More than 800 dairy farms went out of business in 2019, according to numbers released Jan. 6 by U.S. Department of Agriculture’s National Agricultural Statistics Service Wisconsin Field Office.
Wisconsin lost a total of 818 milk cow herds in 2019, bringing the total number of dairy herds in the state to 7,292, according to numbers based on data from the Wisconsin Department of Agriculture, Trade and Consumer Protection Division of Food Safety Dairy Producer License list.
“That really is a huge farm loss,” Director of Dairy Policy Analysis at the UW-Madison Center for Dairy Profitability Mark Stephenson said Jan. 9 during the Western Wisconsin Ag Lenders Conference in Eau Claire.
The state started the year with 8,110 dairy herds after losing 691 herds in 2018.
“As we got into 2017, declining prices that we had been experiencing were starting to impact producers, and we started to see a higher level of exits,” Stephenson said. “That rate increased in 2018 and 2019 now we’re at this 10% level.”
Dairy Extension Outreach Program Manager Mark Hagedorn said that the past five years — during which time the state has lost more than 3,000 dairy herds — have been an exceptionally difficult time in the industry but that things could be turning around for the farms that remain.
“Farmers have gotten so good at producing milk because they’re taking so much better care of their cows,” Hagedorn said. “But when you have too much of anything, the market reflects that.
“We lost herds and we lost cows, but the cows that we lost were probably slated to be lost due to the inevitability of the industry. And the cows that remained went from basically living in a four-star hotel to a five-star hotel, and that promoted more milk from them.”
Hagedorn said that in many cases, well-managed operations have been able to hang on, and in some cases expand, during this extended downturn in dairy prices.
“Farmers were seeing that it was difficult to support two families on 50 cows, so we were seeing them expand to 200 cows and a nice free-stall, and in many cases, that was enough,” Hagedorn said. “And because they love the lifestyle that comes with farming, many farmers were willing to hang on. When you take a look at return on investment, most businesses want 10 to 15%. Dairy farmers, if they can get 3 to 5% back, because it’s a lifestyle they love, they’ll keep plugging away.”
While it came too late for many, dairy farmers did finally see a little relief in 2019, with milk prices reaching highs not seen in five years.
On Jan. 2, the U.S. Department of Agriculture announced the December Federal order Class III benchmark milk price of $19.37 per hundredweight, $5.59 more than what they received in December 2018.
“Milk prices look like they’re rebounding,” Hagedorn said. “It seems like we hit the bottom of the trough and we’re scratching our way back up the hill. Now, is it enough to fix the ails of the past several years? Probably not. But at least there is light at the end of the tunnel. And the industry needs it.”
Stephenson said that, in addition to improving prices, there are other reasons for optimism in 2020. Stephenson said during the December Program on Dairy Markets and Policy outlook video that he’s hearing reports of inventories of storable dairy products being down all over the world, which could support better prices in the next year.
“I think we’re going to start to feel some of this world tightness of milk supplies, and we’ll have more opportunities for the sale of our own products,” Stephenson said. “I’m encouraged by what I see longer term. It’s going to be better than what we saw (in 2019).”
However, Stephenson said that the recent uptick in milk prices may not be enough to completely stop the exodus of farmers from the industry.
“We aren’t going to be able to declare victory and say our farm attrition is done now,” he said Jan. 9. “This has got some long tail on it.
“We’ve got farms that balance sheets are badly enough damaged that we’ll have to find a graceful exit for them. I think that we’ll have a higher than average attrition rate continuing over the next several years.”