Doug Knoepke can't complain about 2011.

“All in all, it’s been a very profitable year for our dairy,” says Knoepke, who runs a 650-cow operation in Durand, Wis. The weather conditions for crops have been excellent. “And the milk prices speak for themselves,” he adds.

Knoepke acknowledges that he is in a favorable position because he grows his own forage, specifically alfalfa and corn silage. He’s better off in that regard than farmers who have to ship in forage at high prices.

While 2011 will be remembered as a year of high feed prices and drought in many parts of the U.S., high milk prices really stole the show. All-time record high milk prices this past summer eased the financial and psychological pain that producers endured in 2009 and into 2010. The crater created in 2009 was so deep that producers needed a really good year to climb out, and by most accounts 2011 did not disappoint.

Milk prices worth celebrating
In August, the all-milk price — a weighted average of the prices dairy processors pay for all Grade A and Grade B milk D — hit $22 per hundredweight, an all-time record.

For many producers, the pay price was even higher.

Lloyd Holterman, dairy producer from Watertown, Wis., says the check he received in September for August milk was just short of $25 per hundredweight. (That was his gross price before deductions.) It was the highest price he has received in 30 years of farming.

Holterman produces his own haylage and corn silage, but does have to buy corn and soybean meal. While facing high feed costs, an interesting phenomenon occurred:

“The more we paid for corn, the more money we made,” he said. The milk price kept offsetting rises in the corn price.

All in all, he said, it was an excellent year.

Everett Williams, a dairy producer from Madison, Ga., also saw prices around $25 in August and September. (Again, that was a gross price from his co-op before deductions.)

It was a very good year for Williams, as well.

To deal with the feed-cost issue, Williams maximized the quality of the forage he raised and used more by-product feeds such as wet brewers grains and citrus pulp.

Simply a “better” year
California producers may have a slightly less rosy view of 2011 because many of them have to buy their feed at high cost.

Michael Marsh, CEO of the Western United Dairymen in Modesto, Calif., says 2011 has been a better year for California producers than 2010. “Milk prices have recovered nicely, but feed costs continue to hinder profitability,” he says.

“California pool receipts will near the record revenue producers received in 2007, but a softening of prices in the fourth quarter are likely to keep that record out of reach,” he adds.

The latest cost-of-production data from the California Department of Food and Agriculture through the second quarter indicate a cost of $16.79 to produce a hundredweight of milk, Marsh points out. “Nearly 58 percent of that cost, or $9.71, was the cost of feed alone.”

Labor remains a challenge
One of the biggest challenges that Georgia’s Everett Williams faces is procuring quality labor. Producers in Georgia must now use E-verify when hiring new workers, and that has limited the number of immigrant workers they can choose from.

The schizophrenic immigration policy of the U.S. government has made it difficult for producers across the United States. It’s difficult to find American-born citizens who are willing to do the work, while many immigrants are willing and also have a great work ethic. Sometimes it appears the government understands this, sometimes not. The biggest disappointment of the year may be that nothing was done in the U.S. Congress to pass meaningful immigration reform.

Hopeful signs
At year’s end, there are two other hopeful signs:
• Exports are booming. It looks like the U.S. dairy industry will export 13 to 14 percent of its production this year, which will be a record. And, the sky is the limit. As a story on page 14 of this month’s issue describes, opportunities abound in Japan and other countries if the U.S. dedicates itself to becoming a long-term, consistent supplier.
• Farmland prices are booming. Federal Reserve banks in the Midwest are documenting a 25 percent increase in farmland values compared to the same time a year ago. The underlying sentiment is that farming will be a huge growth industry as the world population expands by another 2 billion people by the year 2050.