Farm Horizons, April 2016

Some producers share cautious optimism regarding dairy prices

By Mark Mitten, Correspondent

A common viewpoint in the dairy industry is that, over the years, prices rise and fall. There is a natural rhythm of ups and downs.

The year 2009 stands out as one of the worst in recent memory, while 2014 saw prices hit a five-year peak – a welcome relief for Minnesota dairy farmers.

Currently, prices are low again, but there is a sense of cautious optimism among local producers.

Roger Engelmann, a dairy farmer in Plato for 42 years, has 500 milk cows. “I’ve seen a lot of things,” Engelmann said. “2014 was the best year in terms of prices in history, but things have gone lower now in 2016. Hopefully, it’s the bottom . . . I am confident it will go up again.”

Many things can cause price swings, from supply and demand, to the price of fuel, fertilizer, and feed.

This February, the Minnesota Milk Producers Association sponsored a dairy management workshop in Hutchinson. Speakers addressed a roomful of local dairy farmers from four counties regarding factors that have affected the industry, pointing out reasons for the current low prices.

For instance, recent international tensions have resulted in reduced US dairy exports.

When Russia invaded and annexed the Crimean peninsula in Ukraine, western nations, including the US, voiced disapproval with political sanctions. In August 2014, Russia fought back by banning many western imports – including dairy products. The ban is still in effect. Here in the US, when supply swells, prices fall, and dairy producers feel the impact.

Around this time, China also reduced its imports of US dairy products. Dr. Marin Bozic, assistant professor in dairy foods marketing economics at the University of Minnesota, explained that China had stocked up on enough dairy powders that it no longer needed any more, and dramatically reduced what it brought in from the US.

On the other hand, Bozic also pointed out that China changed its one-child family policy to allow married couples to have two children. “Expect dairy demands to go up as a result,” Bozic noted.

There are other reasons for optimism. One is a renewed interest in authentic dairy products in the US.

The June 2014 cover of Time magazine announced that “Butter is Back.” This is good news for Minnesota dairy farmers. The idea that saturated fat and cholesterol are unhealthy is beginning to change – and the June cover of Time reflects the contrast from the magazine’s 1984 cover warning about cholesterol.

As studies have produced more accurate dietary models, there has been an epiphany. Fat is no longer seen as the root of all evil. The dietary culprit is sugar.

As a result, fast food chain McDonald’s is bringing butter back, too.

“McDonald’s is our number one supporter,” Rick Jeurissen said.

Jeurissen has 150 cows on his Lester Prairie farm. A Minnesota dairy farmer his entire life, he learned the business from his father. Jeurissen is on the board of the McLeod County Dairy Association, and is familiar with the challenges local farmers face.

While McDonald’s does use milk products in items like the McCafe series and cheese on its sandwiches, the decision to switch to butter was announced just a few months ago. Large quantities will be required from the dairy community.

Another point made at the dairy management workshop was that promotional approaches seem to be more effective than advertising, and less costly.

One example is the NFL partnership called Fuel Up to Play 60. Describing itself on fueluptoplay60.com, it is “an in-school nutrition and physical activity program launched by National Dairy Council and NFL, in collaboration with the USDA, to help encourage today’s youth to lead healthier lives.” The goal is to instill a healthy lifestyle in children, with 60 minutes of exercise daily and a healthy diet, which includes dairy.

Charles Krause, Midwest Dairy District 12 Director and a dairy farmer in Buffalo, spoke at the workshop and pointed out the vast reach of the Fuel Up to Play 60 program. “It encourages dairy use in schools and creates lifelong dairy consumers . . . We have access to 78,000 schools nationwide to get kids involved in a healthy lifestyle.”

“Promotion is huge,” Jeurissen explained. “On a county level, we decided to . . . concentrate on the younger generation and see if we can get the soda pop out of their hand and put a glass of milk in their hand. And they’ll grow faster, they’ll grow stronger, they’ll grow healthier.”

The negative image of milk fat is changing, and the dairy community will benefit from the paradigm shift. Nothing happens overnight, but according to some sources, cautious optimism regarding milk prices may be reasonable.

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