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Archive for processors

Lilley Farms Halts Dairy Production After 70 Years: Repercussions of Houlton Dairy Closure

Friday, September 6th, 2024

Lilley Farms, a cornerstone of northern Maine’s dairy economy since its establishment in 1946, has been a symbol of resilience and dedication for nearly 70 years. The farm, cherished for its contributions and historical importance, has been a pillar of the local agricultural community. Despite the significant change of discontinuing dairy production and selling its 130 dairy cows, effective at the end of the month, Lilley Farms’ resilience shines through. This decision, while impactful, is a testament to the farm’s ability to adapt and evolve, inspiring hope for the future of the local agricultural community in northern Maine.

“We knew this was going to happen and had been preparing for it,” says Perry Lilley, Lilley Farms’ co-owner.

This decision marks the end of an era and raises serious concerns about the future. How will this shift affect northern Maine’s dairy producers and the local economy? The closure of Lilley Farms’ dairy production will affect the dairy sector and have ripple effects on the local economy, from suppliers to consumers. Let us delve into the more considerable consequences of this significant change.

Perry Lilley, co-owner of Lilley Farms in Smyrna takes a break from topping off hay on Thursday. The farm will stop producing milk the end of the month. Credit: Kathleen Phalen Tomaselli / Houlton Pioneer Times

End of Milk Production: A Turning Point for Lilley Farms

Lilley Farms, a northern Maine staple, has a rich history dating back to 1946. Perry Lilley’s father founded this farm, which has been a cornerstone of the local dairy sector for almost seven decades. Their quest is more than simply providing milk; it exemplifies unrelenting devotion and family connection. Lilley Farms and Houlton Farms Dairy worked together for over 60 years, through good times and bad.

This alliance was not just about business but about mutual respect and trust. “We knew this was going to happen, and we were prepared,” said Perry Lilley, co-owner of Lilley Farms. “We met last spring with Houlton Farms and agreed on a date for us to sell our cows, and they would cease bottling milk. It was a mutual decision.” These simple words encapsulate the essence of their 60-year partnership, characterized by a strong sense of camaraderie and a shared vision for the dairy industry’s future.

For many in the sector, a 75-year operation is noteworthy and significant. It serves as a beacon of resilience and adaptation in an ever-changing market. Lilley Farms and Houlton Farms Dairy’s connection was more than just a business cooperation; it demonstrated the power of togetherness. Their efforts helped each other weather the strains of a volatile business, aided by a common heritage and a shared dedication to excellence.

Today, as Lilley Farms prepares to finish this chapter, it’s time to reflect and honor what has been accomplished. It’s also a reminder to all dairy farmers to be alert about the health and trajectory of their processors since their future may rely on it. The cessation of milk production at Lilley Farms signals the end of an era. Still, it also heralds the start of new possibilities – an homage to their illustrious history and an optimistic look forward.

A Critical Moment for Lilley Farms

Lilley Farms is now at a tipping point. They’ve opted to sell 130 dairy cows and discontinue milk production. Imagine this: Every day, 9,000 pounds of milk are gone. Why? Lilley Farms has no customers for its milk after Houlton Farms Dairy stopped processing milk at its Houlton facility.

According to Eric Lincoln, the general manager of Houlton Farms Dairy, they needed help to keep up with the losses. “We haven’t had the sales,” he said in an interview. The decline in demand for dairy products and unsustainable financial losses rendered it unavoidable. It’s a difficult pill but a sharp reminder of the financial tightrope that dairy processors often tread.

Broad Challenges in the Dairy Industry: Beyond Just Producing Milk

So, what are the significant difficulties that dairy producers face today? It’s more than simply producing milk; it’s a challenging business environment. Milk price declines, agricultural consolidation, and the need for expensive technology are just a few challenges. These factors make it difficult for smaller farms to compete, and this trend is not new but an emerging worry altering the dairy business.

Farmers in Northern Maine face much more difficult challenges. Isolation and economic demands complicate an already tough position. Imagine yourself in Aroostook County, remote from major markets and logistical centers. It makes everything from feed prices to distribution more difficult.

Perry Lilley adequately expresses it when he says, “It’s growing difficult to earn a livelihood. Milk prices have not kept up, and we are isolated here in northern Maine.” His thoughts connect with the challenges of running a small dairy farm in today’s environment.

Ripple Effects of Lilley Farms’ Milk Production Closure: A Community Impact

The termination of Lilley Farms’ milk production has far-reaching consequences for the surrounding community. You may be wondering what this means for other firms and suppliers.

First, consider the immediate loss of revenue for local suppliers. Feed firms, veterinary services, and agricultural equipment suppliers will all feel the impact. Dairy cows need nutrition, healthcare, and upkeep. The abrupt disappearance of 130 cows is more than just a figure; it represents a considerable loss of income for these suppliers.

And it is more than direct suppliers who will see a shift. The local economy lives on interconnection. Small grocery stores and regional distributors who formerly relied on Lilley Farms’ milk would now have to acquire it elsewhere at a more significant cost. These higher expenditures might be passed on to consumers.

Eric Lincoln summed up the more significant issues when he said, “We haven’t had the sales.” This comment represents a harsh reality for many in the dairy industry. Lower sales imply lower revenue, making it more difficult for companies like Houlton Farms Dairy to justify their ongoing milk processing activities.

Beyond economics, there is a social factor to consider. Lilley Farms and Houlton Farms Dairy were long-standing community stalwarts. Their disappearance marks the end of an era, upending customs and everyday routines that many residents valued. The communal relationships developed via these everyday meetings are as meaningful as the commercial transactions. The loss of these community connections significantly impacts Lilley Farms’ decision.

So, as Lilley Farms considers its next initiative and Houlton Farms alters its emphasis, the local network of companies, suppliers, and people will need to adapt. This ripple effect acts as a warning, pushing all dairy farmers to be alert about the health of their relationships and the markets they service.

Lilley Farms: Looking Forward Without Leaving Agriculture

Lilley Farms is not leaving agriculture behind. The Lilleys are actively investigating new agricultural operations that will most use their current land and structures. While different from dairy production, these initiatives seek to be less time-consuming yet equally significant. This forward-thinking approach inspires optimism for the future of Lilley Farms and the local agricultural community.

Perry Lilley said, “We are going to do something that takes less time,” indicating a desire for a change of pace while continuing to work with animals. They are still in the planning phases, debating and deciding on their future actions. “We want to do something with animals that will utilize our land and buildings,” Lilley told me.

The family views this shift as a chance to innovate and adapt to the changing agricultural world, ensuring their rich farming tradition continues in a new and probably more sustainable form.

The Bottom Line

Lilley Farms’ milk production ends after 75 years, signaling the end of an era for the farm and the whole agricultural community in northern Maine. The shutdown illustrates minor dairy farmers’ more significant issues, ranging from declining milk sales and stagnating pricing to growing plant-based alternatives. This transition highlights the dairy industry’s changing terrain and the need for adaptability and knowledge.

So, how can dairy producers adjust to the changing times? It is critical to be proactive and monitor industry developments, customer preferences, and the financial condition of the processors they operate with.

As we look to the future, let us remember the significance of innovation, diversity, and strategic planning in dairy farming. Staying educated and prepared is critical while navigating the intricacies of today’s agricultural environment.

Summary:

Lilley Farms Inc., a cornerstone of northern Maine’s dairy industry, is ending milk production after 75 years. Once supplying 9,000 pounds of milk daily, the farm is selling off its 130 dairy cows. This decision follows Houlton Farms Dairy’s move to cease milk processing at its Houlton facility. Despite the industry’s challenges, such as declining milk sales and non-competitive prices, both businesses plan to pivot: Houlton Farms will continue with its niche products, and Lilley Farms is exploring a new venture with animals on its existing land, marking the end of their six-decade relationship. “We’ve known this was happening and have been preparing for it. It was a mutual decision,” said Perry Lilley, co-owner of Lilley Farms. As Lilley Farms prepares to finish this chapter, it is essential to reflect on the business’s accomplishments and remind all dairy farmers to be alert about the health and trajectory of their processors. The ripple effect of Lilley Farms’ decision and Houlton Farms’ shift in focus will require adaptation from the local network of companies, suppliers, and people.

