The dairy industry in the US has faced a challenging period over the past five years, with farmers grappling with increasing input costs and the impact of changing federal milk price regulations. These issues, combined with the ongoing COVID-19 pandemic, have led to a significant decline in profitability for many dairy farmers.
According to Danny Munch, an economist at the American Farm Bureau Federation, dairy producers are finding it difficult to break even, with many losing over $6 per hundredweight of milk. On average, farmers are putting in about $27 per hundredweight and only receiving $21 per hundredweight in return. For small farms with fewer than 50 cows, this loss can increase to over $20 per hundredweight.
To combat these financial struggles, dairy farmers are increasingly turning to diversification strategies. For example, some have added dairy-beef production or on-farm processing to their operations to improve profitability. However, rising feed prices remain a significant challenge for many dairy farmers, with prices for commodities such as corn and alfalfa increasing year over year.
Despite some increases in milk prices over the past five years, the current softening of prices means that dairy farmers must continue to navigate the difficult balance between feed and milk prices on a daily basis to maintain their economic viability. As the industry continues to evolve and adapt, it remains to be seen what strategies will be successful in ensuring the long-term sustainability of the US dairy sector.