Ben Laine, a senior dairy analyst with Terrain, says that he expects 2023 will be deceptively steady in the sense that the U.S. will stay fairly level with current cow numbers.
“The limitations that we’re seeing is pretty much across the board everywhere now in terms of the limitations on the ability to grow,” he says. “We’re not going to see a lot of expansions in those terms.”
According to Laine, the ability to expand is going to take a backseat, pushing producers to focus on efficiencies.
“I think when you’ve got these higher costs, a lot of producers are saying, ‘I’m going to find the most efficient way that I can make that amount of milk and really focus on that kind of efficiency,’” he says.
Laine also notes that processors are catching on to the fact that component levels have increased since installing base programs.
“I think they’re now catching on that they’ve put limitations on the amount of milk a producer could ship and all of a sudden the milk component levels are starting to start to creep up,” he says.
However, he believes processors will continue to keep base programs in place throughout 2023.
“I don’t think it’s permanent, but I think it’s going to be ongoing through this year,” Laine says. “It’s going to vary region by region, season by season, but I don’t think they’re on the verge of being dropped completely.”
Another limitation is regarding feed costs, and Laine shares that no major relief is in the forecast.
“It’s going to be down from the peak compared to where we have been,” he says, “But certainly still relatively high compared to the last several years.”
Laine advises producers to have a solid risk management plan in place, especially during volatile times. He believes a higher profit margin is attainable in 2023 for producers, but says any given month can vary, so it’s recommended to lock in both sides of the ledger.
“You’re going to have months where the milk price is going to drop. It’s not going to be steadily profitable the whole year. I expect there to be good months, tougher months, and there’s going to be a lot more variability month to month on the milk price,” he says.
Over the years, producers have grown accustomed to the rollercoaster swings and have dealt with low milk prices.
“Prices were relatively low in past years and volatility wasn’t a major factor. We kind of put some of the risk management plans on the back burner,” Laine says. “We’ve had a couple of years that have been pretty good, all told, but we’re getting a hint of reminder about the volatility that can come with that, and I think now is when it’s time to really start putting those plans back in action.”
Laine shares that there are a lot of options out there for producers, more so than they had in place five-plus years ago.
“I think coming up with a plan and figuring out how to optimize that because the variability is going to be driven a lot on the demand side. It’s about what you can do about that on the farm. So, I think it’s best to focus on efficiency. Optimize your milk output and focus on being more efficient overall,” he says.
