Those who have paid attention to the dairy industry know it’s been a roller coaster for farmers, with the ride hitting some lows over the past several years, and continuing to be challenging for many farmers.
In 2014, milk prices were at record highs, and things were relatively good for dairy farmers. In September of 2014, prices peaked at $25.70 per hundredweight (100 pounds) for milk, on the average nationally. Over the past three years, prices have been lower and they have bottomed out at $15.30 per hundredweight in February of this year.
Another indicator of challenging times was at the monthly dairy sale in early May in Pipestone, Minnesota, where the going price of “springers” – cows about to give birth – averaged $1,332, the lowest price since November of 2011. The overall size of the dairy herd was also down by 4,000 cows in Minnesota, according to the Milk Producers Council newsletter.
This has made every move count for dairy farmers.
“Unless you are in a niche market, it can be challenging,” said Goodhue dairy farmer Peter Burfeind.
Making a Go of It In Organics
One person who is in a niche market is Merchants Bank Commercial Banker, Kim O’Reilly, who with her husband, Casey, operates an organic dairy farm where they milk about 100 cows.
She said that back in 2014 and 2015 the cooperative they were working with needed more milk, so they were asked to produce more milk.
“But, it takes time to increase production as it doesn’t occur overnight,” Kim said. “So we have worked to get our production up, and now they have placed a quota limiting the milk the cooperative will take at the current price and are paying less than cost for the amount over quota.”
The Future is Brighter
Overall milk production is starting to slow down lessening the supply in the marketplace, and that means that the prices have started to tick up, Peter said. That sentiment was echoed by dairy expert Dr. Bob Cropp, of the University of Wisconsin-Extension, as noted in the May 25, 2018, Wisconsin Ag Connection newsletter. Cropp said that milk production needs to slow down if prices are going to gain traction again.
Peter, who milks 300 cows at the family operation which started in 1965, said the slowing of production should mean better prices six months from now, and he is hopeful that the smaller producers can stay around to enjoy that benefit, “but we really don’t know for sure where the industry is going.”
Cropp was in agreement in his May 25 column, saying: “Milk prices are expected to strengthen and possibly top out in October or November.”
It’s Nothing New
For many farmers, farming is part of their family history and it gets in their blood. Over the years, they have been through the ups and downs of the economic cycles. They remain resilient and optimistic.
“Farmers work hard day in and day out, but I truly believe it is a great life and a true blessing to be a farmer,” Kim said.
A Part of Merchants Bank Too
O’Reilly pointed out that experience with farming is something that she thinks sets Merchants apart from the other financial institutions working in the Ag sector.
In addition to O’Reilly, who is based in Cannon Falls and Red Wing, Senior Lender Brian Hokanson is also a farmer and also based in Cannon Falls and Red Wing. Lenders like Patti Robertson, who is based in Red Wing and works with the Burfeinds, has decades of experience in Ag, as does Jim Peterson in Cannon Falls.
Jim Allen, Tim Gossman and Blake Koebke help farmers in St. Charles. Matt Schuldt in Caledonia and Spring Grove and Ken Graner in Rushford and Lanesboro have years of experience working with farmers. Senior Lender Shawn Sackman works with farmers out of the Onalaska location. Our Winona location includes Jim Vrchota and Senior Lender Randy Domeyer. Recent additions, like Jerad Brown in Rushford and Kaleb Storm in Winona, who grew up on the family farm and also has experience with helping vineyards, make up our Ag team.