Dairy Industry Holding Tight Right Now

Dairy farmers are not looking to expand much right now, given the current market conditions.

“Obviously, feed costs and overall input costs and you can throw labor in there and the whole kit and caboodle," said Mike North with the Ag Risk Management Company Ever.Ag.  "That ultimately is keeping people from expanding because they don't want to walk into a major capital expenditure and then have the floor drop out from underneath them with a high-cost structure.  Nationally, we still have a quota system that is maintaining a presence in different geographies, also keeping people from expanding. And then lastly, let's say you're not held by either of those concerns, where are you going to find someone to build you a new free stall barn or a new parlor, and then what are you going to have to pay in terms of building materials to get that done?  It's really cost prohibitive to think about expansion right now from that front, too.”

North said there’s been a general suppression on production growth across the country because of those reasons, but he expects those issues to flatten out in the future.

“It’s not necessarily good or bad. It's just where we find ourselves right now," North continued.  "In my 28 years there’s never been a time when we've seen this kind of a setup where we're dealing with massive supply chain issues, which are starting to resolve themselves, together with a macroeconomic picture that's cloudy at best, and maybe scary, at worst, together with all sorts of geopolitical crosswinds when it comes to global trade. And at the same time, this really high cost of production. And I think as a byproduct, there's so much noise, most people are just saying I'm going to sit still for now, and I think that's okay.” 

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