2014 offers variables, opportunity when done right

2/15/2014 7:00 AM

Pick up any paper or journal during the first month or two of a new year, and much space is dedicated to analyzing the markets and other variables, which will impact the year ahead. Dairy is no different and here in January and February, the discussions focus on many variables including some which weren’t even considerations just a few years ago.

Here in Pennsylvania, as we’ve experienced Midwest-like weather conditions, many variables point to an exciting and profitable year. As of early February, farm gate milk prices and margins (milk price minus cost of feed) are nearing record highs. Product innovation in the U.S. continues to focus on the yogurt category and diverse dairy ingredients enabling us to compete in a growing international marketplace. As a result, U.S. dairy ingredients and products are in demand at record levels and in new markets.

All of this is developing as dairy farmers and industry stakeholders vividly recall past experience when prices reach these record levels. Keystone Farm Show and other industry meetings the past few weeks have given us a chance to talk with many producers. We learned many farms are optimistically planning for the future while acknowledging the importance of managing risk through price and margin protection tools, business diversification, or cash management strategies. It has been said, that “history is a great teacher” and we know how market changes in the supply demand equation impact prices. At the center, we encourage each farm to include this discussion as a part of every consultant or profit team discussion.

In early February, a new Farm Bill with new federal programs for dairy became law. The Milk Income Loss Contract (MILC) and product price support programs will end later this year. A margin protection program where producers can choose their level of coverage will become the new safety net for dairy farms. Dairy farmers will have several months during 2014 to learn about the components of the new law and how best to use those programs contained within it. One thing we know: incentives to produce and manage risk are capstones of the new policy.

Recently, I had an opportunity to attend a dairy event out of state <\h>— and learn about other variables impacting how we do business in 2014. Retailers are receiving increased pressure to assure their dairy products meet standards for animal care even though they may know very little about the farm milk production sector of our industry. It is clear: contented cows on dairy farms are far less the concern of those hoping to set these animal care standards than unrelated marketing or social agendas are. Nonetheless, each dairy farm becoming involved in certified animal care programs is increasingly important to assure open and growing markets for our products. We as a dairy production industry hold every opportunity to lead this discussion by participating in programs, ensuring best care practices, and telling our story.

Federal agencies such as Occupational Safety and Health Administration (OSHA), the Environmental Protection Agency (EPA), the Food and Drug Administration (FDA) also have expectations for dairy. OSHA is said to be making spot visits on dairy farms in the Northeast, EPA remains steadfast in assuring “environmental compliance” in agriculture and FDA is requiring a veterinarian’s prescription to feed antibiotics for disease prevention due to concerns about human antibiotic resistance.

In a recent conversation with an environmental industry leader, the question was asked, “What would it look like if our industry pursued a stewardship beyond compliance strategy?” The answer to the question is not the same for every dairy farm in Pennsylvania based on location and other factors. What we do know is the expectations around animal care and treatment, employee management, and nutrient management remain important variables, which will impact many farms. Again, having these conversations around the table with your trusted profit or advisory team is an important aspect of successful business management.

2014 promises to be a year of opportunity for many farms in Pennsylvania. The Center for Dairy Excellence continues to offer programs and resources for your farm that can help assure you are positioned to take advantage of these opportunities. For more information about our resources, contact the center at 717-346-0849 or info<\@>centerfordairyexcellence.org.

Editor’s note: John Frey is the executive director of the Pa. Center for Dairy Excellence.

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