Lilley Farms Inc. exits the milk production business after 75 years, selling off 130 dairy cows.
Houlton Farms Dairy ceases milk processing at its Houlton facility, influencing Lilley Farms’ decision.
Both businesses plan to continue operations in other agricultural ventures.
Lilley Farms is exploring new ventures involving animals, utilizing their existing land.
The transition marks the end of a six-decade relationship between the two companies.
Declining milk sales and non-competitive prices are significant challenges for dairy farmers.
Dairy farmers should stay vigilant about the health and direction of their processors.
The closure’s ripple effects will impact the network of local companies, suppliers, and communities.

Learn more:

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Categories : Breeder Profiles

U.S. Milk Production Plummets to Historic Lows

Friday, August 23rd, 2024

Find out why U.S. milk production is at historic lows and what you, as a dairy farmer, need to know to get through this crisis. How will this impact your farm’s future?

Summary: U.S. milk production has been declining for 13 straight months, with June and July seeing historic drops of 1.7% and 0.4%, respectively. As the dairy herd shrinks and ages, spot milk prices have soared due to strong demand from bottlers and processors. Global factors, including active Chinese participation in the Global Dairy Trade auctions, have further complicated market dynamics by pushing milk powder prices higher. U.S. cheese inventories are at their lowest since 2020, and overall dairy product prices remain volatile. Dairy farmers face significant pressures but have opportunities to mitigate these challenges through strategic herd management, quality feed, and market awareness.

U.S. milk production has faced a decline for over a year, creating historic drops in mid-2023.
The shrinking and aging dairy herd has resulted in higher spot milk prices.
Strong demand from bottlers and processors is driving up milk prices.
Increased participation from Chinese buyers in Global Dairy Trade auctions has pushed milk powder prices higher.
U.S. cheese inventories are at their lowest levels since 2020, reflecting volatility in dairy product prices.
Dairy farmers can combat these pressures with strategic herd management, quality feed, and staying informed about market trends.

milk output, United States, record reduction, production, decline, USDA, dairy herd, growth, managing herds, cull rates, older cows, milk production, stall, rising demand, valuable commodity, spot milk prices, bottlers, processors, milk powder costs, CME spot nonfat dry milk, whole milk powder, skim milk powder, global demand, Chinese purchasers, Global Dairy Trade auctions, milk powder stocks

Milk output in the United States is on track for a record reduction, with production falling for 13 months—the most extended period in modern history. The USDA reported a 1.7% decline in milk output in June, followed by a 0.4% fall in July. What does this imply for your farm and the future of dairying in America?

Month	2023 Milk Output (million pounds)	2024 Milk Output (million pounds)	Year-over-Year Change (%)
June	18,575	18,260	-1.7%
July	18,430	18,360	-0.4%
August	18,800	18,700 (est.)	-0.5% (est.)

America’s Dairy Slump: Facing the Hard Truths of Historic Milk Production Declines

The present status of U.S. milk production is distinguished by unprecedented decreases, with a 1.7% loss in June and a 0.4% dip in July compared to last year. These numbers highlight the most severe two-year slump in decades. The USDA has updated its projections, indicating a lower dairy herd of 9.325 million cows in July, down 43,000 from July 2023. This diminishing and aged herd cannot support considerable growth despite seasonal mild temperatures.

Feeling the Squeeze: How Declining Milk Production Hits Dairy Farmers Hard

Month	Number of Milking Cows (2024)	Number of Milking Cows (2023)	Year-over-Year Change
January	9,368,000	9,392,000	-24,000
February	9,355,000	9,385,000	-30,000
March	9,325,000	9,371,000	-46,000
April	9,312,000	9,362,000	-50,000
May	9,300,000	9,354,000	-54,000
June	9,290,000	9,338,000	-48,000
July	9,325,000	9,368,000	-43,000
August 1-23	9,332,000	9,376,000	-44,000

So, how does the drop in milk output affect dairy producers where it counts the most? Let’s dig right in.

First and foremost, sustaining herd numbers becomes an uphill task. Dairy producers find it more challenging to manage their herds at ideal size. The USDA reported a 43,000 head reduction in milk cows from July 2023 to July 2024. Maintaining herd numbers has become a difficult challenge. Dairy producers need help managing their herds at appropriate levels. The USDA announced that the number of milk cows had decreased by 43,000. That’s a considerable drop, making it challenging to build up output.

Furthermore, higher cull rates exacerbate the situation. Farmers have little option but to cull their older, less productive cows. But here’s the kicker: the surviving cows aren’t growing any younger. According to the USDA, the dairy herd is aging, and older cows produce less milk. What are the consequences? A less efficient herd is failing to satisfy demand.

The actual data provide a striking picture. For the last 13 months, milk production in the United States has been lower than in the previous year. USDA figures indicated a 1.7% loss in June, which eased somewhat to a 0.4% drop in July. This protracted fall is not a fluke but a pattern with far-reaching consequences (USDA Milk Production Report, 2024).

So, what are farmers to do? Producers are working to fill every stall and reduce cull rates. However, the truth remains: a decreasing, aged herd cannot satisfy rising demand, making milk and other dairy products a valuable and costly commodity.

Have you felt the pinch yet? You are not alone. But knowledge is power, and knowing these obstacles is the first step toward overcoming them.

Spot Milk Prices Soar: Bottlers and Processors in a Tug-of-War

Month	2024 Price ($/cwt)	2023 Price ($/cwt)	Year-over-Year Change (%)
January	20.75	22.10	-6.1%
February	21.00	22.00	-4.5%
March	21.50	21.75	-1.1%
April	22.25	21.50	3.5%
May	23.00	21.90	5.0%
June	22.75	22.30	2.0%
July	23.25	22.50	3.3%
August (up to 23rd)	23.50	22.75	3.3%

Right now, the market is congested and busy. Spot milk commands a significant premium above Class III in the central area, ranging from $2.25 to $3.00 per cwt. The increase in spot milk prices is causing processors and bottlers to feel the squeeze.

On top of that, milk powder costs are rising. This week, CME spot nonfat dry milk (NDM) rose 2.75¢ to $1.2825 per pound, the most since January 2023. Whole milk powder (WMP) increased by 7.2% to its highest level since October 2022, while skim milk powder (SMP) recovered by 4%.

As schools reopen, the demand for milk in meal programs increases, and bottlers vie furiously to get supply. This ‘milk tug-of-war’ forces other processors to operate more lightly, complicating operations and raising expenses. Understanding this dynamic can help you anticipate and plan for potential disruptions in the supply chain.

Global Demand: China’s Milk Powder Purchases Spark U.S. Market Surge

The dairy market in the United States is heavily influenced by global demand. Recently, increased activity from Chinese purchasers has played a vital role. After more than a year of modest purchases, China’s participation in the August Global Dairy Trade (GDT) auctions pointed to decreased milk powder stocks in the nation. This rise in Chinese demand increased prices for whole milk powder (WMP) by 7.2% and skim milk powder (SMP) by 4%.

Such worldwide interest directly influences U.S. milk powder pricing, resulting in significant profits. For example, spot nonfat dry milk (NDM) prices increased to $1.2825 a pound, the highest level since January 2023. This considerable growth may be attributed to rising imports from China.

This increasing overseas demand improves the US dairy business as a whole. Export sales contribute considerably to overall market dynamics, mitigating the impact of decreases in local production. As Chinese whey imports increased by 13.2% in July and WMP imports behind the previous year’s amount by just 4.6%, US producers found a confident customer, helping to stabilize prices in the face of local concerns.

Butter and Cheese Frenzy: What’s Happening?

Let’s discuss the butter and cheese markets. Butter stocks fell quicker than expected in July, although there was still 7.4% more butter on hand at the end of the month than a year earlier. Prices fell, with CME spot butter down a cent to $3.13 per pound. Despite this, butter purchasers are still on edge, swapping over 100 cargoes in Chicago last week and another 54 vehicles on the spot market this week.

Cheese supplies are also under strain. Historically, cheese stockpiles in the United States grow by around 30 million pounds between the end of February and the end of July. This year, however, inventories have fallen by 50 million pounds. On July 31, the end-of-month cheese inventory was 1.4 billion pounds, the lowest since late 2020 and 5.8% lower than the previous year. CME spot Cheddar barrels closed at $2.10 per pound, a 15.5 percent loss, while blocks finished at $2.0375, a 6.25 percent decrease.

Navigating the Storm: Proactive Strategies for Dairy Farmers in Turbulent Times

Facing this daunting scenario, dairy farmers need proactive strategies to navigate these turbulent times. Here are some actionable tips to help you weather the storm:

Maximize Efficiency in Herd Management

Consider implementing advanced herd management software. These tools can accurately monitor each cow’s health, productivity, and breeding cycles. As herd sizes decrease (down to 9.325 million cows in July), ensuring every cow performs optimally is vital.

