Dairy Industry Turbulence could Settle in 2013

Dairy producer stress is continuing in the early part of 2013 but Indiana producers might have some easing of the turbulence of the past few years in the second half of this year. It all depends on feed prices falling or at least stabilizing, according to Purdue Extension dairy specialist Mike Schutz.

“Milk prices are expected to decline a bit going into to 2013,” he said. “The average for the year is expected to around $18 per hundred weight, which is down about 35 cents from the expected values from USDA about a month ago. So we’re hopeful that feed prices will also stabilize or stabilize with the planting of the 2013 crop, which will also hopefully help producers get back toward approaching at least break-even or somewhat profitable prices.”

Schutz says many producers now are operating at or below break even. The 2012 drought certainly did not help. It hit the dairy industry hard by decreasing availability of feed while also increasing feed prices. Most dairy producers grow their own forages, but with drought-induced short supplies, many had to buy expensive forage from other growers.

Some producers are still short on forage supplies, so Schutz recommended that they keep a close eye on feed prices and check inventories frequently.

He says the number of dairy producers in Indiana continues to decrease. “We lose about 5 percent of dairy farms per average year, but cow numbers remain remarkably stable and milk production continues to increase.”

For those producers who have survived into 2013, they were relieved of another hurdle when Congress was able to eliminate the dairy fiscal cliff at the start of the year. The expiration of the 2008 farm bill in October and a lack of new federal farm policy heading into this year had many producers concerned that the industry would default to federal policy passed in 1949 and the antiquated price structure would have caused a doubling of milk prices.

“Certainly that would have caused problems for the dairy industry because while double the price of milk sounds great right now to dairy producers, the consumers would have not been able to afford the milk and also the processors would have certainly stopped buying as much milk and it would have caused a real dilemma for the dairy industry.”

With the extension of the farm bill the MILC or milk income loss contract program remains in effect.

The MILC program, administered by the U.S. Department of Agriculture’s Farm Service Agency, compensates dairy producers when domestic milk prices fall below a certain level. The monthly payments can help supplement producers’ incomes if they are losing money at current milk prices. Dairy farmers should check with their local FSA offices for more details.[audio:https://www.hoosieragtoday.com//wp-content/uploads//2013/01/Dairy-2013-outlook.mp3|titles=Dairy 2013 outlook]

Source: Purdue Ag Communications