Dancing in the Rain
In my office is a decoration that says, “Life isn’t about waiting for the storms to pass. It’s about learning to dance in the rain.” I have it sitting so I see it every day when I walk in the office. It’s a reminder to keep moving forward no matter how challenging a situation may become.
It’s ironic right now that we are in the middle of hurricane season, with a new storm brewing in the Gulf of Mexico almost every other week. With each passing storm, you wonder if it will make its way to Pennsylvania or if it will shift out to sea before hitting us. You wait and watch, hoping that it misses the Mid-Atlantic region and, if it does hit, it doesn’t bring too much wind or hail to damage crops or any farm buildings.
The weather, just like the dairy markets, can be hard to predict. Analysts right now are watching the markets closely, uncertain of whether they are about to turn upward or slip farther south. Every report that comes out from the USDA creates a new flurry of insight – dairy product stocks are down, milk production is up, exports are still above year-ago levels, heifer inventories are at all-time highs. Each time encouraging news is released, another discouraging report negates it. It feels a little like we’re watching to see if a storm develops or if it dissipates.
When the July Milk Production Report came out from the USDA, it appeared like we may had turned a corner, with production only up 0.6 percent from a year ago. But then August came out and blew away that theory. The US milk production was back up 1.4 percent from the previous year, with 4,000 more cows than in July. States in the Southwest continued to drive the growth, with Texas, Kansas, Colorado and New Mexico collectively adding 39,000 head of cows in the last 12 months.
Still, the USDA Cold Storage Report that came out the week after the Milk Production Report showed total cheese stocks falling month over month by 53.5 million pounds to 1.36 billion pounds as of Aug. 31, marking the largest month-to-month decline since 2004. Butter inventories were down 9 percent from a year ago, indicating that less product may be going into storage.
A week later, the US dairy export sales in August data was released. Despite the concern about retaliatory tariffs hurting oversea sales, export volumes were up 12 percent in August, driven by strong sales of nonfat and skim milk powder. But that news was countered a day later by news that the dairy price index on the Global Dairy Trade auction had fallen to prices not seen since 2016.
With all these reports, the one certainty has been how unpredictable the dairy markets are right now. Class III Milk Price futures for the remainder of 2018 average just under $16 per hundredweight, while 2019 prices average just over $16 per hundredweight. Any news that indicates a contracting milk supply or increasing demand may make that price increase. Any news about a growing supply or stagnant demand could cause it to decline.
Every Decision Counts
The ongoing period of depressed milk prices illustrates how important good decision-making is on the dairy farm. It has forced almost every dairy farm family to step back, take stock and look hard at your operation and how to navigate through a volatile and uncertain marketplace. Essentially, we all need to figure out how to “dance in the rain.” Resources are out there that can help.
Current market dynamics indicate that all dairy farms need to focus at keeping cost of production at below $18 per hundredweight over the long term. Evaluating every aspect of the operation and making sure you are taking advantage of every opportunity to add revenue and control costs is critical to the future of your business.
The center’s Dairy Decisions Consultant Program may be a resource to do this, with up to $3,500 available for farms to work with a paid consultant to evaluate your business, potential bottlenecks and areas of opportunity. The farm families who have worked with a DDC have found it an invaluable resource for uncovering solutions they never would have considered on their own.
For those of you who work closely with your advisors in making decisions and troubleshooting challenges on the farm, consider leveraging the use of an on-farm advisory team. The center has up to $2,000 for farms to work with a Dairy Profit Team, which brings those key advisors around the table to take a whole-farm look at solutions for improving your profitability on the dairy.
If farms are looking at transitioning to the next generation or adding a new enterprise to their operation, the Transition and Transformation Team options might be a good fit. Each of these programs offer funding for paid team members and pre-planning related costs, such as permitting, legal and design work. Up to $3,000 and $5,000 is available for farms to work with Transition and Transformation Teams, respectively.
In addition to these on-farm grants, the Center also offers a $2,000 grant to cover the cost of discussion and planning groups. Dairy producers who want to come together to meet regular, compare best management practices, share ideas and learn from each other may benefit from this grant, which covers the cost of paid facilitators and meeting expenses.
Funding for these programs is provided through the Ag Excellence line in the Commonwealth budget and has just been made available. Applications can be found on the center’s website at centerfordairyexcellence.org. For more information about the center’s on-farm resource programs, contact Melissa Anderson at 717-346-0849 or by email at firstname.lastname@example.org.
Editor’s Note: This column is written by Jayne Sebright, executive director for the Center for Dairy Excellence, and published monthly in the Lancaster Farming Dairy Reporter