2016 Dairy year in review

MADISON — Sevie Kenyon: Taking a look back at 2016 in the dairy world, we’re visiting with Mark Stephenson, Center for Dairy Profitability, University of Wisconsin-Madison in the College of Agricultural and Life Sciences and I’m Sevie Kenyon. Mark, give us a quick snapshot of what happened in the dairy world last year.

Mark Stephenson: Well, 2016 was the bottom of the trough for dairy prices, the current cycle that we’re going through, so I think that that probably tells you that it wasn’t a pleasant year. Starting to feel wearing now because this is fully two years’ worth of low prices.

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Sevie Kenyon: Can you give us an idea how the margin protection program was used during the year?

Mark Stephenson: Sure, the margin protection program, or MPP, worked as it was supposed to. It provided payments to people who had bought up to levels of protection of 650 or higher. So, there’s even net benefit for people, but for most folks and we had a lot more people who didn’t buy up at that four-dollar catastrophic level of protection who certainly didn’t see anything in the way of payments.

Sevie Kenyon: Were there any silver linings during the course of 2016?

Mark Stephenson: Yeah, we had a great growing season we’ve had excellent crops, I mean a lot of volume and good quality on hay and corn silage that came in. We do have milk prices turning around now. They bottomed out in May and they’ve been on the upward movement since that time period and I expect that to continue.

Sevie Kenyon: How did our farmers here in Wisconsin, what are they going to look like here at the end of the season?

Mark Stephenson: I think that most of them would probably say “I’m treading water” in other words, I didn’t make any real progress, I put off purchases or investments that I would have otherwise made in the normal course of business, but it wasn’t a killer year for most people. The problem is this is the second year in a row of that kind of situation so, some point in time they’re going to need to make reinvestments.

Sevie Kenyon: What kind of tactics do farmer’s take when they’re under these kind of conditions?

Mark Stephenson: Well, you put off purchases that you can. You know, new equipment is something you buy in years like 2014 when we had really good milk prices and you don’t buy it unless you need it in years like this so that’s one thing you can do and other things you can do are to maybe cut back on services that you might otherwise purchase, but you know you always suffer a for a little bit when you do that.

Sevie Kenyon: Have the economics of the last couple of years had any effect on herd expansions or changes like that?

Mark Stephenson: It’s been kind of a strange thing; Wisconsin has grown milk production right through this for the last couple of years. So too have many of the states to our east but if you look at states west, California is just a real typical example they’ve been losing milk production here for fully two years.

Sevie Kenyon: Sum up 2016 for dairy farmers.

Mark Stephenson: 2016 for dairy farmers is one of those years where you say “I’m glad it’s behind me, I’m ready to move on” and I think that 2017 is going to feel a little bit better for moving on.

Sevie Kenyon: We’ve been visiting with Mark Stephenson, Center for Dairy Profitability University of Wisconsin-Madison in the College of Agricultural and Life Sciences and I’m Sevie Kenyon.

— Mark Stephenson and Sevie Kenyon, University of Wisconsin-Extension

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