U.S. milk production continues to exhibit bipolar tendencies, declining in the Western states while production growth remains strong in the Midwest and East. First seen clearly with low dairy farm profitability in 2009, this phenomenon went into remission for a few years. However, the symptoms returned and have continued for about a year now.
A recent analysis by the team at the Daily Dairy Report (DDR) sheds some light on this. (This issue is available with permission from the Daily Dairy Report. DDR subscription information is available at www.dailydairyreport.com.) While dairy farm profitability measures in the United States have been low on average, not every region is affected the same way. The DDR analysis clearly shows that while profitability has been near record lows in the Western states, the same is not true for the upper Midwest and Northeastern states; profitability has been below average in those regions but not at record low levels. The result is that milk production has continued to grow in the Midwest and Northeastern states while declining in the West and Southwest in the face of these marketplace conditions.
Perhaps dairy groups around the country should take a serious look at dairy policy reform proposals, which will be discussed again this year (following the one-year extension of the 2008 Farm Bill programs as part of the fiscal cliff deal reached early this year). The Dairy Security Act, which leaders of both the House and Senate Agriculture Committees tried to force into the fiscal cliff deal, would require all dairy producers who sign up for margin insurance to have their milk checks reduced when the national average dairy farm profitability is low – not very low like in the Western states this past year, just a little low. This past year that would have meant dairy producers in all regions participating in the margin insurance program would have been affected by the Dairy Market Stabilization Program in the Dairy Security Act.