Higher milk prices lead to more optimism among dairy operators

BOISE – For the first time in several years, there is some optimism creeping into Idaho’s dairy industry.

 The average milk price in Idaho has risen from $15 per hundredweight (cwt) in January to $18 and $19 in recent months.

The prices that Idaho dairy farmers are receiving for their milk are at their highest level in five years and, more importantly, above the break-even point that dairy producers need to make a profit.

“There’s a lot of optimism right now, with $18 milk,” Wendell dairy farmer Arie Roeloffs said during Dairy West’s annual meeting, which took place Nov. 13-14. “How can you not be optimistic? Right now, it’s looking great.”

Dairy West represents Idaho and Utah dairy producers. Idaho, which has about 590,000 milk cows, ranks third in the nation in milk production and the state’s 425 dairy operations collectively produce about 15 billion pounds of milk per year.

After reaching record levels in 2014, Idaho milk prices fell significantly the next four years and were at or below break-even for most of that period.

They began ticking up significantly in the spring and are now at their highest level in five years. As a result, the collective mood at the Dairy West annual meeting was up as well.

Idaho Dairymen’s Association Executive Director Rick Naerebout said producers are more optimistic this year but he said it was a cautious optimism because of apprehension over how long the higher milk prices will continue.

“There is some caution in that upturn,” he said. “But it is great to be here at an annual meeting where dairymen are once again making money and spirits are better. It’s been a fun few days here to see our dairymen in a more upbeat mood, knowing they are making money today and that’s not been the situation the last few years.”

Gooding dairyman Steve Ballard also said the optimism is cautious.

“Any time you see a bump in milk prices, there is more optimism. That’s always a good thing,” he said. “But the question is, how long will it last?”

During the period of low prices, the number of Idaho dairy operations in Idaho shrunk from just over 500 to 425.

“A lot of people just got tired of it and went out of business. A lot of people quit while they had a little bit of equity left,” Roeloffs said. “It’s devasting when you see your neighbors and others going out of business. It’s been rough.”

After four years of bad news, some good news began trickling into Idaho’s dairy industry in February when Gem State Dairy Products announced it will build an aseptic milk processing facility in Twin Falls. Aseptic milk is shelf-stable milk that does not require refrigeration before the product is opened.

In June, a Taiwanese dairy product manufacturer, Jetton Biochemistry Co., announced it will locate, in Nampa, a new blended powder facility for production of a proprietary dairy formula.

In addition, Schreiber Foods announced it plans to expand yogurt production at its Logan, Utah, facility, which sources a lot of its milk from Idaho.

The recent uptick in milk prices is good news for the state’s overall agricultural industry as well since dairy is the top performer in Idaho’s farming sector in terms of total cash receipts. 

Dairy accounts for about a third of Idaho’s total farm cash receipts and when livestock feed crops such as hay and corn silage are considered, the dairy industry’s impact on the state’s agricultural sector is huge.

While the overall picture for Idaho dairy producers is certainly better this year than it has been in several years, the state’s dairy operations still produce more milk than can be processed in Idaho at the moment and that’s a major concern, said Roeloffs, a member of IDA’s board of directors.

According to IDA, Idaho operators produce about 2 million pounds a day of “excess milk” that isn’t under contract and has to leave the state.

That milk is sold at discounted prices because of the additional transportation costs and the fact that milk not produced under contract is typically purchased at a lower price.

“We don’t have the capacity to process all the milk we’re producing and a lot of milk is leaving our state because of that,” Roeloffs said. “I think we really need to work as a team, through the IDA, to get more processors in our area.”

The recent announcements of more milk processing capacity coming to Idaho help but a lot more processing capacity is still needed, Roeloffs said.

Achieving that is a major goal of the Idaho dairy industry, said Dairy West CEO Karianne Fallow.

“Having processing capacity is a really important part of the equation because we do have so much more milk in the marketplace right now,” she said.

While that challenge needs to be addressed, there’s no doubt that there is more optimism among the state’s dairy operators now compared to recent years, Fallow said.

“It’s been a long road over the past four years and we’ve had some fallout from that,” she said. “But I think the farmers who are dairying today do sense more optimism for the future.”

During those four years of depressed milk prices, it was tough for dairy operators to wake up every morning knowing they were losing money regardless of how well they managed their dairy and took care of their cows, Naerebout said.

“It was been a long four years in that regard,” he said. “But things are much more positive right now. It’s always great to go into the holiday season with an upbeat market and an upbeat perspective.”