“Utilizing data-driven technologies can significantly enhance herd efficiency and milk yield,” says John Smith, dairy management expert at FarmTech Innovations.

Invest in Quality Feed

The nutritional value of your feed directly impacts milk production. Opt for high-quality, balanced diets catering to your herd’s needs. Grain prices have dipped (December corn closed at $3.91 per bushel; November soybeans at $9.37), making it an excellent opportunity to stock up on feed.

Monitor Cow Comfort

Stress can severely affect milk production. Ensure your cows have comfortable bedding, ample space, and a stable environment. Regularly check ventilation and temperature controls, significantly as temperatures drop seasonally, boosting milk output.

Strategize Cull Rates

Although culling less productive cows is necessary, consider a more selective approach. Focus on maintaining a younger, more efficient herd to maximize milk production per cow.

Optimize Milk Production

Studies show that certain practices, like frequent milking and ensuring cows have constant access to clean water, can increase yield. Remember to periodically review your milking equipment to ensure it’s working efficiently.

Tap into Market Opportunities

With spot milk prices soaring (trading at $2.25 to $3.00 per cwt over Class III), it’s a prime time to renegotiate contracts or seek new buyers willing to pay a premium. Consider diversifying your products if possible – cheese and butter prices fluctuate. Still, high-protein dairy products like whey are currently in demand.

“Farmers who adapt quickly to market shifts by diversifying their product lines often find more stable income streams,” advises Laura Anderson, market analyst at AgriMarket Insights.

Stay Informed and Collaborative

Keep up with industry reports and trends. Join local farmers’ groups or online forums to share insights and strategies. Sometimes, the best advice comes from fellow farmers who understand your unique challenges.

Remember, while the current landscape seems challenging, intelligent and proactive management can help you survive and thrive. Keep experimenting with different strategies and stay abreast of market trends to make informed decisions.

The Bottom Line

Milk output in the United States is declining at a record rate, posing substantial challenges for dairy producers. The problems are significant, with milk supply behind prior-year volumes by more than a year, fewer cows in the herd, and higher spot milk prices. Global demand movements, notably from China, and shifting dairy product prices add an extra complication. Maximizing herd efficiency, investing in quality feed, and monitoring cow comfort are critical for navigating these tumultuous times. Strategic market actions are also necessary. Staying educated and collaborative within the industry might offer the competitive advantage required.

Given these unprecedented obstacles, how will you adjust to guarantee the viability of your dairy farm?

Learn more:

Categories : Dairy Markets

Mixed Year for UK Dairy Farms: Rising Milk Prices Still Fall Short of Production Costs, Reports Show

Tuesday, July 16th, 2024

UK dairy farms faced mixed results in 2023. Are higher milk prices sufficient to cover production costs and provide fair income for farmers? Learn more.

Imagine laboring daily to provide an essential staple people need only to find your efforts insufficient to pay for your costs. Many UK dairy companies experience this reality. The changing milk prices over the last year have created additional challenges. Although prices improved significantly from a low of 36.49ppl in July 2023, the Kingshay Dairy Costings Focus Report reveals that they still do not meet realistic wages or manufacturing expenses. Good news is available, however. Milk solids per cow have increased by almost 11%; herd numbers have grown, and stocking rates have become more significant during the last ten years. Markets must provide premiums to cover these extra costs as climate change takes center stage. Now, efficiency and sustainability are more important than ever. The future of dairy farming relies on knowledge of the interactions between environmental factors and market pressures.

Despite the challenging year, UK Dairy Farmers have shown remarkable resilience in the face of economic challenges, with Milk Prices and Production Costs coming under scrutiny. Last year, UK dairy producers displayed conflicting fortunes, particularly regarding milk pricing and production costs. According to the Kingshay Dairy Costings Focus Report, milk prices dropped drastically to an average of 36.49ppl in July 2023. Prices have increased since then but still fall short of manufacturing expenses. Many farmers need help to get fair compensation for their family effort.

The market peaked at 13.8ppl in March 2023 and narrowed to 11.6ppl by March 2024. The gap between the highest and lowest milk prices was erratic, drawing attention to the difficulties of satisfying customer needs and store expectations.

While the continuous difference between expenses and income threatens economic sustainability, the potential for market changes to offset these extra expenses and labor on farms, especially given climate change, offers hope.

The UK’s Dynamic Milk Market: Navigating Volatility and Embracing Sustainability

The milk scene in the UK is constantly changing. In March 2023, the difference between the highest and lowest milk prices exceeded 13.8ppl; in March 2024, it narrowed to 11.6ppl. These price swings reveal consumer and retailer desires, causing market instability.

Consumers and stores are now advocating sustainable practices in addition to reasonable costs. Promoting regenerative agricultural methods, which focus on restoring and enhancing the health of the soil, helps the market adjust as climate change takes the front stage. Meeting customer expectations and laws depend on processors like First Milk providing premiums for these environmentally beneficial approaches.

Dairy farmers face a complex combination of changing market dynamics, sustainability mandates, and varying milk prices. They must strike a compromise between environmental conscience and financial feasibility.

Over the past decade, UK Dairy Farms have embraced efficiency amid dynamic shifts in production trends, indicating positive developments in the industry.UK dairy farms’ production patterns have changed dramatically over the last ten years. Now averaging in the mid-8,000 liters per cow range, milk solids reach a record 646 kg/cow—an 11% increase from 10 years earlier. This meets contract criteria and shows a higher feed economy. Herd sizes have also increased from 185 cows in 2014 to 219. From 2.25 a decade ago, stocking rates have risen to 2.39 cows per hectare. These developments indicate a concentration on increasing output and economic resilience in challenging market circumstances.

Weather’s Whims: A Tale of Diverging Fortunes for UK Dairy Farmers

Dairy farming has traditionally depended heavily on the weather, so this year proved difficult. Due to bad weather, three percent less milk was produced from pasture. Fascinatingly, Scotland broke the trend with a 16% rise, demonstrating how much regional practices and the environment affect outcomes.

Talk about the Kingshay Dairy Costings Focus Report-based patterns in milk prices over the last year. Describe how milk prices have increased but fall short of supporting fair rewards for family work and manufacturing expenses.

Rebound in Reproductive Health: Dairy Herds Return to Stability After Last Year’s Heatwave

After last year’s scorching summer, fertility patterns steadied. Days until the first service is 70—one day more than in 2021/22; the calving interval is back to 393 days. For the herds, these consistent readings point to a resumption of regular reproductive cycles. The not-in-calf rate over 200 days has dropped to 12%; the infertile culling rate is now down to 6.7%, in line with pre-summer rates. These patterns indicate that farmers are recovering control over the reproductive condition of their cattle.

Production Systems and Economic Efficiency: Diverse Approaches in the UK Dairy Sector

Economic efficiency varies across the UK’s dairy production systems. All-year-round calving herds focused on housing achieve the highest margin per cow at £2,495. Meanwhile, autumn and split block calving herds with a grazing focus lead in margin per liter, reaching 29ppl. Economic implications are significant. Higher margins per cow mean better cash flow for reinvestment in the farm.

In comparison, higher margins per liter highlight the cost-effectiveness of pasture use. These efficiencies influence profitability, resilience, and the ability to meet consumer demands. Understanding them is critical to optimizing your operations in a dynamic market.

Organic Dairy Farming: Navigating Financial Pressures and Growth

With the margin over-bought feed per cow declining 13.9% to £2,048 from £2,380 last year, organic dairy farms are under financial strain. Still, in the previous ten years, organic herd numbers have increased by 19% and now stand at 243 cows. Conversely, conventional herds have grown 18.4% to 219 cows from 185 in 2014. Although both farms are expanding, organic farmers suffer more profitability because of considerable feed expenses, stressing their difficulties in fulfilling organic requirements.

The Bottom Line

This year has been a swirl of events for UK dairy farmers driven by changing milk prices and growing production costs. Notwithstanding these difficulties, the industry has improved efficiency, with mixed results. Milk prices fell during the last 12 months, then slowly recovered, still not covering production expenses or paying adequate compensation for family work. This shift captures a consumer and retailer-driven market motivated by environmental needs.

From the production standpoint, there are advantages. Adverse weather affected forage milk, but generally, milk solids reach record levels because of better feed efficiency and careful herd management. Although lameness still exists from inclement weather, health statistics reveal fewer incidences of mastitis. After the heat wave, reproductive health has steadied, underscoring good management.

