Ag Secretary Brancel Calls for Dairy Farms to Communicate

Dairy farmers in Wisconsin got quite the scare when a Canadian trade dispute left dozens of them without a buyer for their milk. Luckily, they were able to find other buyers. But Wisconsin Agricultural Secretary Ben Brancel doesn’t think the state’s dairy farmers are out of the weeds just yet.

“It is now time for us as an industry to keep the conversation going and look long-term,” said Brancel in a statement. “The current situation has shown us all the importance of communication.”

The Canadian scare came after a few years of milk prices that were so low, some dairy farms had to sell their cows. Prices have dropped around $15 per 100 pounds after sitting around $17 through the winter. That’s a far cry from the $24 farmers were receiving in 2014.

At current prices, the profit margin on milk production is razor thin.

When profit margins are so thin, many dairy farmers see expansion as the solution. Increasing herd size typically is an economy of scale, so farmers can chase those thin profit margins without it costing them too much in additional infrastructure.

The number of big dairy operations overtook smaller ones around 2009, when milk prices plunged to $12, forcing consolidation.

Brancel warns that expansion isn’t always the cure for low profits, instead farms need to communicate more.

“Processing plants and farmers will have to work together directly to determine how much milk is needed,” said Brancel. “We cannot produce milk that does not have a final market.”

Americans are drinking less milk than they used to. Maybe the Wisconsin legislature is blaming this on cashew milk packaging, but it’s simply a fact. Processors don’t want to make a product they can’t sell so they won’t buy as much milk, leaving dairy farmers drowning in overproduction.

That’s where communication with the consumer comes in.

“Consumers have a lot to say about where their food comes from,” said Brancel. “In our promotion and marketing, we need to react to what consumers want.”

Brancel added that while milk consumption is down, Americans have never eaten more cheese and yogurt. If farmers and processors both understand what their market wants more clearly, they can better tailor their product to demand.

In the future, Brancel does think Wisconsin will be synonymous with dairy, but it might look a little different.

“This is a time of opportunity for us in agriculture to learn from the lessons of our past, refocus and move forward together.”

Crop prices (May 8)

Rio Creek Feed Mill – Algoma

Fox River Valley Ethanol – Green Bay

Basis: The difference between the local cash price for a commodity and the Chicago cash price (where the Board of Trade sets national futures price).

Gas Price Averages

United States: $2.34

United States one year ago: $2.21

Wisconsin: $2.30

Wisconsin one year ago: $2.20

Northern Door: $2.33

Sturgeon Bay: $2.35

Other Commodities

Gold: $1,220.80/troy ounce

Silver: $16.22/troy ounce

Oil: $46.24/barrel

Sources: aaa.com, agweb.com, gasbuddy.com, money.cnn.com, Wisconsin Ag Connection