Here & Now

Dairy Prices for Wisconsin Farmers at a Record High

Pat O'Brien:

The milk prices are exciting right now.

Zac Schultz:

The milk Pat O’Brien’s cows are producing has never been more valuable.

Pat O'Brien:

I’ve been farming for 40 years and I’ve never seen milk prices this high. It’s about time.

Zac Schultz:

O’ Brien’s Stoner Prairie Dairy is milking 210 cows, and they hope to be at 250 by the fall to take advantage of the high prices.

Pat O'Brien:

Well, this is a boom time definitely.

Robert Cropp:

Farmers are experiencing some very nice margins.

Zac Schultz:

Professor Robert Cropp has been studying dairy prices for the University of Wisconsin since 1966.

Robert Cropp:

Well, we’re at record milk prices, substantially higher than we had a year ago.

Zac Schultz:

As is usually the case in farming, the weather has a lot to do with it.

Robert Cropp:

Right now California has the worst drought in 130 years. Nevada and some of those areas are very dry. Texas has suffered from that.

Zac Schultz:

Severe droughts in the southwest the last two years and rising beef prices have led to some farmers sending their dairy cows to the meat market.

Robert Cropp:

Farmers sell a dairy cow for hamburger at a pretty good price.

Zac Schultz:

Pat O’Brien says a wet spring in Wisconsin last year made for poor forage, which means lower milk production.

Pat O'Brien:

Our milk production isn’t quite as good as it has been in the past.

Zac Schultz:

But it’s not just the weather in Wisconsin, or even the United States, that matters.

Robert Cropp:

We’re impacted a heck of a lot more, whether it rains in New Zealand or it doesn't in New Zealand.

Zac Schultz:

Cropp says the biggest driver in dairy prices is world demand, and if exporting countries like New Zealand see a decline in production, demand for US dairy rises.

Robert Cropp:

Relatively small changes have big changes in prices.

Zac Schultz:

The United States exported 15.5% of all milk production last year, valued at $6.7 billion dollars.

Robert Cropp:

Record exports last year continued through January, exports way above a year ago. Butter exports are up 115%, cheese 46%.

Zac Schultz:

Pat O’Brien remembers when all that mattered was the weather in your own backyard, not on the other side of the world.

Pat O'Brien:

We didn’t think about the impact of the weather on farmers in California or whether New Zealand had a good crop.

John Umhoefer:

It takes a confluence of events from around the world.

Zac Schultz:

If anyone knows about the world market for dairy products, it’s the cheesemakers.

John Umhoefer:

This came from Austria for the contest.

Zac Schultz:

John Umhoefer is the executive director of the Wisconsin Cheese Makers Association. Cheesemakers from around the state are in this warehouse unpacking entries for the World Championship Cheese Contest.

John Umhoefer:

This is the ugly work before the pretty show.

Zac Schultz:

90% of all milk in Wisconsin goes into cheese production, so these men feel the effect of rising prices.

John Umhoefer:

You start to put all that together with really high demand, and the milk prices and the cheese prices are soaring.

Robert Cropp:

They’re paying, you know, $23.00 for milk going into cheese which is, you know, $6.00 higher than they had to pay a year ago.

John Umhoefer:

Well, when you get a high price like that, it is partially absorbed along the way, and the consumer also sees the higher price.

Brian Zimmerman:

I think the farmers and the cheesemakers both are gonna see some pretty good months ahead.

There we go.

Zac Schultz:

Brian Zimmerman is a cheesemaker, and says his profits are tied to the price of a 40-pound block of cheese.

Brian Zimmerman:

So as the 40-pound block price increases our profits increase.

Announcer:

Welcome to the Wisconsin Cheesemakers' Association world contest.

Zac Schultz:

While rising prices likely won’t impact the sale of high end cheese, like that found at the world championships, Umhoefer says cheesemakers are worried high costs could eventually be too much for consumers.

John Umhoefer:

There’s always a range that’s good. And if you hit the top of that range, you start to get the consumer saying, I can’t afford that. The cheesemaker would love to see a price settle in a little lower so the consumer’s happy, the farmer’s happy, he’s happy. You don’t need record prices.

Zac Schultz:

Bob Cropp isn’t seeing it.

Robert Cropp:

We’ve seen in the past, when cheese gets to over $2.00 a pound, we saw some resistance on the demand side. We’re not seeing that.

Zac Schultz:

Pat O’ Brien is also concerned the high prices could drop off.

Pat O'Brien:

I’m a little concerned that we may overproduce, and they’ll become a huge supply and we’re gonna lose this.

Zac Schultz:

In the past a jump in prices led farmers to increase their herd size, but Cropp thinks this graph of milk prices in recent years will make farmers more cautious.

Robert Cropp:

They know they’re not gonna stay at record levels forever, they know feed prices go back up again. And so there may be more caution in expansion, recognizing there is more uncertainty.

Pat O'Brien:

We have no intentions of expanding. We’re just gonna kinda get caught up.

Zac Schultz:

Pat O’Brien says he’ll use extra income on repairs that were put off during the hard times, like new barn doors.

Pat O'Brien:

The milk prices in 2009 were devastating. And I think there’s a lot of farmers, probably a little bit including ourselves, are still recovering from that time.

Zac Schultz:

Meanwhile, farmers and cheesemakers want you to know their profit is your gain as well.

Brian Zimmerman:

You make hay while the sun shines, and when the cheesemakers are doing good and the farmers are doing good, the local economy is doing great.

Pat O'Brien:

When we go downtown, we spend our money at the implement dealer, we spend our money at the car dealership.

Zac Schultz:

Cropp says the good times will continue at least through the end of the year.

Robert Cropp:

Prices will be lower the second half of the year, but we’re not looking for real sharp declines.