Efficiency is crucial; different economic performances across manufacturing systems result from this. Although both conventional and organic farms deal with financial constraints, the industry is changing with creative ideas aimed at sustainability and lessening environmental impact.

Market changes such as increased premiums for environmentally beneficial approaches and better price stability could better assist UK dairy producers in meeting environmental criteria and remaining profitable. Your help advocating these changes may significantly change this rugged yet hopeful terrain.

Key Takeaways:

Milk prices dropped sharply to an average of 36.49ppl in July 2023 but have since risen, albeit insufficiently to cover production costs and family labor for many farmers.
The price gap between the highest and lowest milk prices fluctuated significantly, peaking at 13.8ppl in March 2023 before narrowing to 11.6ppl in March 2024.
Retailers and consumers are increasingly demanding sustainable practices, pushing milk processors to offer premiums for regenerative farming.
Despite adverse weather conditions, average herd sizes have grown to 219 cows, and milk yields have seen a slight increase.
Health improvements include a reduction in mastitis cases, although lameness has increased, primarily due to poor weather affecting grazing.
Fertility metrics have stabilized following disruptions caused by the previous year’s heatwave, with calving intervals and days to first service returning to normal levels.
Diverse production systems showcase varying levels of efficiency, with housing-focused herds yielding higher margins per cow and grazing-focused herds delivering higher margins per liter.
Organic dairy farming has also been impacted, with margins over purchased feed dropping by 13.9% while herd sizes have increased by 19% over the past decade.

Summary:

UK dairy farmers have faced a challenging year due to changing milk prices and growing production costs. The Kingshay Dairy Costings Focus Report shows that milk prices dropped drastically in July 2023, but still fall short of manufacturing expenses. However, good news is available as milk solids per cow have increased by almost 11%, herd numbers have grown, and stocking rates have become more significant over the last ten years. Markets must provide premiums to cover these extra costs as climate change takes center stage. The dynamic milk market in the UK is constantly changing, with the difference between the highest and lowest milk prices exceeding 13.8ppl in March 2023 and narrowing to 11.6ppl by March 2024. Processors like First Milk must provide premiums for environmentally beneficial approaches to meet customer expectations and laws. UK dairy farms’ production patterns have changed dramatically over the last ten years, with milk solids reaching a record 646 kg/cow and herd sizes increasing from 185 cows in 2014 to 219.

Learn more:

Categories : Dairy Industry

Soaring Temperatures Hammer Dairy Production: Tight Milk Supply and Rising Costs Impact Market

Sunday, July 14th, 2024

How are soaring temperatures impacting dairy production and milk supply? Discover the challenges faced by farmers and the market shifts affecting your dairy products.

For America’s dairy producers, the increasingly sizzling summers are a testament to their resilience. Despite the rising heat and humidity that create severe difficulties for the dairy business, these farmers continue to persevere. The unrelenting heat may compromise cow comfort and lower milk output, but these dedicated individuals are finding ways to adapt. Their efforts, even in the face of the worst conditions in decades, are a source of inspiration. They are proving that even in this heat, cows can still produce.

Tightening of Spot Milk Availability: A Dire Shift for Dairy Processors

Month	Average Price ($/cwt)	Year-Over-Year Change	Five-Year Average ($/cwt)
January	21.87	+3.5%	19.30
February	20.75	-2.0%	19.60
March	22.15	+1.8%	19.80
April	23.05	+4.2%	20.00
May	24.00	+5.1%	20.20

The lack of spot milk availability is rather apparent. Dairy Market News notes a shortfall of extra shipments even during last week’s vacation. As temperatures climb and cow comfort falls, Midwest milk workers find it challenging to meet demand. Usually, there would be a surplus, but this season provides few choices. Against the five-year average of about $2.70/cwt discounts, processors seeking spot cargoes of milk now face expenses averaging 50¢ above Class III. This sudden shift draws attention to the mounting strain in the dairy sector.

Improvement in Milk Margins: A Double-Edged Sword for Dairy Farmers

Month	Milk Margin 2023 ($/cwt)	Milk Margin 2024 ($/cwt)	Change ($/cwt)
January	$8.90	$9.60	+$0.70
February	$8.30	$10.10	+$1.80
March	$8.50	$10.05	+$1.55
April	$8.75	$9.60	+$0.85
May	$9.60	$10.52	+$0.92

Despite the better milk margins recorded by USDA’s Dairy Margin Coverage program, the financial environment for dairy farmers is not without its challenges. The Milk Margin Over Feed Cost climbed to $10.52 per hundredweight (cwt) in May, a noteworthy 92%-increase from April, the highest number since November 2022. This increase has helped dairy producers relax some of their financial load. However, various economic hurdles include high interest rates, increased borrowing costs, and limited operational investment. Further impeding development are low heifer supplies necessary for herd expansion, replenishment, and high meat costs. As such, increasing milk production presents significant difficulties even with improved profits.

Significant Decline in Dairy Powder Production: A Paradoxical Market Stability

Month	NDM Production (Million lbs)	SMP Production (Million lbs)
January 2024	120.5	95.3
February 2024	115.2	90.1
March 2024	118.7	92.8
April 2024	112.3	88.6
May 2024	109.4	86.5

The effects on dryers have been notable; nonfat dry milk (NDM) and skim milk powder (SMP) output shows a clear drop. The industry’s difficulties were highlighted in May when the combined production of these powders dropped by 15.9% year over year. Over the first five months of 2024, NDM and SMP’s combined production fell to a decade-low. Still, NDM rates have remained highly constant, varying within a small 20′ range over the previous 17 months. Tepid demand balances the limited supply and preserves market equilibrium, providing this stability.

Volatile Dairy Export Markets Take a Hit: Mexico and Southeast Asia Push NDM and SMP Exports to Record Lows

Month	NDM Exports (Million Pounds)	SMP Exports (Million Pounds)
January	150.2	33.1
February	130.4	31.7
March	120.9	29.3
April	140.3	32.5
May	133.6	30.6

The dairy sector has been severely disrupted by the decline in NDM and SMP exports, which has been made worse by a dramatic reduction in demand from Mexico and Southeast Asia. The lowest for May since 2017, shipments of NDM and SMP dropped 24.2% year over year to barely 133.6 million pounds. The drop occurred mainly due to a notable 18.3% annual fall in sales to Mexico. Orders have also notably dropped in key markets in Southeast Asia. This crisis exposes dairy export markets’ sensitivity to trade dynamics and regional economic situations.

Butter Market Soars Amid Supply Constraints: Elevated Prices Highlight Unyielding Demand

Reflecting a robust historical figure, the butter market has maintained high prices at $3.10 per pound. Fundamental causes include:

Limited cream supply from the summer heat.
Growing competition from Class II users.
An aggravating cream shortage.

Notwithstanding these limitations, May’s 4% year-over-year growth in butter output points to strong demand. These supply problems disturb the churns, yet the market needs more butter to satisfy industrial and consumer requirements.

A Tale of Two Cheeses: Italian Varieties Surge While Cheddar Falters

Cheese Type	Production Change (Year over Year)	Key Influences
Italian Varieties	+4.4%	Rising Demand, Improved Margins
Cheddar	-9.7%	Lack of Available Supplies, Market Fluctuations

Cheese manufacturing is undergoing a significant shift, reflecting the impact of changing consumer tastes. Italian variants like Parmesan and Mozzarella are witnessing a 4.4% spike in May, indicating the evolving market. On the other hand, Cheddar’s output is falling, plagued by declining milk supplies and growing manufacturing costs. This shift in consumer preferences is a crucial factor that the industry needs to be aware of and prepared for. As global consumers search for less expensive options, present high costs might restrict exports in the future.

Whey Markets Surge: Breaking Through the 50¢ Barrier

Month	Price per Pound	Volume Traded (Loads)	Trend
May	47¢	25	Stable
June	48.5¢	22	Slight Increase
July	50¢	30	Increase
August	51¢	28	Stable

This week, the whey markets performed well, surpassing the 50¢ per pound threshold for the first time since February. Monday’s slight decrease was followed by Tuesday’s and Thursday’s price increases. With three cargoes exchanged, dried whey prices on Friday had risen 1.75% from the previous week to 51¢ per pound. Manufacturers concentrate on value-added goods such as whey protein isolates and high protein whey protein concentrates, even if regular cheese output drives constant whey manufacturing. This change reduces dry whey output and will probably help near-term pricing.

