WisBusiness: Dairy industry looking forward to profitable 2010

By Brian E. Clark

For WisBusiness.com

MADISON — The year 2009 can’t end fast enough, milk producers said Tuesday at the annual Dairy Business Association conference.

And while prices appear to be headed up for 2010 — meaning dairy farmers should be able to make money next year — many fear that the high cost of corn, fuel and other so-called “inputs” may put a crimp in their profits.

“This has been a very rough year that no one wants to repeat,” said M&I Bank’s Sam Miller, who moderated a panel dubbed “What Will We Do to Thrive After 2009?” with three Wisconsin dairymen.


Miller, the bank’s senior vice president for agribusiness, said milk producers lost an average of $720 per cow this year. For a thousand-animal dairy, that would be a whopping $720,000 loss.


But Gordon Speirs, who has 1,350 cows at his family’s Shiloh Dairy in eastern Wisconsin’s Calumet County, said the loss was more than $900 a cow when debt service for the farm was added on.


Miller said he believes 2010 should be profitable for most of the state’s 13,000 milk producers, and he forecast that they will make around $300 per cow next year. But he warned that volatility in the price of milk — as well as the price of inputs — will remain, so dairying will continue to be a risky business.


In 2008 — a good year for most milk producers — most farmers made an average of $750 a cow.


In his career as a banker, Miller said he has learned that milk prices go through three-year cycles. Unfortunately, he said the high-price periods are becoming shorter and the lows are lasting longer.  


Speirs, a native of Canada, said he trimmed nearly all the costs he could this year, and he lamented that he had made mistakes in 2008 and signed contracts to sell his milk that was well below the higher prices that came later.


“I left $600,000 on the table,” he said.


“I have to ask myself if I have the personality to hedge milk,” he mused. “Sometimes I feel like the Packers in that I have the ability to snatch defeat out of the jaws of victory.”


But Speirs he has not considered getting out of the dairy business and he said he “has not lost a lot of sleep” over marketing decisions. He also said he will probably hedge 30 percent to 40 percent of his milk in the coming year and sell the remainder on the regular market.


Ben Peterson, who runs the Four Cubs Farm in Burnett County with this father, said his dairy did well in 2008 and paid down debt going into 2009.  He said they managed to get by with this year using their “old, broken down” milking parlor to handle 600-plus cows.


He also said growing nearly all of their feed inputs and raising their own calves helped them manage the financial storm.


“To be honest, 2009 was not the end of the world for us,” he said. “We’ve had worse years.”


And he said he has never considered leaving the dairy business. But he noted that if not for the cows, his family could have moved to Hawaii for four months, lived well and lost less money than they did with their dairy during the same period.

Brian Larson, who milks 1,400 cows at the Cottonwood Dairy in LaFayette County, said he came close to leaving the dairy in 2001. But not this year.


He said he and his partners must manage their profit margins better and be content with good profits “rather than trying to hit a home run.”


Miller, the banker, said milk producers who own land were cushioned somewhat financially during 2009 because of rising real estate prices.


While $4-a-bushel corn makes it difficult for dairy farmers to make a profit on their milk, that same high price “puts support under farmland values” and helped a lot of milk producers refinance their debt, he said.