With the first quarter of the year coming to a close, of course the profitability of the dairy industry is still uncertain for 2017.
The mild, yet lingering winter will affect crop production. For example, how well did your alfalfa fields survive the heaving from the freezes and thaws? The milk price was low in 2016, but optimism remains for additional improvement in 2017.
There appears to be some positive direction in exports, which could be a key factor to improvement in milk price. Of course, dependent on the crop year ahead, feed prices are expected to remain moderate.
This is very critical since feed typically consists of 50 percent of the costs of milk production. Of continual discussion this year will be the farm bill and the Margin Protection Program (MPP). I think it is somewhat beneficial that it is finally being acknowledged that the MPP did not have the success for which the industry hoped.
This acknowledgement has now spurred other program proposals and modifications to the MPP. A couple of cliches come to mind as I reflect on the MPP.
One of which is, “I’m from the government, I’m here to help you.”
If a farmer is always counting on the government program to keep them profitable, then I would say you are a risk taker. Management aspects need to be in place to make the dairy operation most profitable, whether an “effective” support program is in place or not.
The other cliche is the KISS (Keep It Simple, well you know the other “S”) principle is not always the best principle to use. The MPP was initiated to be kept simple; however, regional milk prices may vary by $2-4.50/cwt and regional feed costs may vary by $2/cwt or more.
One of the proposed modifications to the MPP is regionalizing the feed costs, something that was known as a key issue with the beginning of the program. With the volatility of milk prices, I think efforts to stabilize the milk price, thus remove the lows of profitability, are important, but the approach used may not be simple and unintended consequences need to be avoided.
Continued discussion on potential modifications to MPP or an alternative program will take up a lot of people’s time during 2017, something the industry seemingly just went through to develop the MPP.
Modernization of the dairy industry will continue in 2017, with new herd management technology being installed, increased number of farms with robotic milkers, and increased number of farms with automated milk feeding systems for dairy heifers.
The continued issues with hiring farm employees, potential changes in immigration laws, and farmers’ preference to spend less time in managing labor will continue to drive these adoptions of technology.
Because of these forces, the use of robotic milkers in Ohio is well beyond where many predicted five to 10 years ago. Certainly as 2017 advances, it is important to be optimistic about the dairy industry and to continue to work together for its success.
Several changes within the industry are likely to occur this year, but the fundamentals are developing goals for the operation, controlling costs, and pursuing price improvements. The goals will need to focus on the plans for short- or long-term investment in the dairy industry and whether it is time for some of the new technology.