USDA’s July Report: Sobering Projections Amid Flood-Induced Uncertainty

The July World Agricultural Supply and Demand Estimates published by the USDA provide a mixed picture of the maize and soybean output for 2024/25. Increased acreage causes estimates of corn output to rise by 1.6%, but greater use and exports lower ending stockpiles. Conversely, lower starting stocks and less acreage caused soybean output to drop by 0.3%, resulting in declining ending stocks.

While soybean meal prices held at $330 per ton, USDA shaved the average farm price prediction by 10¢ for both commodities, bringing corn to $4.30 per bushel and soybeans to $11.10 per bushel. This ought to keep feed expenses under control. However, recent extreme flooding in the Midwest, particularly along the Mississippi River, has severely disrupted crop output, possibly rendering up to one million acres of maize useless with little likelihood of replanting. These difficulties might cause feed price volatility, changing the economic environment for dairy producers and other agricultural sector players.

The Bottom Line

Modern dairy markets must contend with changing market dynamics, economic instability, and climate change. Rising heat and humidity have put cow comfort and milk output under pressure, therefore affecting spot milk supply. High borrowing rates, heifer shortage, beef pricing, and better margins all help to limit milk output. Extreme weather influences market stability and dairy output: the declining dairy powder output and butter and cheese market volatility highlight sector instability. Unpredictable availability and significant price fluctuations are resulting from supply restrictions and competition. Dampened demand from Mexico and Southeast Asia complicates matters, especially for skim milk powder and nonfat dry milk. The future of the dairy sector depends on changing consumer tastes, economic pressures, and environmental issues. To guarantee a robust and sustainable future for dairy, stakeholders must innovate for sustainability by adopting adaptive practices.

Key Takeaways:

Milk production has declined due to high temperatures affecting cow comfort.
Spot milk availability has tightened significantly, with handlers in the Midwest struggling to find excess loads.
The price of spot milk is averaging 50¢ over Class III, compared to a five-year average discount of $2.70/cwt.
US milk supply has been trailing prior year levels for almost a year on a liquid basis.
May Milk Margin Over Feed Cost reached $10.52/cwt., the highest since November 2022.
Despite improved margins, producer expansion is limited by high interest rates, heifer scarcity, and elevated beef prices.
Milk supplies are tightest for dryers, with NDM/SMP production down markedly and cumulative production at its lowest in a decade.
NDM prices have remained stable despite low production, ending the week at $1.18/lb.

Summary:

Rising heat and humidity in America have put cow comfort and milk output under pressure, affecting spot milk availability. Dairy producers are adapting to these challenges, with processors facing expenses averaging 50¢ above Class III. The Milk Margin Over Feed Cost increased by 92% in May, the highest number since November 2022. High interest rates, increased borrowing costs, and limited operational investment are also impeding development. Low heifer supplies for herd expansion and replenishment are causing difficulties. Dairy powder production has declined significantly, with nonfat dry milk (NDM) and skim milk powder (SMP) output dropping by 15.9% year over year. The volatile dairy export markets have taken a hit, with Mexico and Southeast Asia pushing NDM and SMP exports to record lows. The butter market maintains high prices at $3.10 per pound due to limited cream supply, growing competition from Class II users, and an aggravating cream shortage.

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Categories : Dairy Markets

Why Are Class III Milk Prices So Low? Causes, Consequences, and Solutions

Thursday, June 27th, 2024

Uncover the factors behind the low Class III milk prices and delve into practical measures to enhance milk protein and butterfat content. What strategies can producers and processors implement for adaptation?

The U.S. dairy industry faces a critical challenge: persistently low Class III milk prices. These prices, which comprise over 50% of the nation’s milk usage and are primarily used for cheese production, are vital for the economic stability of dairy farmers and the broader market. The current price indices reveal that Class III milk prices align with the average of the past 25 years, raising concerns about profitability and sustainability. This situation underscores the urgent need for all stakeholders in the dairy industry to come together, collaborate, and explore the underlying factors and potential strategies for improvement.

Class III Milk Prices: A Quarter-Century of Peaks and Troughs

Over the past 25 years, Class III milk prices have fluctuated significantly, reflecting the dairy industry’s volatility. Prices have hovered around an average value, influenced by supply and demand, production costs, and economic conditions.

In the early 2000s, prices rose due to increased demand for cheese and other dairy products. However, the 2008 financial crisis led to a sharp decline as consumer demand dropped and exporters faced challenges.

Post-crisis recovery saw gradual price improvements but with ongoing unpredictability. Stability in the mid-2010s was periodically interrupted by export market changes, feed cost fluctuations, and climatic impacts on milk production. Increased production costs from 2015 to 2020 and COVID-19 disruptions further pressured prices.

In summary, while the average Class III milk price may seem stable over the past 25 years, the market has experienced significant volatility. Understanding these trends is not just important; it’s critical for navigating current pricing issues and strategizing for future stability. This understanding empowers us to make informed decisions and take proactive steps to address the challenges in the dairy industry.

The Core Components of Class III Milk Pricing: Butterfat, Milk Protein, and Other Solids

Examining Class III milk prices reveals crucial trends. Due to high demand and limited supply, butterfat prices have soared 76% above their 25-year averages. Meanwhile, milk protein prices have dropped by 32%, impacting the overall Class III price, essential for cheese production. Other solids, contributing less to pricing, have remained stable. These disparities call for strategic adjustments in pricing formulas to better align with market conditions and ensure sustainable revenues for producers.

Dissecting the Price Dynamics of Butter, Cheese, and Dry Whey in Class III Milk Pricing

The prices of butter, cheese, and dry whey are crucial to understanding milk protein prices and the current state of Class III milk pricing.

Butter prices have skyrocketed by 70% over the 25-year average due to increased consumer demand and tighter inventories. This marks a significant shift from its historically stable pricing.

Cheese prices have increased slightly, indicating steady demand both domestically and internationally. This trend reflects strong export markets and stable milk production, aligning closely with historical averages.

In contrast, dry whey prices have remained steady, reflecting its role as a stable commodity in the dairy sector—consistent demand in food manufacturing and as a nutritional supplement balances any supply fluctuations from cheese production.

Together, these trends showcase the market pressures and consumer preferences affecting milk protein prices. Understanding these dynamics is critical to tackling the broader challenges in Class III milk pricing.

Decoding the USDA Formula: The Intricacies of Milk Protein Pricing in Class III Milk

Understanding Class III milk pricing requires examining the USDA’s formula for milk protein. This formula blends two critical components: the price of cheese and the butterfat value of cheese compared to butter.

Protein Price = ((Cheese Price – 0.2003) x 1.383) + ((((Cheese Price – 0.2003) x 1.572) – Butterfat Price x 0.9) x 1.17)

The first part, ((Cheese Price—0.2003) x 1.383) depends on the cheese market price, which has been adjusted slightly by $0.2003. Higher cheese prices generally boost milk protein prices.

The second part, ((((Cheese Price – 0.2003) x 1.572) – Butterfat Price x 0.9) x 1.17), is more intricate. It adjusts the cheese price by 1.572, subtracts 90% of the butterfat price, and scales the result by 1.17 to match industry norms.

This formula was based on the assumption that butterfat’s value in cheese would always exceed that in butter. With butterfat fetching higher prices due to increased demand and limited supply, the formula undervalues protein from cheese. This mismatch has led to stagnant protein prices despite rising butter and cheese prices.

The formula must be reevaluated to align with today’s market, ensuring fair producer compensation and market stability.

Unraveling the Web of Stagnant Pricing in Class III Milk

Stagnant pricing in Class III milk can be traced to several intertwined factors. Inflation is a key culprit, having significantly raised production costs for dairy farmers over the past 25 years—these increasing expenses span wages, health premiums, utilities, and packaging materials. Yet, the value received for Class III milk has not kept pace, resulting in a perceived price stagnation.

Another factor is the shift in the value relationship between butterfat and cheese. Historically, butterfat’s worth was higher in cheese production than in butter, a dynamic in the USDA pricing formula for milk protein. Today’s market conditions have reversed this, with butterfat now more valuable in butter than in cheese. Consequently, heavily based on cheese prices, the existing formula must adapt better, contributing to stagnant milk protein prices.

Also impacting this situation are modest increases in cheese prices compared to the substantial rise in butterfat prices. The stable prices of dry whey further exert minimal impact on Class III milk prices.

Addressing these challenges requires a multifaceted approach, such as reconsidering USDA pricing formulas and strategically managing dairy production and processing to align with current market realities.

