Views from the Vet: It’s looking like 2014 is a good year for dairies

Today for the first time I saw evidence that fall is really on its way. Was it wood smoke coming from someone’s chimney? The first colorful leaves? Robins congregating and planning their journey south? None of the above; today I saw the first rows of corn disappearing into the chopper. Soon corn silage will fill the big bunker silos and the valuable forage will be fermenting into next year’s feed.
This year’s corn crop looks like it will be a good one in Addison County. Dairy farmers certainly hope so as the past few years have yielded smaller corn harvests and bunk silos are thin. It was also a good year to make grass; the cooler weather and timely rains have given farmers a bumper crop of high quality winter hay and grass silage. I’ve written many times about the value of good quality forages — they make for healthy animals and healthy wallets. Good quality forages mean farmers are able to make a lot of milk and keep animals in good condition without having to purchase as much expensive grain.
You may have heard that this past year was a good one for dairy farmers — a very good one in fact. Like any business, profit on a farm is made when the price of the goods sold is higher than the cost to make it. 2014 brought record high milk prices for dairy farmers along with lower input costs.
Pricing milk is a complicated process, but it comes down to supply and demand just as with any other commodity product. This year demand was quite high, especially in Asia. New Zealand is a major supplier of milk and milk products to Asia but they experienced a severe drought in 2013, which has suppressed their milk production into 2014. Japan has gone cheese crazy so their demand for dairy is up. In this country, the severe drought in California (a major milk producing state), along with drought in much of the Southwest, has kept national milk production down. Reduced or flat supply and increased demand means higher milk prices for the farm next door.
On the other side of the ledger, purchased grain costs have dropped a bit. The nationwide 2014 crop of corn and soybeans, the two most important basic grains Vermont farmers purchase to balance their cow’s nutritional needs, should be excellent.
 Milk price forecasts for 2015 are about $2 less per 100 pounds of milk than in 2014 (100 pounds of milk, or one hundredweight, is roughly 8.6 gallons and is the unit of milk that has the price attached). Since milk is perishable, small increases in production can lead to dramatic drops in price. Milk production is already increasing due to some expansion in the Midwest, so milk prices will inevitably drop.
Other factors indicate things may drop a little but shouldn’t be quite as dramatic as the terrible farm economy of five years ago. Butter consumption is at an all-time high, and we haven’t even entered the holiday baking season. Consumer confidence is the highest it’s been since July of last year. Demand for dairy in Asia continues to grow and grain prices look like they’ll drop further. It’s a guessing game and bad weather during harvest could change things, but 2015 is shaping up to be another good year for dairy farmers. Next month we’ll look at what’s happening in the beef world.

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