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Dairy situation very tough

The first 6 months of 2009 were perhaps the worst that U.S. dairy farmers have experienced for at least several generations, notes Ed Jesse, CALS emeritus professor and extension dairy marketing specialist, in a factsheet entitled Current Dairy Situation FAQs. Producers are squeezed between very low milk prices and very high feed prices, he points out. In nominal prices, the Wisconsin All-Milk price had its lowest half-year average since 2003. But in 2003 the state’s corn prices were averaging $2.35 per bushel. So far in 2009, they’ve been between $3 and $4.

USDA Economic Research Service puts Wisconsin’s January-June returns over cash costs averaged negative $2.81 per hundredweight. “Using rough Wisconsin current averages for milk per cow (20,000 pounds annually) and herd size (95 cows), this represents a cash flow deficit of $47 per cow per month and a monthly loss of about $4,500 per herd,” Jesse says.

Milk production was expected to drop below year-ago levels in July, but it didn’t, point out the monthly Dairy Situation and Outlook Report by Bob Cropp, another CALS emeritus agricultural economist. Still, Cropp notes that improved dairy product prices have brought some improved milk prices. The Class III price, for manufacturing milk, was just under $10 in July but will be near $11.20 for August, he says. It should continue to improve as milk production drops. But it will have to get over $16 for producers to experience favorable returns over operating costs, and that may not happen much before the second half of next year.