Dairy Industry Prospects Improve
Economist says the recovery is slow and replacing equity will take time.
Compiled by staff
Published: Dec 7, 2010
The dairy price debacle of 2009 and into early 2010 took out a lot of farm equity, and a Purdue University ag economist says recovering that value will take time. Nicole Olynk says the typical dairy farm in 2009 lost $350 to $1,000 per cow in equity with some of that loss coming from high costs; while some could be accounted for it lower value cows and heifers.
Dairy farms that could control their own forage production and had more equity before the collapse - often through land ownership - were best positioned to survive the losses. Olynk, and Mike Schutz, dairy specialist, note that milk cow prices were at $1,290 at the beginning of 2010, compared to $1,920 a year earlier. However, prices are inching back up, they say.
While volatile feed prices remain a challenge, milk and cheese prices strengthened to an average of $14.07 per hundredweight for the first nine months of the year. Milk price of the summer represented a return to levels that should cover costs of production for most dairy farms.
"Thins are turning around in the dairy market," Olynk says.
According to both Olynk and Schutz, a return to the low prices of 2009 seems unlikely, but the improvement in prices also is unlikely to last long enough to make up for a significant portion of equity lost in 2009 and early this year. Forecasts point to triggering of Milk Income Loss Contract program payments beginning in February. But anything that affects milk production or product sales could dramatically change a very fragile market.
Permalink: Click here
Tagged: farm, Purdue University, Dairy market
|