reports on the dairy industry as editor and publisher of the monthly newspaper called The Milkweed, spoke to a group of Green and Dane County dairy farmers who gathered for a session at the town hall in Paoli recently.
«We can’t let the first three or four months of bad prices get us down.
«I’m incredibly optimistic. I see the next few months as a bump in the road. Don’t get too shook about a bad first quarter in 2015,» he told the farmers.
Admitting it’s very difficult to make predictions, Hardin said he foresees a time when Wisconsin may even regain its position as the top milk producing state in the nation.
A part of that calculation is the severe drought hitting California. Based on data collected from tree rings, among other things, he said the three-year drought affecting agriculture in California is the worst to hit the region since the 1500s.
Reserves in the reservoirs that feed the state’s cities and agricultural regions are down significantly. «Barring a weather miracle that replenishes the reservoirs with snow and rain, there is no guarantee that farmers will get the water they need because agriculture is low man on the totem pole.»
The heavy rains the state is getting now are causing mud slides and there’s no guarantee that this moisture will help with the overall drought picture.
Hardin said that hay is very short in California and as such is quite expensive for farmers to buy. Alfalfa production there is also very water intensive, he added.
Adding to the overall U.S. dairy picture, he said, farmers in the northeastern states had a cool, wet spring and had issues of maturity in their feed crops. «We’ll have to wait and see what the functionality of those feeds is as they are used to feed dairy cows.»
In the year that’s just ending, dairy prices were driven by heavy exports of milk powder, butter and cheese. Those exports began to ramp up in 2012.
Mexico is buying 50 percent more cheese than it did a year ago, he added.
At this time last year, China was 15-20 percent below year earlier levels in terms of its own dairy industry’s production. Hardin attributes that to China’s policy of getting rid of smaller farmers in response to the melamine scandal of 2009-10, when the industrial plastic was put into dairy products like infant formula to ostensibly raise protein levels.
Melamine, however, is poisonous and infants died as a result of consuming the contaminated formula products.
Hardin said Chinese farms that remain also have significant problems with foot and mouth disease (FMD.) To make up for the nation’s problems with domestic production, it imports great quantities of dairy products to feed its 1.3 billion people.
«China sets the tone for global demand.»
As China kept drawing U.S. dairy products out of storage, butter inventories here went to «almost zero,» he said, and cheese inventories dropped as well.
Dairy protein powder started the up-tick and butter and cheese followed, he said, but now milk powder exports have slowed because U.S. prices «were off the charts» and perhaps because «China may have bought too heavy.»
Prices for U.S. dairy products were $2 higher than New Zealand prices by mid-year, he said and that largely shut off our exports. It also opened the U.S. market to dairy imports.
«Our prices got way out of whack and with our low inventories we have been running on fumes the last couple of months.»
Besides the needs for the export market, one of the things Hardin builds his optimism for dairy farmers on is that the value of their livestock has grown over the year.
«I’ve never seen anything like it. Not only was it a good year — a great year — but farmers saw an appreciation in the value of their livestock.»
He advised farmers to do any discretionary culling after the first of the year, to defer income into 2015, because the value of cull cows has risen so much.
Beef cattle producers have fewer animals to sell during the first few months of the year, he noted, because the market has worked through all the animals that were raised on pasture and rangeland. From January through Easter, he said, dairy cull cows make up a larger percentage of total cattle slaughter on average over time.
Great Lakes ‘breadbasket’
Hardin believes that because of its inherent qualities — soil, moisture, climate, economic and political stability and its infrastructure — the Great Lakes basin is poised to become a powerhouse of food production going into the future.
As other regions of the world fall victim to drought or population pressures — think California — the Midwest region will come to the fore.
Chinese interests are already buying food production interests in Ontario, Canada, he said, as the Chinese take the long view on things like this.
Because the Chinese people suffered starvation under the early Communist leader Chairman Mao, access to good food is an important national consideration. «Their government is committed to them eating better. That’s the tail that wags the dog.
«We have to realize the opportunity ahead of us that demand for food is going to get bigger. We have the soils, the moisture, the climate and the infrastructure to meet that demand.»
The number of dairy farms in the state of Wisconsin helps create the infrastructure that begets more strength in the industry.
In states in the northeast, especially New Hampshire, farmers must go hundreds of miles to find parts for their tractors — «and good luck finding someone to repair your milking equipment.»
Wisconsin also has a good cheese basis, lots of good forage and good corn silage.
«It’s a hungry world and in the next 20 years I see this as the world’s bread basket.»
Hardin sees Wisconsin potentially surging ahead of California in milk production because of the challenges facing that state and the inherent strengths of the Midwest in food production. He puts that time horizon at anywhere from five to eight years, depending on the amount of moisture that California gets.
Milk powder sales are down drastically now, virtually shutting down large new plants that were built to service foreign powder demand; butter sales are down. However Hardin said that cheese sales are down only 3 percent and current cheese inventories are very manageable.
Dietary advice
Hardin sees other reasons for optimism — even with regard to U.S. dairy product consumption. Though it will take a while to turn the tide, he believes new research and information that is providing dietary advice will point the way to greater consumption of butter, meat and cheese.
He cited the book called «The Big Fat Surprise,» by Nina Teicholz, subtitled «Why butter, meat and cheese belong in a health diet.»
«Everything we know about dietary fat is wrong,» Hardin said. «It turns out the past 60 years of nutrition advice was based on questionable research.»
It has turned out to be an era of experimentation on the U.S. population during which time obesity and problems like diabetes have become prevalent. As doctors and others begin to realize that the old advice was flawed, it bodes well for the dairy industry, he believes.
There is also a lot of new research into the attributes of dairy proteins that will only serve to make consumers more interested in dairy products, he believes.
«A lot of good things are going on and the dairy industry has a lot of catching up to do.»