What is making so many dairies close month after month? Why is the future of dairy farms so uncertain?
At this time, there are fewer than 40,000 dairy farms left in the United States. Just under 50 years ago, there were over 650,000 farms milking cows on the daily. However, even with this 610,000+ farm swing, there are more cows being milked than ever. The norm for a dairy has switched from many small farms to a few large farms, each with hundreds to thousands of cows on them.
With so many more cows producing milk across the country, it has also created a milk surplus for most of the country, driving down profits that farmers need to survive. The market is going on its fourth consecutive year of costing farmers more to produce the milk than they make from it, furthering the pressure to close up shop, especially for small dairies. To add to that, there’s more dairy alternatives than ever before available for consumers. The alternatives drive the demand for dairy even lower, while doing the same to small farm’s ability to stay afloat. The causes of the dairy crisis are indeed complex, regardless if you feel the processing plants, large farms, milk alternatives or something else is the biggest problem. No matter the cause, farmers must discover a solution if they wish to keep their tanks and wallets as full as possible.
There isn’t a single cure all for the array of problems plaguing the industry. There’s no getting rid of milk alternatives, farm debt, or forcing processors to care more about small farms overnight. But it’s not hopeless, there are options. One of those options is diversified risk management. Today’s dairy market is volatile and unpredictable, meaning doing nothing is not an option for those wanting to survive. Two generations ago, farms could manage just fine without worrying about risk management, but those times are long gone. First, there are government programs out there like Dairy Margin Coverage (DMC) and Dairy Revenue Protection (DRP, Dairy RP). It’s usually not a good idea to stick all your eggs in one basket, so a diversified plan with multiple endorsements across these programs is a great start to tackling risk management for a dairy. Another option for producers is using the future to their advantage via hedging programs, like our Revenue Over Feed Program. Programs like these can help producers offset their feed costs and keep their income more consistent – quite useful in a market that is as volatile as the dairy industry.
Regardless of how you manage your risk, at least some management is basically required at this point. Our advice to producers is to do your research and figure out what’s best for your operation. Investing a little time into these programs could be what saves your dairy from going under and could even send it into some profits. Feel free to check out other pages on our site for more information or give us a call if you’re interested in consulting and our available programs.