Jan. 9 2015 08:42 AM

Growing prospect of another recession threatens exports and farm milk prices.

Despite big dips in the stock market this week, the U.S. economy remains in fabulous shape.

Except that's in comparison to the rest of the world. Depending upon whom you ask, "fabulous" is just a matter of our financial boat having smaller holes in it than everyone else's.

Outside our borders, the global economy is in trouble. Especially where oil revenue is vital. Unemployment and deficits are rising, income is falling, and just about everyone's currency exchange rate against the dollar has taken a hit. A couple have taken big hits.

At best, foreign economic growth and recovery from the 2009-11 recession may have stalled. More likely, say more and more business articles, another one is at hand.

As U.S. dairy producers saw the last time, the linkage between weak foreign economies and our dairy product exports and milk prices is strong. Right now, the dollar's strength makes everything the world buys from us expensive. Even worse, it comes at a time when cutting spending in general is a renewed priority.

The giddiness of gas prices below $2 distracts us from the financial pain the rest of the world is feeling. And today's reality is we need a vibrant global economy to help us export the equivalent of all the milk made in Wisconsin each year. Otherwise, the dairy pipeline backs up and prices fall.

Both have already happened, because exports have been declining for about six months now.

The result: Class III milk prices have plunged $7 in just a few months, futures prices in spring are projected at $3 less, and producers should probably pencil-out "what if?" scenarios that have them going even lower.

It already looks like many Western dairy producers will be operating at a loss when February prices are announced. Elsewhere, each passing week also improves the chances that producers who were aggressive in signing up for Dairy Margin Protection Program coverage will collect checks from USDA.

Good for them for making the right call, but bad for the dairy industry as a whole for being back in trouble.

Dennis blog footer
The author has served large Western dairy readers for the past 37 years and manages Hoard's WEST, a publication written specifically for Western herds. He is a graduate of Cal Poly-San Luis Obispo, majored in journalism and is known as a Western dairying specialist.