Dairy Producers Face Tightest Margins on Record
While we have flipped the calendar to a New Year, we didn’t necessarily say goodbye to low milk prices. 2023 was a tough year financially for dairy producers and 2024 isn’t off to a great start either. According to Stephen Cain, the senior director of economic research and analysis at National Milk Producer Federation (NMPF), 2023 had some of the lowest margins since the Margin Protection Plan debuted.
“In June and July [2023] margins were down below $4, the tightest margins on record,” he shared at the 2023 Milk Business Conference in Las Vegas.
Cain adds the tightening of milk production is not only seen in the U.S., but also abroad.
Joe Outlaw, professor and Extension economist in the Department of Agricultural Economics at Texas A & M University, shares better prices are needed as most producers, especially those attending Milk Business Conference, are larger dairies and have seen their operating loans grow due to higher input costs and interest rates creeping upward over the last year.
Gaining Attention
Jackie Klippenstein, senior vice president of chief government and industry relations officer with Dairy Farmers of America, says what has caught her attention is the dysfunction in commerce.
“We've always been lucky in agriculture to put together a bipartisan bill which represents the best that Congress can deal by bringing together urban folks and rural folks to put together a piece of legislation that supports rural America and supports those that are hungry,” she says. “I think many would agree that the dynamics in Congress right now is a little different than we've seen in the past.”
Outlaw says the current Dairy Margin Coverage (DMC) program works fairly well.
“We have a good program in the DMC program. It's working well. We're looking at updating some production history numbers that will just make it that much more effective,” he shares, referring to the new Farm Bill.
Will There Be Future Changes in DMC?
Cain concurs with Outlaw and says that we won’t likely see a complete overhaul in the DMC program.
Klippenstein shares that the current production is at five million pounds and ideally, they’d like to see that limit get pushed.
“Our reasoning is when the DMC was first put together and the 5-million-pound cap was set that was representative of the average dairy herd at the time,” she says. “The average dairy from now is 8 million pounds.”
The Farm Bill took a backseat priority, as the Senate and House ag committees worked on other issues. Outlaw, who’s worked on eight farm bills, says if it isn’t passed by February, it could be two years before agriculture sees a new farm bill because of the election.
With a long, drawn-out fight to finish the Farm Bill likely, Outlaw says farmers need to start making their voices heard.
“We shouldn't have to wait until there are problems, but unfortunately, the way things work in Washington these days, we tend to have to have a crisis to get things done,” he says.
