The President's Pen by Andrew Dugan, President

President’s Pen, by Andy Dugan

2019 shows new growth for Northeast Dairymen and Northeast Agriculture Businesses   

If you will recall, fluid milk supply grew quickly in 2016, 2017, and early 2018.  Demand for soft and hard processed dairy products stayed firm, but fluid milk demand was dropping quickly.  This led to headlines that read "Northeast dairy farms dumping milk,” as milk processors across our area were forced to unload milk in farm manure pits.  

During 2018, total milk supply growth slowed and appears to be getting back in balance with demand.  Unfortunately this supply moderation has occurred just as some of our customers and friends have had to sell their cows and exit the business.  Additionally, remaining farm herd growth has remained slow compared to prior years.  

The new Farm Program has been released and has a very strong emphasis on risk management.  The USDA is heavily subsidizing insurance program premiums that help dairymen set predefined milk income over feed cost (i.e. margin).  Of course feed commodity risk management tools have long been available through feed companies as well as brokerage firms (i.e. commodity contracting).  As banks continue to review lines of credit with dairy customers there will be intense discussions over risk management, both for milk margin as well as locked in feed costs.  

The future milk prices for the rest of 2019 shows an increase in Class III milk by over $2.00/cwt with both firm fat and protein values.  This creates a great opportunity for nutritionists to focus on meeting dairymen's butterfat and protein production goals by applying the use of technology which can really increase milk components, and therefore, farm income as milk price increases. 

While none of the above points to a significant profitability increase, all of these reasons will make 2019 a very improved year for the Northeast Dairy Industry.  Farms and businesses that have their house in order are poised to capitalize in 2019!