Class III Milk Producers: Navigating Low Prices through Strategic Adaptations

Class III milk producers have adapted to persistently low prices through critical strategies. Over the past 25 years, many have expanded their herds to leverage economies of scale, reducing costs per gallon by spreading fixed costs over more milk units.

Additionally, increased milk production per cow has been achieved through breeding, nutrition, and herd management advances. Focusing on genetic selection, high-productivity cows are bred, further optimizing dairy operations.

Automation has also transformed dairy farming, with robotic milking systems and feeding solutions reducing labor costs and improving efficiency. These technologies help manage larger herds without proportional labor increases, counteracting low milk prices.

Focusing on higher milk solids, particularly butterfat, and protein, offers a competitive edge. Producers achieve higher milk quality by enhancing feed formulations and precise nutrition, yielding better prices in markets with high-solid content.

An Integrated Strategy for Optimizing Class III Milk Prices

Improving Class III milk prices requires optimizing production and management across the dairy supply chain. Increasing butterfat levels in all milk classes can help align supply with demand, especially targeting regions with lower butterfat production, like Florida. This coordinated effort can potentially lower butterfat prices and stabilize them.

Balancing protein and butterfat ratios in Class III milk is crucial. Enhancing both components can increase cheese yield efficiency, reduce the milk needed for production, and lower costs. This can also lead to better control of cheese inventories, supporting higher wholesale prices.

Effective inventory management is critical. Advanced systems and predictive analytics can help producers regulate supply, prevent glutes, and stabilize prices. Maintaining a balance between supply and demand is crucial for the dairy sector’s economic health.

These goals require collaboration among producers, processors, and organizations like Ohio State University Extension, which provides essential research and services. Modernizing Federal Milk Marketing Orders (FMMO) to reflect current market realities is also vital for fair pricing.

Addressing Class III milk pricing challenges means using technology, improving farm practices, and fine-tuning the supply chain. Comprehensive strategies are essential for price stabilization, benefiting all stakeholders.

Strategic Collaborations: Empowering Stakeholders to Thrive in the Class III Milk Market

Organizations and suppliers play a critical role in optimizing Class III milk prices. Entities like Penn State Extension, in collaboration with the Pennsylvania Department of Agriculture and the USDA’s Risk Management Agency, offer valuable resources and guidance. These organizations provide educational programs to help dairy farmers understand market trends and best practices in milk production.

The Ohio State University Extension and specialists like Jason Hartschuh advance dairy management and precision livestock technologies, sharing research and providing hands-on support to enhance milk production processes.

The FMMO (Federal Milk Marketing Order) modernization process aims to update milk pricing regulations, ensuring a more equitable and efficient market system. Producers’ participation through referendums is crucial for representing their interests.

Processors should work with packaging suppliers to manage material costs, establish contracts to mitigate financial pressures and maintain stable operational costs.

These collaborations offer numerous benefits: improved milk yield and quality, better financial stability, and a balanced supply-demand dynamic for butterfat and protein. Processors benefit from consistent milk supplies and reduced production costs.

In conclusion, educational institutions, agricultural agencies, and strategic supply chain collaborations can significantly enhance the Class III milk market, equipping producers and processors to handle market fluctuations and achieve sustainable growth.

The Bottom Line

The low-Class III milk prices, driven by plummeting milk protein prices and stagnant other solids pricing, highlight an outdated USDA formula that misjudges current market conditions where butterfat is valued more in butter than in cheese. Compared to the past 25 years, inflation-adjusted stagnation underscores the need for efficiency in milk production via larger herds, higher yields per cow, and automation.

To address these issues, increasing butterfat and protein levels in Class III milk will improve cheese yield and better manage inventories. Engaging organizations and suppliers in these strategic adjustments is crucial. Fixing the pricing formula and balancing supply and demand is essential to sustaining the dairy industry, protecting producers’ economic stability, and securing the broader dairy supply chain.

Key Takeaways:

Class III milk, primarily used for cheese production, constitutes over 50% of U.S. milk consumption.
Despite an increase in butterfat prices by 76%, milk protein prices have plummeted by 32% compared to the 25-year average.
The USDA formula for milk protein pricing is a critical factor, with its reliance on cheese and butterfat values leading to current pricing challenges.
Inflation over the last 25 years contrasts sharply with stagnant Class III milk prices, necessitating strategic adaptations by producers.
Key strategies for producers include increasing butterfat levels, improving protein levels, and tighter inventory management for cheese production.
Collaborations between producers and processors are essential to drive changes and stabilize Class III milk prices.

Summary:

The U.S. dairy industry is grappling with a significant challenge: persistently low Class III milk prices, which account for over 50% of the nation’s milk usage and are primarily used for cheese production. These prices align with the average of the past 25 years, raising concerns about profitability and sustainability. Over the past 25 years, Class III milk prices have fluctuated significantly, reflecting the dairy industry’s volatility.

In the early 2000s, prices rose due to increased demand for cheese and other dairy products. However, the 2008 financial crisis led to a sharp decline as consumer demand dropped and exporters faced challenges. Post-crisis recovery saw gradual price improvements but with ongoing unpredictability. Stability in the mid-2010s was periodically interrupted by export market changes, feed cost fluctuations, and climatic impacts on milk production. Increased production costs from 2015 to 2020 and COVID-19 disruptions further pressured prices.

The core components of Class III milk pricing include butterfat, milk protein, and other solids. Butterfat prices have soared 76% above their 25-year averages due to high demand and limited supply, while milk protein prices have dropped by 32%, impacting the overall Class III price, essential for cheese production. Other solids, contributing less to pricing, have remained stable.

Understanding the price dynamics of butter, cheese, and dry whey in Class III milk pricing is crucial for navigating current pricing issues and strategizing for future stability. Butter prices have skyrocketed by 70% over the 25-year average due to increased consumer demand and tighter inventories. Cheese prices have increased slightly, indicating steady demand both domestically and internationally, while dry whey prices have remained steady, reflecting its role as a stable commodity in the dairy sector.

Understanding Class III milk pricing requires examining the USDA’s formula for milk protein, which blends two critical components: the price of cheese and the butterfat value of cheese compared to butter. This formula undervalues protein from cheese, leading to stagnant protein prices despite rising butter and cheese prices. The formula must be reevaluated to align with today’s market, ensuring fair producer compensation and market stability.

The stagnant pricing in Class III milk can be attributed to several factors, including inflation, the shift in the value relationship between butterfat and cheese, and modest increases in cheese prices. To address these challenges, a multifaceted approach is needed, such as reconsidering USDA pricing formulas and strategically managing dairy production and processing to align with current market realities.

Class III milk producers have adapted to persistently low prices through critical strategies, such as expanding herds to leverage economies of scale, increasing milk production per cow through breeding, nutrition, and herd management advances, and focusing on higher milk solids, particularly butterfat, and protein. This has led to better control of cheese inventories, supporting higher wholesale prices.

Improving Class III milk prices requires optimizing production and management across the dairy supply chain. Balancing protein and butterfat ratios in Class III milk is crucial, as it can increase cheese yield efficiency, reduce milk needed for production, and lower costs. Effective inventory management is essential, and advanced systems and predictive analytics can help producers regulate supply, prevent glutes, and stabilize prices.

Collaboration among producers, processors, and organizations like Ohio State University Extension, which provides essential research and services, and modernizing Federal Milk Marketing Orders (FMMO) to reflect current market realities is also vital for fair pricing. Comprehensive strategies are essential for price stabilization, benefiting all stakeholders.

Organizations and suppliers play a critical role in optimizing Class III milk prices. Entities like Penn State Extension, in collaboration with the Pennsylvania Department of Agriculture and the USDA’s Risk Management Agency, offer valuable resources and guidance to dairy farmers. They provide educational programs to help dairy farmers understand market trends and best practices in milk production.

The FMMO modernization process aims to update milk pricing regulations, ensuring a more equitable and efficient market system. Producers’ participation through referendums is crucial for representing their interests. Processors should work with packaging suppliers to manage material costs, establish contracts to mitigate financial pressures, and maintain stable operational costs.

In conclusion, educational institutions, agricultural agencies, and strategic supply chain collaborations can significantly enhance the Class III milk market, equipping producers and processors to handle market fluctuations and achieve sustainable growth. The low-Class III milk prices, driven by plummeting milk protein prices and stagnant other solids pricing, highlight an outdated USDA formula that misjudges current market conditions where butterfat is valued more in butter than in cheese.

Categories : Dairy Markets

Dairy Cooperative Pushes for Timely Payment Rule in Farm Bill to Protect Farmers

Thursday, June 27th, 2024

Can timely milk payments protect dairy farmers? Discover why Edge Dairy Farmer Cooperative is pushing for new rules in the farm bill to safeguard their livelihoods.

