Dairy farm exits likely to continue

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dairy cattle

Just a year ago, this column began: “Between June and October of 2018, 66 Ohio dairy farms ceased milking cows. In 3 months, 3% of Ohio’s dairy herds were gone… with the industry experiencing a rate of exit more than 3 times the rate for the previous 10 years.”

It was not a stretch to predict that: “ … these numbers will continue to rise as the toll of too many years of poor milk prices and unpredictable markets for milk, cull cows, breeding stock and feed take their toll. As the industry faces a fourth year of poor prices, it is not surprising that more and more farms wisely chose to preserve hard-earned equity after cash reserves ran out.”

What has happened

Fortunately, this March milk prices started improving. Year-to-date, the statistical uniform price (the Class III price plus the Federal Order 33 Producer Price Differential) is averaging $1.57 higher than 2018.

Relief started to come early in the year, with first-quarter Producer Price Differentials of more than $1 per cwt. moderating the impact of January and February Class III prices less than $14. Lows horribly reminiscent of 2016.

The newly revised Dairy Margin Coverage program offered some additional relief to participating farms. Unfortunately for many farm families, it was too little, too late. As equity continued to deteriorate, some improvement in breeding stock prices offered a meager incentive to sell out and divert growing crops into grain and feed sales.

In the past 12 months (October 2018 to October 2019), herd and farm sales have continued across Ohio, with 262 farms ceasing milk production, 80 more farms than exited in the prior year. These 262 farms represent an additional loss of 12.3% of Ohio’s licensed dairy farms.

Which farms

dairy excel table

Manufacturing grade farms lost 81 from their ranks, or 21%, compared to 10% of Grade A dairies, with 181 farms leaving. This is not surprising as manufacturing grade farms receive only the Class III price for their milk.

Since they do not meet Grade A requirements (based on facilities, quality or both), they do not receive the Producer Price Differential, which shares the increased value of Grade A milk among all Grade A dairy farms.

Even with 2019’s improved economics so far, we will continue to see higher rates of farm exits. Stress continues to be very real for many families. Families must continue to carefully monitor income, expenses and equity positions. More will decide it is time to change enterprises and careers. Others will add more cows.

What will not change is the need for families to manage their farms as a business to enjoy the privilege of farming as a way of life. What will not be stopped in the continuing impact on families, farm support industries and communities as they all deal with the impacts of our changing dairy industry.

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