Status of Wisconsin Agriculture 2010 - Agricultural & Applied ...

Dairy
Bob Cropp (262-9483)
Review of 2009
Wisconsin dairy farmers had more
financial stress in 2009 than in any
year since the early 1970’s. Fortunately,
milk prices were strong going
into 2009—highest on record in 2007
and second highest in 2008. But
those years also brought high prices
for feed and energy, which kept
returns over operating costs modest.
Feed and energy prices dropped
some during 2009, but milk prices
plunged. The Wisconsin All-Milk
Price fell as much as $9.10 per hundredweight
below year-earlier levels
and averaged $6.82 lower January
through October. Returns over feed
costs reached a low of $1.71 per
hundredweight for February 2009
and averaged just $2.53 Januarythrough-October.
Returns over feed
costs had averaged $9.22 per hundredweight
during 2008.
This wasn’t the decade’s only bad
stretch for dairy farmers—there were
major price declines in 2000, 2002
and 2006—but this one was different.
Each of the earlier price drops
were due to a relatively large
increase in U.S. milk production.
The 2009 plunge in milk prices was
caused by a fall in demand. Production
in 2009 increased just 0.4 percent
for the first six months, was flat
in July and fell below year-ago levels
in August (0.1 percent), September
(0.6 percent) , October (1.1 percent)
and November (1.0 percent). At the
same time, however, the downturn
that began in 2008 curbed the growth
in domestic dairy sales and reduced
U.S. dairy exports.
Domestic dairy sales grew just 0.4
percent in 2008 due to very high
retail prices. 4 USDA forecasts
improvement for 2009, with growth
4 The milk equivalent of domestic use and
exports of dairy products are expressed here as a
weighted average of reported sales on a fat basis
(40 percent) and skim-solids basis (60 percent).
of 2 percent. But the economic
downturn has also brought a shift in
eating habits. Consumers are eating
out less, which has brought a shift in
the composition of domestic dairy
product consumption. This shift
improved beverage milk sales in
2009, but slowed sales of butter and
cheese, particularly mozzarella, both
of which are consumed mostly in
restaurants. From January through
October, beverage milk sales were up
1.2 percent from the same period in
2008. Domestic sales of cheese, butter
and cream products were also
expected to show relatively good
increases during the October to
Dollars Per Hundredweight
Dollars per Hundredwieght
$22
$20
$18
$16
$14
$12
$10
$14
$12
$10
$8
$6
$4
$2
$0
Jan
2007
2008
Wisconsin All-Milk Price (NASS, USDA)
less Estimated Feed Costs (ERS, USDA)
Mar
2008
2009
May
Wisconsin All-Milk Price
Jul
Sep
Nov
December period, thanks to lower
wholesale and retail prices along
with store specials.
Farm milk prices took a bigger hit
from the loss in U.S. dairy exports
than from changes in domestic sales.
U.S. dairy exports had climbed 9.4
percent in 2007 and 14.5 percent in
2008, countering anemic gains in
domestic use. Those exports represented
9.2 percent of U.S. milk production
in 2007 and 10.8 percent in
2008. But exports began to decline
during the last half of 2008. Exports
in the first half of 2009 were half of
what they were during the first half
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Wisconsin Dairy Returns over Feed Costs
STATUS OF WISCONSIN AGRICULTURE 2010—CURRENT OUTLOOK: DAIRY 17
Jan
Mar
May
Source: NASS, USDA
2009
Jul
Sep
Nov