Ripple effects

What an interesting, and concerning, spring we are having. At any given time, there are a handful of concerns swirling around in my thoughts.

Our livestock hauler said the auction has twice as many herd sell-outs scheduled for this spring as they typically do. Others have said the actual number is over 30 herds. That’s a lot of dairy farms exiting the business in our part of the world; most of them are likely smaller farms like ours. 

I’m certain the supply of milk won’t be affected; other dairy farms will increase output to keep processing plants full. What concerns me are the impact on the families exiting the dairy business, the impact on our local economy, and the impact on the dairy-based businesses that we rely on to support our farm. Without a doubt, small- and mid-sized dairy farms spend more dollars per cow in their communities than larger dairies. Put another way, the same cow on a smaller farm generates more economic activity than the same cow on a larger farm.

Our Dairy Margin Coverage statement for February made me laugh but in a sad way. Because of the significant difference between Class III and Class IV milk prices, and because the higher Class IV milk price is buoying the all-milk price, the payment for February was 6 cents per hundredweight. For those of us in the Class III-heavy Upper Midwest, it’s like salt in the wound. Our February Class III market price was $16.08 cwt versus the $20.10 cwt all-milk price used in the calculations. Even if the Upper Midwest average feed cost is below the $11.16 cwt used by DMC, our margin above feed cost is still in the $6 cwt range, not $9.44.

I would rather not need programs like DMC and Dairy Revenue Protection, but the truth is that these programs help move the needle on the cash flow gauge. When the gauge says we have enough, we’re able to reinvest in our dairy to make improvements. When the gauge says there’s not enough, we trim expenses to match outflows to inflows. The way it looks right now, with Class III prices hovering around breakeven, DMC not paying out, and ever-increasing input costs, we’ll be doing more trimming than investing this year. Again, this has a ripple effect in our local community.

On top of economics, we now have bovine influenza A, or H5N1. At this time, Minnesota doesn’t have a test-positive herd. Our business model doesn’t require regular transportation of cattle, but I’ve been tuning into webinars and reading updates anyway. The biosecurity recommendations and raw milk handling recommendations from the U.S. Department of Agriculture Animal and Plant Health Inspection Service, while necessary, will not make dairy farming or milk hauling any more enjoyable. We already canceled one farm tour scheduled for June because of biosecurity reasons. I hate to think about the other ripple effects this virus could have. 

I shared these concerns with lawmakers while lobbying in Washington, D.C., with my cooperative last week. We were there to lobby for passage of the farm bill and to raise awareness of the tax provisions expiring in 2025, but dairy farm economics, DMC and H5N1 fit into those discussions. 

Unfortunately, Congress is plagued by its own set of ripple effects. For every lawmaker or pundit who was confident that Congress would pass a farm bill this session, another voice expressed skepticism. What was encouraging, however, was the universal feeling that the farm bill will continue to be legislated in a bipartisan manner.

I don’t have any other encouraging thoughts with which to close this column. I imagine these concerns will continue for some time. But, as I tell myself when the dairy business feels heavy, the sun is shining, the grass is greening, the cows are thriving, and we’ll keep farming.

Sadie Frericks and her husband, Glen, milk 100 cows near Melrose, Minnesota. They have three children: Dan, Monika, and Daphne. Sadie also writes a blog at www.dairygoodlife.com. She can be reached at [email protected].