As I write this, I am looking out my window at about three inches of snow. It is the first significant snowfall of the winter season, and it has our valley painted in a sparkling white hue. Have you ever noticed how quiet and peaceful it is after a snowfall? Even the cows in the barn seem unusually quiet when there is snow coming down. Sometimes it almost seems so quiet that I can hear myself think.
I recently read that the reason it seems so quiet is because the snow on the ground absorbs sound waves, creating a hush across the landscape. Snowflakes are actually six-sided crystals, filled with open spaces that can absorb sound waves. The article, which was published by AccuWeather, said that a dusting of snow wasn’t enough to create the quieting effect. It requires at least a couple of inches.
This being the season when we pivot between the past year and the year that lies ahead, the snow seems like a fitting background to reflect on what happened in 2024 and consider what is ahead for 2025. It also seems fitting this time of year to reflect on what we learned from the past year that could help us pivot in the coming year.
Reflections From 2024
When we look back on 2024, it was a year of highs and lows within the dairy industry. In terms of dairy pricing and margins, this past year was a relatively strong year. Class III milk prices averaged $18.89 per hundredweight, starting out fairly low at $15.07 per cwt in January and peaking at $23.34 per cwt in September before falling back down to $18.62 in December. Class IV milk prices were more stable, starting out at $19.39 in January and peaking at $22.29 in September before settling at $20.74 in December. Class IV prices averaged slightly higher than Class III at $20.75 per hundredweight.
While Class III and IV milk prices for 2024 were only the second highest in the last five years, with 2022 being the highest, milk margins were the highest, thanks to commodity prices for corn, soybean meal, and alfalfa hay at below average levels. USDA announced the November margin under the Dairy Margin Coverage (DMC) program at $14.29 per hundredweight, well above the $9.50 maximum threshold for an indemnity payment. Margins peaked in September at $15.57 per hundredweight, the highest level since the DMC program was created in 2019.
While milk prices and margins were relatively strong throughout 2024, the dairy industry had its share of other issues to deal with. The outbreak of the highly pathogenic avian influenza virus (HPAI) on dairy operations in 16 states across the US has created economic hardships for dairy farm families and poultry producers. To date, 917 dairy farms have been affected across the country, with California’s milk production down nearly 10 percent last month due to the outbreak there.
While milk supply has been subdued partly due to the outbreak in HPAI, lackluster dairy demand has been keeping the milk price from escalating more. Domestic demand for dairy proteins, cheese and butter remains strong, with demand for whole milk also strong. However, on the export side, strong global competition has kept global sales at bay, with October dairy export volumes down 2 percent from a year ago.
Looking Ahead
With milk supply growth continuing to come back online and demand potentially continuing to face headwinds, milk prices are softening into 2025. The Class III milk price is currently forecast at $19.91 for the first half of the year, while the Class IV price is forecast at $20.82 for the first six months of 2025. With commodity feed prices expected to remain low, margins are expected to be above the maximum margin level for the DMC Program of $9.50 per hundredweight. With Congress passing a Farm Bill extension in December, enrollment in the USDA program is expected to open soon.
While margins remain relatively strong, nobody knows for sure what 2025 will bring. Whether you’re presented with a few minutes of quiet time in a snowstorm or just doing some reflection while you finish up morning chores, consider a few lessons you could take away from 2024 to make a couple resolutions for 2025. A couple I thought of on this snowy evening are:
- Protecting the Dairy. With HPAI continuing to spread, the risk is still there that your herd may be infected. Do you have a biosecurity plan? Are you limiting movement on and off your farm? If not, consider making a resolution to get it done as soon as possible.
- Protecting the Margin. What goes up must come down. If you enrolled in the USDA DMC Program last year, you might be thinking that you could eliminate the premium expense this year because it didn’t pay out in 2024. Remember that DMC is insurance to provide a safety net, not a guarantee, of payment in catastrophic years. Don’t risk having to weather tight margins because you never know when they are around the corner.
- Prepare for the Unexpected. If anything, 2024 should have reminded us all to prepare for the unexpected. Whether it’s HPAI that spread across the dairy industry, the Bay Bridge collapse in Baltimore or even the tragic events that happened in New Orleans on New Year’s Eve, we never know what is around the corner. Having a contingency plan for the unexpected and uncontrollable is never a bad idea.
Hopefully this winter’s snowy weather doesn’t bring too much extra work and you can find enough quiet time to reflect on a few of your own lessons from 2024. If you would like help with a biosecurity plan or just want to better understand how the USDA’s Dairy Margin Coverage program works, remember the Center is here to help. Give us a call at 717-346-0849. Best wishes to you and yours for a healthy, safe and prosperous new year.
Editor’s Note: This column is written by Jayne Sebright, executive director for the Center for Dairy Excellence.