Dairy Report: Financial Stress for Dairies; Milk Hauling Costs Jump

The Dairy Report 021919

Dairies, particularly in the Midwest, have been going through financial stress and spikes to milk hauling rates aren’t helping. For more on these stories watch the AgDay video above or read the following news brief links.

Chicago Fed Notes Dairy Liquidations, Financial Stress

The latest AgLetter from the Federal Reserve Bank of Chicago indicates that dairy farmers in the Seventh District are going through significant financial stress.

“The biggest difference right now is the challenges that are faced in the dairy sector, particularly in Wisconsin, but also in Michigan,” says David Oppedahl, senior business economist for the Federal Reserve Bank of Chicago.

Oppedahl says that this has caused land prices to slow down the valuation. Other states like Iowa and Indiana had gains in land value because of large corn yields.

Rising interest rates are also making it difficult on farmers in the five state region.

Milk Hauling Rates Jump in Upper Midwest

Rates for milk haulers in the Upper Midwest were reached 28¢/cwt in 2018, according to a study by the Upper Midwest Federal Milk Marketing Order. That’s a 40% increase since 2017 when the rate was 20¢/cwt. However, the rate charged in the region is still lower than other areas of the country and some states have larger price differences within the Upper Midwest.

“North Dakota has the highest average hauling charge (64¢ weighted average),” says Corey Freije, a dairy economist with Upper Midwest Order. “This result is from a low number of farms, the longest distance from high demand areas, and less handler competition. Wisconsin, in contrast, has a low average hauling charge (24¢ weighted average) with a high number of farms and close proximity to high-demand areas,” he says.