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Record-High Milk Prices Generate Big Profits for Wisconsin Farmers

Erin Toner

It’s been a bang up year for Wisconsin’s dairy producers. Milk prices hit record highs and feed costs were low, resulting in big profits.

It’s a turnaround from five years ago, when the milk market plummeted and many farmers went deeply into debt. This year’s fortunes are helping producers recover from earlier losses, and catch up on overdue projects. Some will also squirrel money away, as experts warn of big price “corrections” in 2015.

Keith York is a sixth generation dairy farmer in Lake Geneva. He runs the farm, along with his brother and his cousin.

“We have 30 employees. Twelve of them are part of our family and then we have people that we hire,” York says.

They milk 1,500 cows, and sell all of their product to a cheese company that supplies mozzarella to pizza makers. Apparently, people are eating lots of pizza.

“This year’s been a real good year for the dairy industry,” York says. 

York says strong demand for dairy – both domestically and internationally – drove record-high milk prices.  And with feed costs down, farmers were in a position to make money.

York says he’ll use his profits to pay off debts incurred in 2009, when milk prices collapsed due to over-production.

“We probably lost 20 percent of our equity in 2009, but this year we probably gained back 20 percent of our equity. So if you stay in the industry for the long term, things will even out,” York says.

After paying the bills, York says there’ll be cash left over to tackle overdue maintenance and buy a few new things. He’s planning to upgrade the farm’s manure management system and runoff controls. And, he’s installing little microphones on his cows’ collars that monitor their activity and health.

“So we know when it’s time to breed them. Plus it listens to the rumination of the stomach so we can tell if she’s not eating as well or not feeling well, and we check her out to see if there’s something wrong with her,” York says.

But beyond maintenance and modest upgrades, expect farmers to approach these boom times cautiously.

“Unfortunately like a lot of other things, prices run in cycles,” says to Steve Kelm, a professor of animal and dairy science at UW-River Falls.

When we reached Kelm at his office, he was watching milk prices starting to slide on the Chicago Mercantile Exchange. A few factors are to blame, including declining exports. Kelm says some countries are backing off on purchasing from the U.S. Also, the U.S. and Europe have imposed sanctions against Russia that include withholding dairy sales.

“If part of your market, because of political reasons, gets shut off, then that’s going to change the dynamics of the markets back here,” he says.

The USDA predicts milk prices will drop more than 20 percent in 2015.

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