It’s a piece of the milk price cycle we have become accustomed to. When milk prices go up, milk production follows. The panelists on the February 24 Hoard’s Dairyman DairyLivestream surmised that about 50% or more of the nation’s farms are under base excess programs. Given this situation, these farms may respond differently than we have in the past to high milk prices.
During the webcast sponsored by AMS Galaxy, Blimling and Associates’ Phil Plourd outlined the situation this way.
“We have a lot more base programs in place,” he explained. “While it's tempting to say, with $22 milk and decent profits, here comes the flood, I do think that there's more supply mitigation, management, or private programs in place that are designed to keep us from getting too carried away on the rebound.”
He did warn listeners that the flood may still come, but these base programs may flatten or alter the trajectory of the increased month-over-month potential gains in milk flow.
Cornell University’s Andy Novakovic took it a step further, detailing how the base programs in fact curtail production in a much different manner than simply letting the market take its course.
“If you get the price low enough, you beat people over the head enough, and some folks just hang it up,” Novakovic said. “Typically, those folks that hang it up are ones that are close to retirement, where it was kind of unfeasible at the stage of life anyway. And some just can't hack it and go out involuntarily. Those two groups — the ones that are kind of on the edge and the ones that are approaching retirement — probably weren't planning on growing anyway.”
In a stricter program set up, like a quota system, the production restrictions affect everyone, big and small.
“This growth management approach is about restraining growth on people who wanted to grow, and to me, that's really significant,” the veteran Cornell economist shared. “You're not really introducing constraints on folks that weren't planning on growing anyhow. What you're really doing is restraining the folks that in many ways, are going to be kind of the lifeblood of the next generation.
“I think these growth management plans are restraining who grows in a very, very different way than other things that we've done. To me, that's kind of significant,” he concluded.
To watch the recording of the February 24 DairyLivestream, go to the link above. The program recording is now also available as an audio-only podcast on Apple Podcasts, Spotify, Google Podcasts, and downloadable from the Hoard’s Dairyman website.
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