While most signs point to a positive year for Wisconsin dairy producers, if improved economic conditions stimulate too much milk production, 2014 prices could be pressured lower, according to Mark Stephenson, director of the UW Center for Dairy Profitability at the University of Wisconsin-Madison.
In an interview (audio link available here) with Sevie Kenyon, UW-Madison communications specialist, Stephenson called 2013 “a very good year for dairy farmers,” with milk production up, and improved conditions for both producers and processors setting the stage for a largely optimistic outlook for Wisconsin in the year ahead.
With that backdrop, he offered a good news/bad news scenario for 2014.
“(The) good news is that feed costs have tumbled really quite dramatically,” he said, “and we expect that those low feed prices are going to persist through 2014. So, that provides much-needed relief on the input costs side.
“On the bad news side of things, we think that this is likely to stimulate milk production, and because of that we’re likely to have a little bit of down pressure on prices,” he continued. As a result, average milk prices could be as much as 80¢/cwt. lower next year. “But if you take that total, feed prices have fallen farther than milk prices, so the margin for dairy producers is even better for 2014 than they were in 2013.”
How should dairy producers approach 2014? Stephenson urged dairy producers to prepare for surprises, and “to keep a pencil sharp.”
“They need to think a little a bit about ‘what should I invest in?’, and this is going to be a year when you might have an option for capital investments with these better margins,” he said. “You want to think about your capacity, and where you are in the dairy industry.
“I’m not a dairy farmer, and every dairy farmer has a different answer for their own operation,” he continued. “It’s a matter of where are we in the lifecycle of our farm and operation or our family. Are we expecting a next generation to come back anytime soon? Do we need to grow the business?”
Stephenson will moderate a panel discussion, “Understanding the Revolution in Wisconsin Dairying,” during the upcoming Wisconsin Agricultural Economic Outlook Forum, Wednesday, Jan. 22, on the UW-Madison campus. The panel discussion will be held during a pre-forum luncheon, which runs from 11:15 a.m.–12:45 p.m.