DMC, DRP offering a lifeline

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Dairy Margin Coverage and Dairy Revenue Protection programs have blunted the pain of $15 Class III milk. Ever.Ag President Phil Plourd said these programs have had a major impact. “The bottom line is that the steady stream of DMC payments this year has been a lifeline for a lot of small- to medium-size producers,” Plourd said. “And, if you look at the DRP program on top of that, it paid out more than $400 million through Q3 in net indemnities. For producers using that program, that’s also been a big help.” U.S. dairy export demand is stagnant. Domestic demand is also flat. “If you look at the three big pizza chains that report publicly, none of them had a good quarter in Q3,” Plourd said. “Consumer credit card debt is at all-time record levels so while things aren’t terrible, the consumer has gotten a little more conservative in this economic climate.” In Plourd’s view, all segments of the dairy industry struggled in 2023. The export outlook has the potential to improve, offering optimism as we get into 2024.

Planning for the next 20 Years or next 12 months

Minnesota Milk Producers Association Executive Director Lucas Sjostrom said the price received by dairy farmers is more variable than ever. “We’ve been in a weird spot over the past 24 months where you may have a $5 variance from one farm to the next, which is unprecedented,” Sjostrom said. “It is all due to market conditions and the processor you send to.” Minnesota lost 58 dairy herds during December 2023, which is one of the worst months on record. “Dairy is really in a spot today where farmers are making plans for the next 20 years or just planning on how they make it through the next 12 months,” Sjostrom said. The farms in the middle, with 300 to 1,000 cows, may be having the biggest issue with the low milk prices. Sjostrom said the most successful dairies in the mid-range have found a niche. That may include dairy beef production or custom harvesting.

Farm income down from 2022 record high

As farmers close the books on 2023, many of those spreadsheets are showing farm income came down significantly from the record highs of one year ago. U.S. Department of Agriculture Chief Economist Seth Meyer said net farm income will total $158 billion this year, a 21% drop from 2022. “That’s still well above the average of the last couple of decades,” Meyer said.

What a difference a year makes

Those differences can be seen as farmers close out the books for 2023. “If we just look year-over-year, it was tax planning to no end last year and what are we going to do with the profitability and how do we manage that,” said Keith Olander, executive director of AgCentric. “This year, we’re certainly going to see a reduction in income. I think USDA is looking at 15% down.” 2023 can be considered an average year for many grain farmers. The animal agriculture sector took a bigger hit, especially the dairy and swine sectors.

Federal order reform hearing to resume

The USDA will reconvene its public hearing to consider changes to the Federal Milk Marketing Orders Jan. 16. This hearing process began in late August 2023 near Indianapolis, Indiana. Significant changes have not been made to the federal orders in more than 20 years.

Optimism for milk pricing reform

Menahga, Minnesota, dairy farmer Kristine Spadgenske testified during the Federal Milk Marketing Order hearing in September 2023 and is excited about the continued interest in this process. “It means that people care,” Spadgenske said. “We’ve had a record number of dairy farmers who have testified. The USDA is listening to these proposed changes, and that’s a good thing.” Compromises will be necessary, but Spadgenske is optimistic about potential improvements in federal orders.

Carbon neutral by 2050 

The dairy checkoff has established a goal for the dairy industry to be carbon neutral by 2050. Dairy Management Inc. board member Charles Krause said dairy farmers are taking steps to become more efficient with 75% of milk produced committed to the dairy stewardship. “Every year, farmers become more efficient in what we do and more innovative,” Krause said. “We’re not all expected to make the big change and put digesters in, but it’s the little things we do every day that add up.” Krause farms near Buffalo, Minnesota.

FAFSA change impacts farmers, small businesses

An attempt to simplify the government’s student aid process could make college more costly for farm families, thanks to an omnibus bill that passed this past year which included a change in the Free Application for Federal Student Aid. Previously, there was an exemption for families who owned farms or small businesses. American Farm Bureau Federation Director of Government Affairs Dustin Sherer said that exemption is now gone. “The example that’s been given is for a farm that’s valued at about $1 million under the old rules that family would have been expected to pay about $7,600 toward the education under the old rules,” Sherer said. “Under the new rules, that same family would be responsible for more than $41,000, which essentially would take you out of the Pell Grant and federal and state aid programs and force most people to take out student loans.” The FAFSA change takes effect for the 2024-25 school year. Legislation has been introduced in both chambers of Congress to reinstate this exemption.

Risk management training for the underserved

The USDA is making up to $3 million available to provide risk management training to underserved, small-scale and organic farmers. Nonprofit groups and land grant universities can apply for these grants. The deadline for applications is March 4.

Rural Finance Authority supports beginning farmers

The Minnesota Department of Agriculture is now accepting applications for its Beginning Farmer Tax Credit. For this year, the state has $4 million available, and the tax credits are funded on a first come, first served basis. In addition, beginning farmers are eligible for a tax credit of up to $1,500 for tuition in the Farm Business Management program.

New ownership for Horizon Organic

A private equity firm, Platinum Equity, is acquiring Horizon Organic. Horizon Organic is a USDA-certified organic dairy brand that is now owned by Danone. Terms of the deal were not announced.

Mortenson takes new role with Minnesota FFA

Natasha Mortenson is the new Minnesota FFA career development and alumni coordinator. For the past nine years, Mortenson worked for Riverview LLP in community outreach, communications and project management. Previously, Mortenson was an agriculture education instructor and FFA advisor at Morris Area High School. Mortenson is a member of the Minnesota FFA Hall of Fame.

Trivia challenge

Grade AA is the highest quality grade for butter. That answers our last trivia question. For this week’s trivia, what is the No. 1 pizza chain in the United States? We will have the answer in our next edition of Dairy Star.

Don Wick is owner/broadcaster for the Red River Farm Network of Grand Forks, North Dakota. Wick has been recognized as the National Farm Broadcaster of the Year and served as president of the National Association of Farm Broadcasting. Don and his wife, Kolleen, have two sons, Tony and Sam, and five grandchildren, Aiden, Piper, Adrienne, Aurora and Sterling.

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