Tough times in 2009 for dairy

By Susan Harlow, editor, Northeast DairyBusiness

     The next year will bring hard times for U.S. dairy producers, said Scott Brown of the University of Missouri’s Food and Agricultural Policy Research Institute, during DAIReXNET’s webinar Nov. 10. “The first six to nine months of 2009 could be some of the toughest of the decade for dairy producers,” he said, forecasting a $17.10 all-milk price for 2009.
     Keep an eye on these indicators: 2009 corn plantings, oil prices and the general economy, to get a read on how the year will go, Brown said.
Domestic demand is weakening, especially with negative income growth projected for the United States through the third quarter of 2009. Brown also said exports will weaken in 2009, with Class III prices driving Class I prices for much of the year.
    If milk prices fall substantially in  the first half of 2009, the all-milk price could sink below $15.50 cwt. That would signal a faster turnaround for the better in the second half of the year. But if prices level out at $17 per cwt., “the pain will go on a lot longer,” he said.
    That would be devastating, given production costs. Although corn prices have dropped from their highs of $7.50 per bushel last summer, that probably won’t last, Brown said, and prices are still above historic averages. Next spring’s corn plantings will foretell where feed prices will trend. Higher prices “will put the brakes on the supply side in this industry and keep milk prices from becoming too low,” he said.
    We’re in the unprecedented fourth consecutive year of 4-billion-pound annual increases, Brown said. Numbers of milk cows haven’t seen much decline over the last decade, but he expects that to change in 2009. 
    The next CWT buyout will lure better bids and remove more cows. “That could help us remove supplies more quickly,” he said. CWT has enough money to act rapidly and forcefully to maximize its effects, which he projected would add 71 cents per cwt. to the milk price.
    With a feed adjuster now part of the Milk Income Loss Contract (MILC) program, “we certainly could be at a point where we would trigger an MILC payment in the next few months,” he said.