Last year initially showed promise for U.S. dairy farmers, then trade battles with America’s top three dairy trading partners — Mexico, China, and Canada — sent international dairy product sales skidding, and the forecasted milk prices for 2018 never materialized.
As a result, dairy farmers received the lowest payments for their milk since the 2009 downturn. It also marked the fourth straight year of dismal dairy prices, and that situation shook the financial foundation of many dairy farmers.
Big range in costs
“There is a real shakeout in part due to a $10 range in the cash costs related to milk production in Wisconsin,” said Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison. This situation is occurring in many other regions of the United States.
Wisconsin lost 6.5 percent of its dairy operations in 2018. That number started approaching 9 percent in March 2019.
The Badger State isn’t alone. Nearby Michigan lost 13.1 percent of its dairy businesses last year, an exit pace that is continuing this year.
Four farm groups
“There are four groups of dairy farms,” said Stephenson. “Summarizing discussions with ag lenders around the country:
- About 20 percent of the dairy farms cash flowed right through this trough
- 30 percent of the farms have had to borrow more
- Another 30 percent have had to restructure loans
- And as many as 20 percent are in financial trouble they may not recover from.”