Virginia’s dairy industry faces a tough year ahead.
“It’s going to be a tough year for the dairy sector with probably the lowest prices since 2010,” predicted Dr. John Anderson, American Farm Bureau Federation’s deputy chief economist.
He told members of the Virginia Farm Bureau Federation Dairy Commodity Advisory Committee at an April 6 meeting that statistics from the first two months of 2016 indicated that milk prices were the lowest they had been since the same time in 2009.
“But if there is a positive, feed prices are down so the milk-to-feed price ratio looks a little better than it did. And I think that’s going to continue,” Anderson said.
Energy costs, however “remain erratic, and labor and health care costs continue to climb, which will likely tighten margins for our farmers,” said Tony Banks, VFBF assistant director of commodity marketing.
Prices paid to dairy farmers for Cheddar cheese, nonfat dry milk and dry whey were all down the first quarter of 2016, and butter prices were up just slightly. Demand for dairy products in the export markets was down as well. “That’s a real concern,” Anderson said. Fortunately, domestic demand appears to be stable.
And despite low prices for dairy products, milk production was on the upswing. Anderson reported that milk production has increased every year between 1995 and 2016. “Milk production seems to be impervious to prices,” he said.
The U.S. Department of Agriculture’s milk price projections for 2016 are down about $2 per hundredweight, about 12 gallons, from last year’s prices.
In Virginia, the dairy industry contributes $3.2 billion annually to the economy, according to a 2014 economic impact study conducted by the University of Virginia’s Weldon Cooper Center for Public Service. Based on that report, the state’s dairy industry employed 7.975 workers in 2014 and accounted for an estimated $2.298 billion in total output, $451 million in value-added product sales and $159 million in labor income.
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