Ten years ago, a half-dozen straight months of Class III milk prices over $21 would have triggered epic herd expansions and new dairy construction in the West. But not this time; not even close.
Still-fresh memories of the Great Recession of 2008-09 is one reason, said producers and dairy industry leaders that we contacted. Another is the far stricter lending environment that it produced.
Those cautions may prove to be beneficial for dairies in early 2015. Class III price futures early in the year are currently forecast to be $6 less than their peak this spring.
"People are paying down debt, fixing things that are broken, and replacing what they really need to operate," said California dairy accountant Bruce Miles. "But they aren't rushing to have the most cows. It's a hard lesson they had to learn but they did it."
At Idaho Dairymen's Association, Rick Naerebout said, "I don't know of any lender who is loosening credit requirements right now, which is a big factor. If the money isn't there, then the [expansion] thought process isn't either, because the decision has already been made for you."
Bankers are limiting growth in Colorado too, says dairyman Terry Dye. "The gossip around here is that many banks were ready to exit the dairy business, but high prices kept them hanging in for now."