Imagine the dedication of a dairy farmer, tending to a herd of cows before sunrise every day, regardless of the season. This commitment is not just a personal choice but a crucial part of maintaining the stability of the dairy industry. Dairy cooperatives play a significant role in this, providing regular payments and assisting farmers in selling their milk, thereby ensuring the industry’s stability.

Processors under the Federal Milk Marketing Orders (FMMO) must pay farmers at least twice a month. Still, not all milk is insured by the FMMO, which increases financial risk.

Tim Trotter of Edge Dairy Farmer Cooperative says, “The risk we have right now, especially in the upper Midwest, is there’s an increasing amount of milk deployed and not covered by the FMMO.”

The issue of timely payments is not just a financial concern but a matter of urgency. Farmers in Minnesota, Wisconsin, northern Iowa, northern Illinois, and eastern North and South Dakota areas, where most of the country’s milk is outside the marketing pool, live in financial instability without the legal mandate for timely payments. Immediate action is needed to address this pressing issue.

Delayed payments affect individual farmers and have a ripple effect on the community’s well-being and agricultural operations. To prevent such social and economic disruptions, the farm bill needs to clearly outline and enforce conditions regarding timely milk payments.

The Untold Challenges of Depooling: Navigating the Complexities of Federal Milk Marketing Orders (FMMOs)

Federal Milk Marketing Orders (FMMOs) guarantee producers are paid fairly and help maintain steady milk prices. These rules help manage cash flow and financial stability by requiring milk processors to pay dairy farms at least twice a month.

But “depooling” ruins this mechanism. Milk is taken from the controlled price pool depools, exempting it from the FMMO payment schedule. This might result in uneven and delayed payments, significantly affecting farmers in places where much milk is deployed.

Risk of Financial Instability for Dairy Farmers in Federal Order #30: The Urgency for Timely Payment Requirements

For farmers, particularly those under Federal Order #30 covering portions of Minnesota, Wisconsin, Iowa, Illinois, North Dakota, and South Dakota, the absence of prompt payment obligations for deployed milk exposes particular dangers. Although processors pay farmers twice a month under FMMOs, this regulation does not cover deployed milk, exposing producers to payment delays.

This financial volatility is problematic, given that 30% of the country’s milk comes outside the marketing pool and might cause cash flow problems. Delayed payments impede everyday spending, long-term sustainability, and farm upkeep.

Producing most of the deployed milk, farmers under Federal Order #30 need more with quick payment assurances. Legislative action mandating prompt payment for all milk might provide more security and assist in operational management and growth by farmers.

Advocating for Dairy Farmer Security: Why Timely Milk Payment is Crucial for Federal Order #30 Farmers

Under Tim Trotter’s direction, The Edge Dairy Farmer Cooperative seeks timely milk payments included in the farm bill. They contend this will financially safeguard dairy producers, particularly in milk deploying cases from Federal Milk Marketing Orders (FMMOs). Historically, processors have paid on time, but this is only assured with a legislative mandate. About thirty percent of the milk in the country is outside the marketing pool. Hence, prompt payment policies are significant for farmers—especially those under Federal Order #30—to minimize financial uncertainty.

Unbiased Milk Quality Assessments: The Imperative of Third-Party Verification Services for Accurate Component Testing

Verification services guarantee accurate and consistent milk component testing. These outside assessments validate the tools used to evaluate milk components like lactose, fat, and protein. This ensures exact measurements, which directly impact financial stability and payment computations. These services should be codified in the agriculture bill. It guarantees precise and objective quality tests for every dairy farmer, even those with deployed milk, safeguarding their income and encouraging industry openness.

The Bottom Line

Protecting dairy producers impacted by milk depooling depends on the farm bill, which includes prompt payment rules and verification tools. Verifying third-party milk quality and requiring processors to pay twice monthly helps lower financial risks and ensure correct pay. These steps support a consistent agricultural economy and guarantee the stability of the more significant dairy sector.

Key Takeaways:

Federal Milk Marketing Orders currently require processors to pay dairy farmers at least twice a month.
Farmers face a growing risk, particularly in the upper Midwest, as more milk is depooled and falls outside the protection of FMMOs.
Approximately 30% of the nation’s milk is outside the marketing pool, with many affected farmers in Federal Order #30 covering parts of the Midwest.
The cooperative seeks to ensure the payment requirement is legally mandated to guarantee its continuance.
Third-party verification services for component testing are also needed to ensure accurate milk checks, especially for depooled milk.

Summary:

Dairy farmers are vital to the dairy industry’s stability, providing regular payments and assisting in milk sales. However, not all milk is insured by the Federal Milk Marketing Orders (FMMO), leading to financial risk. Farmers in certain areas, such as Minnesota, Wisconsin, northern Iowa, northern Illinois, and eastern North and South Dakota, face financial instability without legal mandates for timely payments. Depooling disrupts the FMMO mechanism, causing uneven and delayed payments and impacting cash flow and farm upkeep. The Edge Dairy Farmer Cooperative advocates for timely milk payments in the farm bill to safeguard dairy producers, especially those under Federal Order #30. Codifying verification services in the agriculture bill would ensure accurate and consistent quality tests for every dairy farmer, safeguarding their income and encouraging industry openness. Protecting dairy producers impacted by milk depooling depends on the farm bill, which includes prompt payment rules and verification tools. Ensuring third-party milk quality and requiring processors to pay twice monthly can lower financial risks, support a consistent agricultural economy, and provide dairy sector stability.

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Categories : News

Tags : agriculture bill, cash flow problems, consistent agricultural economy, controlled price pool, dairy farmer income, dairy farmers, Dairy Industry, dairy sector., delayed payments, depooling, Edge Dairy Farmer Cooperative, everyday spending, farm bill, farm upkeep, federal milk marketing orders, Federal Order #30, financial instability, financial risk, financial risks, financial stability, financial uncertainty, financial volatility, FMMO mechanism, Illinois, industry openness, Iowa, legal mandate, long-term sustainability, milk component testing, milk deploying cases, milk depooling, Minnesota, North Dakota, payment computations, precise quality tests, processors, prompt payment policies, prompt payment rules, regular payments, selling milk, South Dakota, stability, third-party milk quality, timely payments, twice monthly payments, uneven payments, verification services, verification tools, Wisconsin

Irish Farmers Urge Higher Milk Prices Amid Rising Costs and Market Pressures

Monday, June 17th, 2024

Irish farmers demand higher milk prices to combat rising costs and market pressures. Can increased prices ensure the future of Ireland’s dairy sector?

Amidst the relentless financial pressures and unpredictable markets, Irish dairy farmers , with their unwavering determination, call for higher milk prices. Rising input costs, poor weather, and strict nitrates regulations have heavily burdened these farmers, reducing margins and threatening sustainability.

The dairy industry , a cornerstone of Ireland’s economy, supports rural livelihoods and contributes significantly to the national economy through exports and jobs. Organizations like the Irish Farmers Association (IFA) and the Irish Creamery Milk Suppliers Association (ICMSA) are advocating for fair milk prices, recognizing the industry’s vital role.

“We are at a critical juncture,” warned a representative from the IFA. “The current base milk prices are pushing us to the brink, especially with the surge in feed, fertilizer, and energy expenses. We need immediate relief.”

If these pressing issues are not promptly addressed, the dairy sector, a pillar of Ireland’s economy, could suffer a severe blow, forcing many farmers out of business. Addressing these challenges is not just important; it’s a matter of survival for Ireland’s dairy farmers.

As Irish dairy farmers grapple with the multifaceted challenges shaking their sector, one cannot overlook the stark figures that illustrate their plight. From declining production levels to stagnant milk prices, the data paints a clear picture of the adversities faced by those who form the backbone of Ireland’s dairy industry.

Year	Total Milk Production (million liters)	Base Milk Price (€/liter)	Input Costs (€/liter)
2018	7700	0.34	0.25
2019	7600	0.32	0.26
2020	7500	0.31	0.27
2021	7400	0.30	0.29
2022	7300	0.29	0.30

The figures above starkly demonstrate the mounting financial pressure on Irish dairy farmers, who are facing higher input costs without a corresponding increase in milk prices, leading to a vicious cycle of dwindling margins and decreased production.

