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Dairy Market Showing Signs of Recovery

While it may be too early to declare the four-year dairy crisis over, the market is showing signs of recovery. “We’re pretty encouraged to see that the dairy market is starting to take off again,” says Brody Stapel, who, along with wife Carolyn, is a partner of Double Dutch Dairy LLC, in Cedar Grove, Wisconsin. “It won’t make up for what we’ve been through, but it is sure helpful.”

The optimism is noteworthy because it was only in 2012 when Stapel, his brother, Jory, and his father, Rudy, started Double Dutch Dairy. They currently milk 220 cows on 1,050 acres. “We started out with a bang and had a couple of great years. Then 2015 happened. It’s been a long road,” Stapel says.

In 2014, the average all-milk price was $24.98. The following year, that figure dipped to $17.08, according to the USDA.

Declining herd numbers, higher slaughter levels, and an expected jump in feed costs are predicted to lead to a very small milk production increase of below 2% over the relatively small increase in 2019 of 0.3%. With that, the average all-milk price could reach $18 to $19 – levels not seen in years. 

“A lower increase in production per cow and only a decrease in the nation’s dairy herd in 2019 will start to impact supply. We’re going to see $17 the last part of 2019, and I would not rule out $18 as we move into the fourth quarter of 2019 and into 2020,” says Robert Cropp, dairy marketing specialist at the University of Wisconsin. “We may start to see production numbers increase into 2020, but that may be tempered by the lack of quality feed.”

Cropp says producers should be using all the tools available to lock in prices. “The futures market is offering some opportunities, and the Dairy Revenue Protection Program should also be considered,” he says. 

Signing up for the Dairy Margin Coverage Program provided by the 2018 Farm Bill is another option. 

“While there are signs of a recovery, there are also many external issues that could unexpectedly weigh on prices,” Cropp says.

Control the Controllable

Dairy farmers who have weathered the price storm may take the news of possible higher prices with a bit of cautious optimism. It’s been a rough few years. Cutting costs, delaying purchases, and eating into farm equity have been common themes. 

“There is certainly a lot of stress in the dairy industry because of external factors that have impacted prices, things that are beyond a farmer’s control,” says Michael Hutjens, professor of dairy science at the University of Illinois. “It’s understandable, and it’s very frustrating.” 

Stapel says they have learned a lot in the past four to five years. “Moving forward, we will continue to keep an eye on expenses and look for opportunities to diversify.”

Hutjens gives this advice to producers: Focus on the things you can control. 

It’s an approach Double Dutch Dairy has learned and put into practice. “Focus on your animals; focus on your employees,” Stapel says. 

It also includes a focus on family, and it’s why he recently took a vacation. “I know times are lean, but I wanted to make time for my family,” Stapel says.

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