Dairy farmers getting squeezed

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dairy cattle

Like 2015, 2016 was not a kind year for many Ohio farms.

The Class III milk price averaged $14.90 per hundredweight (cwt). The Federal Order 33 Producer Price Differential added another 17 cents per cwt. to the price received by farmers shipping Grade A milk (the majority of Ohio milk is Grade A), resulting in an average statistical uniform price of $15.03 for the year.

In 2015, the net return per cow generated by 40 dairies in the Ohio Farm Business Analysis Program averaged $36 per cow. Adjusting that desolate number for the lower milk price that was projected for 2016, and I anticipated the average net return per cow to be deeply negative in 2016.

Hint of silver lining

The good news is net return per cow for the summary herds actually ticked up a bit to $95 per cow (Table 1). Why?

Table 1, Dairy Excel

There are several factors that contributed to this unexpected result.

Of the participating farms, 31 are managed conventionally, and three organically. If we look at only the conventional herds, the net return drops to $34.26.

Farms choose to participate in the analysis program, so there are some new herds and some herds that exit the program and sometimes the industry each year. (Table 2).

Table 2, Dairy Excel

Sorting out only the conventional herds, the net return per cow drops to $645. While this is not the $1,000+ per cow we were accustomed to seeing in this bracket, with sufficient cow numbers it should be enough to make principal payments, pay income taxes and generate family living for sole proprietorships.

Earlier this year, we anticipated being able to breathe a sigh of relief by now as milk prices were projected to rise into the $17 per cwt. range by the end of 2017. Instead, markets have been diving back under $15 into 2018.

Farmers have spent the last three years watching every penny and tightening management practices. Will it be enough?

Each farm has to crunch numbers and ask themselves the hard questions about their future in the dairy business.

Your farm’s numbers

Completing a farm business analysis for your farm will provide good numbers to use for these decisions. The complete 2016 Ohio Farm Business Summary and benchmark reports for dairy, crop and whole farm business analysis will soon be available on the Ohio Farm Business Analysis & Benchmarking Program Website at http://farmprofitability.osu.edu.

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Dianne Shoemaker is an OSU Extension field specialist in dairy production economics. You can contact her at 330-533-5538 or shoemaker.3@osu.edu.

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