After dealing with volatile milk prices last year, 2021 so far has been an average year, but not a great year, for Wisconsin dairy farmers, says Robert Cropp, professor emeritus with University of Wisconsin-Extension and UW-Madison.
“Milk prices have been less volatile this year than last year,” Cropp said in mid-September. ”So dairy farmers didn’t experience the very low prices this year as they did last year. They haven’t experienced the fluctuations in monthly income and profits as they did last year.
“Those farmers (83.2% of Wisconsin dairy farmers) who are enrolled in the Dairy Margin Coverage program have received very helpful payments under the program to offset lower operating margins,” Cropp said.
“So overall, it has been not a great year but an average year for dairy farmers,” he added.
The Wisconsin all-milk average price for July was $17.70 per hundredweight, down from $22.30 in July 2020. But in May it was $19.70, up sharply from $13.70 in May 2020. Dairy farmers saw very low milk prices in April and May 2020 after the COVID-19 virus outbreak took hold.
As for the rest of 2021, Cropp said, “Milk prices can change quickly with changes in milk sales, dairy exports and milk production.
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“Normally, with schools opening in the fall, which increases beverage milk sales, and the strong seasonal sales of butter and cheese from Thanksgiving through Christmas, milk prices increase from October through November,” Cropp said. “But with strong milk production this year and some effect of the delta virus, the seasonal increase in milk prices may not be as strong this year.”
Cropp said he thinks the Wisconsin all-milk average price could come in around $17.20 per hundredweight in August, $17.85 in September, $18.65 in October, $18.75 in November and $18.65 in December.
“But a possible higher increase can’t be ruled out if milk production slows down more than expected, milk and cheese sales are stronger, and dairy exports higher,” Cropp added.
Cropp said a significant reduction in COVID-19 cases earlier this year with the availability of vaccines helped things return more to normal, with restaurants open to in-person dining, fans returning to arena and stadium events, students returning to in-person learning and people returning to in-person conferences.
With those things happening, he said, “The demand for cheese and other dairy products has been stronger than last year and has helped keep milk prices more stable.
“Last year, with restaurants restricted with in-person dining, people prepared more meals at home,” Cropp said. “The result was increases in beverage milk sales. This year, with an increase in eating out, beverage milk sales are lower than last year, but cheese sales are higher. Since more than 50% of U.S. milk is used for cheese and only 25% for beverage use, milk prices have been more stable this year.”
Can Wisconsin dairy farmers make a profit with current milk prices?
“The dairy situation varies a lot from one farm to another, so the milk price needed to make a profit also varies,” Cropp said. “The level of debt a farmer carries impacts profitability.
“Those farmers enrolled in the Dairy Margin Coverage program have fared better than those who aren’t enrolled,” he said. “So profitability varies a lot.
“On average, dairy farmers have made some profit, but it hasn’t been a strong profit year,” Cropp added. “On average, dairy farmers need an all-milk price near $18 to make some profit. But for strong profit and a real good dairy year, they need at least a $19 all-milk price. So if you ask dairy farmers whether they are making a profit, or what milk price they need, you will get a wide range of answers.”