Preparing For the Next Swing in Milk Prices

Preparing For the Next Swing in Milk Prices

UW dairy experts design interactive suite of computer decision making tools.

The dairy industry is one of Wisconsin's most important economic engines. From 1990 to 2007 farm earnings remained relatively flat while the volatility of milk and production input prices increased. During late 2008 through 2009, price volatility reached the critical juncture of very low milk prices and high input costs resulting in significantly negative net margins for many producers. The first six months of 2009 were described by UW-Emeritus Professor of Agricultural Economics, Edward Jesse as "Perhaps the worst that U.S. dairy farmers have experienced for at least several generations."

While dairy producers have experienced continued economic pressure, the tools for efficient planning for the coming financial year and comparing plans against actual performance have been lacking according to Ken Bolton, University of Wisconsin-Extension dairy/livestock agent. In the interim dairy producers continue to struggle with how to pay the bills, maintain physical plant, control cost of production, identify advantageous prices and manage risk exposure.

In answer to this pressing need, University of Wisconsin-Extension Center for Dairy Profitability and Dairy Science experts have collaborated to design an interactive suite of computer decision making tools. The tools utilize commonly available financial records to assist producers in the development of realistic annual financial plans to identify Cash Flow and Working Capital requirements for the coming production year.

Through the experience dairy producers can identify Cash Flow excesses and shortages well in advance of occurrence. From this information proactive management actions may be applied to address the issue including making production adjustments, arrange for operating capital and identify risk management options. The resulting product is a business plan to guide decisions and communicate business performance and needs to lenders and other stakeholders. The ultimate goal is increased dairy farm financial security and reduced producer stress.

The new program is now available through UW-Extension agents, technical college farm trainers, farm management association field staff and the Wisconsin DATCP Farm Center. This decision making suite compliments the Grow Wisconsin Dairy Team on-farm management advisory teams.

Contact your UW-Extension agricultural agent, farm records association field staff or technical college farm trainer for more information about "Planning for the Next Swing in Milk Price."

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