Report: Better milk prices helped Wisconsin dairy farmers begin to recover

Things couldn’t have gone better for Wisconsin corn and soybean producers in 2010. For milk producers, they went a lot better than they did a year ago, according to University of Wisconsin–Madison agricultural economists in their 2011 Status of Wisconsin Agriculture report.

“For Wisconsin corn and soybean producers, 2010 was a fabulous year in nearly every respect — early planting, timely and abundant rains, warm temperatures and early harvest with little or no drying required. Best of all, they had plenty to sell at good prices,” the report says.

The state’s dairy farmers received some much-needed relief from the devastating milk prices of 2009 — the state’s average all-milk price increased by about $3 to $16.18 and farmers sold 3 percent more milk — but the added income wasn’t nearly enough to rebuild the nearly 9 percent loss in net worth that they suffered in 2009.

Wisconsin’s net farm income nearly doubled in 2010, but that’s not saying much because 2009 was the worst year in a decade. The report’s authors estimate the state’s 2010 net farm income was about $1.5 billion, up $700 million from 2009 but $500 less than what it was in 2008 and $1.1 billion below the record set in 2007.

Wisconsin has seen much steeper peaks and deeper valleys in farm earnings than most states, they add. Net farm income jumped 144 percent for the state and 22 percent for the nation in 2007. It fell 58 percent in 2009 here while dropping 28 percent at the national level, and climbed 80 percent and 31 percent, respectively, in 2010.

“The wider fluctuations in Wisconsin’s net farm earnings reflect the dominance of milk in our commodity mix and the increased volatility of milk prices in recent years,” the report’s authors explain. Dairy products account for about half of the state’s farm revenue.

The state’s dairy farmers will face tough sledding for the first half of 2011, the report notes. Milk prices will be down in the wake of a late-2010 production surge, while feed prices will be up significantly. But things will improve in the second half, so the average price for 2011 will be about the same as it was in 2010.

While corn and soybean farmers can’t hope to see a repeat of 2010’s perfect growing season, they should fare well from a price standpoint in 2011. USDA forecasts record prices for both corn and soybeans, the report says.

Some other points in the report:

• The hot, wet weather that benefited field crop producers caused disease problems in cranberries, potatoes, snap beans, green beans and sweet corn. Untimely frosts cut the apple crop by 20 percent and the cherry crop by 46 percent.
• Production costs were about the same as they were in 2009. Feed costs were down, but feeder cattle and hogs, dairy heifers and poults cost more. Fertilizer and pesticide prices were down, but these were offset by a 22 percent jump in fuel costs.
• There should be plenty of money available to lend to farmers in 2011 at very favorable rates. Interest rates on farm operating loans have been dropping steadily. As of 2009 they were at about 6 percent, roughly half of what they were 20 years ago.
• A recent upward trend in Wisconsin cow numbers and total milk production continued in 2010 and is expected to do so in 2011. The state’s dairy herd averaged about 1.262 million cows in 2010, up about 50,000 cows from 2009. Per cow production increased 2.7 percent, and total production exceeded 26 billion pounds, up 3.2 percent. In the mid-2000s, the state reversed a troubling decline in milk production and cow numbers that began in 1989.
• Signs of strength in the restaurant trade bode well for the state’s milk producers and processors. The Restaurant Performance Index was above 100 — indicating that the industry is expanding — during several months in 2010. The RPI dropped below 100 in 2007 and stayed there through 2008 and 2009. Eating establishments account for a large share of domestic purchases of cheese and other manufactured dairy goods, the main end products for most Wisconsin milk.

This year marks the silver anniversary for the Status of Wisconsin Agriculture report. The first issue was published in 1986, when the farm sector was beset with a wave of financial problems related to an enormous devaluation in farmland values. Electronic copies of the 2011 report are available at http://www.aae.wisc.edu/pub. For a print copy, call 608-262-9488.