By STAN MADDUX
INDIANAPOLIS, Ind. — Indiana lost 10 percent of its dairy farms in 2018, but the worst could be over for an industry struggling nationwide from a series of negative impacts on the market.
"It's kind of a perfect storm," said Doug Leman, executive director of Indiana Dairy Producers. He explained the ongoing price slump has much to do with overproduction, but the number of milk-producing cows in the past two months recorded its first recent decline.
Leman said the 36,000-head drop in the country's 9.4 million dairy cows isn't much, but it's a start toward production getting to where it reflects current demand and higher returns.
"There's just too much milk right now," he said.
He said another source of encouragement is that consumption of all dairy products like cheese and yogurt on a per capita basis is up, despite people drinking less milk. "Capitalism works, right? We eventually will get to where we need to be. The sooner, the better.”
Leman said ups and downs are nothing new in agriculture and economic times have been worse, but especially difficult for milk producers this time is prices staying down beyond the usual two- to three-year cycle.
A tough four-year period starting in 2009 was followed by two extremely strong years – then the bottom dropped again and has remained there ever since, he said. Overproduction as drinking milk continues a long gradual decline hasn’t helped matters.
Another source of recovery is the new trade agreement among the United States, Mexico and Canada aimed at opening more opportunity for U.S. milk producers to sell across the borders. Provisions in the new farm bill including margin protections and winning the ongoing fight against plant-based beverages labeled as “milk” could also work in favor of the industry.
"Every little bit helps," said Leman.
He said the 10 percent decline in dairy farms is not exclusive to Indiana and the percentage, although unusually high, is not as alarming as it might seem. It’s not like every physical farm that closed no longer exists, he said; many of them were absorbed through consolidation.
Another spoke in the wheel toward better times is creating more intimacy with the product. According to a report from CoBank’s Knowledge Exchange Division, consumers in growing numbers want to know where their food comes from and what was involved in its production.
Meeting such demand provides opportunity for some dairy producers, cooperatives and processors. But doing so will require more segmented supply chains and direct contracts with farms.
“Dairy supply chains are adapting in order to meet consumer demands for increased transparency about farm production practices,” said Ben Laine, senior economist for the dairy sector at CoBank. “However, the entire industry will be forced to walk a fine line to meet these demands in an environment in which cost reduction and efficiency are a constant focus.”
Laine said assurance about best farm management practices must also play a role with consumers in the U.S., who are further removed from the farm than ever before with less than 1 percent of the population engaged in farming. Such a disconnect makes it easier to formulate false impressions about things like GMO feed, animal welfare and antibiotic use, he said.
According to the report, expanded product offerings also creates a higher risk that retailers will require different and potentially conflicting farm management practices from suppliers.
In response, the National Milk Producers Federation has developed the Farmers Assuring Responsible Management program. It defines and audits responsible farm management as an industry so individual farms are not susceptible to unique requirements based on the retailer they ultimately supply, according to the report.