The Multifaceted Challenge Facing Irish Dairy Farmers: Navigating Declining Production and Stagnant Prices

Irish dairy farmers face a significant challenge due to declining milk production and stagnant prices. Data from the Central Statistics Office (CSO) shows that milk volumes lag behind 2023 levels, creating pressure on farmers’ livelihoods.

The Irish Creamery Milk Suppliers Association (ICMSA) is leading the charge for change. Despite a slight improvement in the Global Dairy Trade (GDT) index and the Ornua Purchase Price Index (PPI), current prices still need to be improved. The ICMSA calls for a base milk price of 45c/L to restore sector confidence. High input costs and adverse weather conditions compound this need.

Stagnant prices and reduced production erode farmers’ margins, leading to tighter cash flows and difficulty managing costs. Stringent nitrate regulations and unpredictable weather patterns worsen this situation.

Higher milk prices are essential for the long-term viability of the sector. Addressing these challenges can restore confidence, stabilize the market, and ensure future growth.

The Escalating Costs Squeezing Ireland’s Dairy Sector: A Perfect Storm of Financial Pressures

Parameter	2022	2023 (Projected)
Average Milk Price (per liter)	€0.37	€0.34
Total Milk Production (million liters)	8,000	7,800
Input Costs Increase (%)	15%	10%
Weather Impact on Yield	Moderate	Severe
Nitrates Pressures Compliance Cost	€50 million	€60 million

Rising input costs are a significant burden on Irish dairy farmers. The feed cost has surged due to global supply chain disruptions and local shortages. Similarly, fertilizer prices have increased due to high demand and supply constraints. Additionally, fluctuating oil and gas prices have caused energy costs to soar, impacting transportation and machinery expenses. Rising labor costs, influenced by higher minimum wages and labor shortages, add further financial pressure.

These escalating costs erode farmers’ slim margins, resulting in severe cash flow difficulties. Increased spending on essential inputs leaves farmers less financial flexibility for operational needs or investments in sustainability. Moreover, adverse weather conditions and strict nitrates regulations further strain their finances, threatening the viability of dairy farming in Ireland.

A Clarion Call for Financial Sustainability: Irish Dairy Farmers Advocate for Essential Base Milk Price Increase

Irish dairy farmers are demanding an increase in the base milk price to at least 45 cents per liter, as the Irish Creamery Milk Suppliers Association (ICMSA) advocates. This increase is essential for several reasons. Rising input costs, volatile weather, and strict nitrates regulations have tightened farmers’ margins. Without a price hike, many face unsustainable cashflows and further declines in milk production.

The call is more than a temporary plea; it’s crucial for restoring confidence in the sector. A higher base price would boost cash flow, allowing farmers to invest in resources and cover expenses adequately. Improved margins would help farmers withstand market pressures, ensuring a stable milk supply and fostering long-term growth and sustainability.

Increasing the base milk price also benefits the broader dairy market. Returning the value realized from market improvements—such as the recent 1.7% rise in the Global Dairy Trade and the 1.1 cents per liter increase in the Ornua Purchase Price Index—to farmers, the entire supply chain gains. Enhanced farmer profitability strengthens rural economies and the dairy supply chain, benefiting processors, retailers, and consumers. Thus, increasing the base milk price is vital for fortifying Ireland’s dairy sector.

Complexities and Constraints: The Role of Milk Processors in Pricing Dynamics

Month	Global Dairy Trade Index (GDT)	Ornua Purchase Price Index (PPI)
January	1,080	108.9
February	1,085	109.5
March	1,090	110.1
April	1,095	110.7
May	1,080	108.4
June	1,075	107.8

Milk processors influence milk pricing by acting as intermediaries between dairy farmers and the market. They determine the base milk price, factoring in global market trends, domestic supply, and costs. Their pricing decisions significantly impact farmers’ incomes.

Setting prices involves balancing market conditions indicated by the Global Dairy Trade (GDT) and the Ornua Purchase Price Index (PPI). The PPI recently showed a slight increase, reflecting a modest improvement. However, these gains do not always lead to higher payouts for farmers, as processors face financial pressures, including processing and distribution costs.

The Irish Creamery Milk Suppliers Association (ICMSA) has called for a milk price of 45c/L to restore confidence in the sector, stressing the tension between farmers’ needs and processors’ financial stability.

Although the Ornua PPI indicated an increase to 39.6c/L for May, this falls short of what farmers need. Processors argue that price increases must be sustainable in the market context and reflect real improvements in dairy product prices.

Based on transparent market understanding, practical changes in milk pricing require coordinated efforts between farmers and processors.

The Ripple Effect of Higher Milk Prices: Balancing Immediate Relief with Long-Term Market Dynamics

Increasing milk prices would offer immediate relief to dairy farmers, stabilizing cash flows and covering rising input costs. This support is crucial for maintaining production levels and preventing further declines in milk volumes.

However, higher prices may reduce consumer demand for dairy products, as price-sensitive consumers might turn to cheaper alternatives. This could cause an initial oversupply, impacting processors and retailers.

Higher milk prices encourage farmers to invest in advanced production technologies long-term, boosting efficiency and output. Consistent pricing could also attract new entrants, strengthening the supply base.

Internationally, Ireland’s dairy competitiveness could be affected. Higher costs might make Irish products less competitive. Still, improved quality and supply could capture niche markets willing to pay premium prices.

In conclusion, while a price increase is crucial for farmers, its broader impacts on supply, demand, and global market positioning must be carefully managed for long-term sustainability.

The Bottom Line

The Irish dairy sector faces several challenges, including declining milk production and stagnant prices, compounded by rising costs and environmental pressures. A key issue is the gap between what farmers earn for their milk and the increasing costs they face. It’s crucial for processors to fairly distribute market gains back to farmers to ease cash flow pressures faced by dairy producers.

Increasing the base milk price to at least 45c/L, as suggested by the Irish Creamery Milk Suppliers Association (ICMSA), is essential to restore confidence among producers. Transparency and timely price adjustments by milk processors, in line with market trends like those shown by the Ornua Purchase Price Index (PPI) and Global Dairy Trade (GDT), are also critical.

Tackling these issues calls for collaboration among processors, associations, and policymakers to support farmers. This would provide immediate financial relief and ensure the dairy industry’s resilient and prosperous future.

Key Takeaways:

Financial Strain: Irish dairy farmers are under considerable financial strain due to declining milk prices and rising input costs.
Production Decline: There is a tangible decline in milk production, impacting the overall market and supply chain.
Advocacy for Fair Pricing: Industry bodies like the Irish Farmers Association and the Irish Creamery Milk Suppliers Association are advocating for a base milk price increase to support farmers.
Regulatory Pressures: Stringent nitrate regulations and unpredictable weather patterns add to the challenges faced by dairy farmers.
Call for Sustainable Practices: Ensuring financial sustainability through fair pricing can enable farmers to invest in better resources and practices, ultimately benefiting the broader agricultural sector.

Summary: Irish dairy farmers are grappling with financial pressures and unpredictable markets, resulting in dwindling margins and decreased production. The dairy industry, a vital part of Ireland’s economy, supports rural livelihoods and contributes significantly to the national economy through exports and jobs. Organizations like the Irish Farmers Association and the Irish Creamery Milk Suppliers Association are advocating for fair milk prices to restore sector confidence. High input costs and adverse weather conditions further exacerbate the situation, with milk volumes lagging behind 2023 levels. Stringent nitrate regulations and unpredictable weather patterns exacerbate the situation. To restore confidence, the dairy sector is advocating for an increase in the base milk price to at least 45 cents per liter. This would boost cash flow, enable farmers to invest in resources, and ensure stable milk supply. The broader dairy market benefits from increased farmer profitability, strengthening rural economies and the dairy supply chain. However, the broader impacts on supply, demand, and global market positioning must be carefully managed for long-term sustainability.

Categories : Dairy Industry

Tags : adverse weather conditions, base milk price, cash flow, cash flows, consumers, Dairy Industry, dairy market, decreased production, demand, dwindling margins, expenses, exports, fair milk prices, farmer profitability, farmers' margins, financial pressures, future growth, global market positioning, high input costs, ICMSA, Ireland's economy, Irish Creamery Milk Suppliers Association (ICMSA), Irish dairy farmers, Irish Farmers Association (IFA), jobs, long-term growth, long-term sustainability, long-term viability, managing costs, market pressures, market stability, milk volumes, national economy, nitrate regulations, price increase, processors, reduced production, resource investment, retailers, rural economies, rural livelihoods, sector confidence, stable milk supply, stagnant prices, supply, supply chain, sustainability, unpredictable markets, value realization, weather patterns

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