It wasn’t the year anyone predicted in the dairy industry, but according to University of Wisconsin-Madison’s Mark Stephenson, in terms of milk price, 2020 was better than we thought. He shared his observations during the January Hoard’s Dairyman webinar, “Pandemic, prices, and PPDs . . . What will 2021 offer?”

In his presentation, he showed that the average All-Milk price for 2020 was $18.24 per hundredweight (cwt.). For milk covered at the $9.50 level under the Dairy Margin Protection program (DMC), another 67 cents per cwt. was added to the price. The Coronavirus Food Assistance Program (CFAP) tacked on another $2.45 to the average price paid to farmers.

“Honestly, it was not nearly as bad as we thought it would be,” he said. When adding DMC and the government payments, the total net milk income average price was $21.36.

“We haven’t seen that level of milk price since 2014. This is the best year we’ve seen in several,” he added.

Stephenson said this income level had an impact. For example, in Wisconsin, farm loss slowed in 2020. The percent of farms exiting the dairy business in the Badger State rose in 2017, 2018, and 2019, but last year, it fell from 10% in January to just over 5% in December.

“The better income has helped farms,” Stephenson said. While other states don’t track monthly farm loss, he said, “I am hopeful we will see the same pattern in our national numbers.”

What can farmers do to help support their milk prices in 2021?

Stephenson said, “DMC is a no brainer. We are expecting DMC payments for sure.” He recommended signing up all Tier 1 milk possible at the $9.50 level.

He also said to watch for ways to secure profitable prices in the futures markets.

“Price opinions may move around quite a bit,” he said. He advised looking for price floor opportunities with Dairy Revenue Protection a quarter or more out and watching for price floor opportunities with options in the near future.

To learn more about how the dairy industry fared in 2020, watch the full presentation, “Pandemic, prices, and PPDs . . . What will 2021 offer?” This webinar was sponsored by Cargill.

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(c) Hoard's Dairyman Intel 2021
January 18, 2021
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