Here & Now

Ben Brancel Talks High Milk Prices, Low Feed Costs

Frederica Freyberg:

That drop in consumer confidence probably isn’t being felt on the farm where record high milk prices and record low feed costs are creating profits six times higher in 2014. The latest figures show Wisconsin agriculture adds $88.3 billion annually to the state’s economy while employing nearly 414,000 people. Ben Brancel, secretary of agriculture, trade and consumer protection, gives us his insights this week and explains why that good news might not last. Secretary, thanks very much for being here.

Ben Brancel:

Thanks for having me.

Frederica Freyberg:

Before we talk about why that good news might not last, let’s talk about the boom year for milk prices. How does it compare historically?

Ben Brancel :

It’s very high. We've had some historically high milk prices for our dairy farmers out there. In fact, in Wisconsin they’re even a little higher than they are in other parts of the United States, and certainly much higher than in California.

Frederica Freyberg:

Why is that? Why are we better than other states right now?

Ben Brancel :

Because we have processors. We have a multitude of variety of places to sell your raw milk from your farm to go into the processing community. We have 120-some different processing entities, where others don’t have that option.

Frederica Freyberg:

And what are these profits looking like on the farm for, say, the average farmer in– milk farmer, dairy farmer in Wisconsin?

Ben Brancel :

Well, I think it’s looking pretty good. Some of our farms, some of the better farms, are telling us that if they’re milking around 174 cows, they might anticipate about a $200,000 income this year.

Frederica Freyberg:

Wow. And so what will farmers be doing with that income, with those profits? Are there places that they need to shore up that might have been lost due to drought or recessionary trends?

Ben Brancel :

Well, if you remember in 2009 we had depressing milk prices and everybody was worried it was the end of the dairy industry in Wisconsin. And some of those created huge debts on their farms. So they’re buying– They’re paying down those debts. In 2012 we had very high feed prices. And so when they thought they were getting things straightened around, they again created some debt because of those high feed costs. Those are now being paid down.

Frederica Freyberg:

What about fuel costs? That presumably helps producers as well if they’re low.

Ben Brancel :

If they’re low, yeah, it does. Because it takes a great deal of energy to produce the crops, to take care of your animals, to keep the environment so that they do produce as you would like them to.

Frederica Freyberg:

And what’s responsible for crop prices being low?

Ben Brancel :

Nationally, we’ve had a great year. We’ve had weather that was conducive to record soybean and corn yields. In much of the United States they’re producing corn that they have not in the past. The acreage is up in North Dakota, for instance, which is not a state that was predominantly involved in corn. So that has led to a great production of, and yield of, corn and soybean.

Frederica Freyberg:

So this is all the good news. But we started this by saying it might not last. Why not?

Ben Brancel :

Well, as you know, if feed prices get quite high, then people don’t feed as much grain to their cows and the production per cow goes down. With low corn and soybean prices, those feed costs go down and they start feeding a little more in the cow’s ration and then the cow starts producing more milk. We expect milk production will probably go up. We still have the challenges in the international marketplace with the EU, European Union, and the pressures they’re putting on other countries to negotiate trade agreements. It would make it more difficult for us to sell in those markets.

Frederica Freyberg:

Speaking of the EU and markets and exports, exports also have way up this year, 17% over last year. Worth, we understand $2.8 billion overall. What is responsible for this spike?

Ben Brancel :

Well, we’ve gotten some new opportunities in the marketplace. China, of course, has been purchasing a lot of whey and that is a byproduct of our cheese processing industry here. So whey has found a home. We have found places for people to sell cheese into. One of the countries that we sell cheese to that nobody would ever guess, we could sit here for a long time, is Egypt. So people would be surprised that a country in the Middle East is actually producing dairy products from Wisconsin.

Frederica Freyberg:

Does that open up a whole new regional market?

Ben Brancel :

Yes. In fact, one of our trade team employees at DATCP is in Dubai with some companies. We don’t generally travel with large companies. We take smaller and middle size companies, teach them about the marketplace and then try to find them access into the marketplace. So she is in Dubai with some companies showcasing products from Wisconsin, if you will.

Frederica Freyberg:

Interesting. So with the current milk market and this hike in exports and new markets there, how does that affect the Wisconsin economy overall?

Ben Brancel :

Well, it affects it tremendously. We knew that it was growing, but it was the census that’s taken every five years that UW professors calculate the economic impact. When you talk about an $88 billion impact. I’ll give you a relationship, our dairy industry is worth $43.4 billion to this state. You talk about orange juice in California, $9 billion. You talk about Idaho potatoes, $6 billion. You talk about the apple industry in Washington, DC and it’s a few billion. So you can see that dairy is very, very important to this state. More important to this state than any other commodity to any other state.

Frederica Freyberg:

We are the Dairy State.

Ben Brancel:

We are.

Frederica Freyberg:

Secretary Ben Brancel, thanks very much.

Ben Brancel:

Thanks for having me.