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The coronavirus situation over the last few months has significantly changed the outlook for dairy producers, although it now appears that the worst-case scenarios may be avoided.

Avg. Price per Cwt.

2017

2018

2019

2020 F

Boston Blend Price1

17.44

16.09

18.12

17.28

Avg. WNY Blend2

16.40

15.06

17.10

16.67

F=forecast

  • The average Boston blend price for 2018 was $16.09/cwt, and the average net earnings as reported in the Dairy Farm Summary (DFS) was a loss of -$40 per cow. In 2019, milk prices increased to an average of $18.12, which resulted in net earnings of $447 per cow for the DFS sample, meaning farmers were coming off of a relatively good year at the beginning of 2020.
  • In January 2020, the outlook for the year looked relatively positive. Agri-Mark forecast the 2020 average Boston blend price at $19.86/cwt, which should have resulted in relatively good earnings. Unfortunately, the impact of coronavirus has been the near-total loss of institutional and foodservice markets for dairy products virtually overnight. Prices fell dramatically, and some farmers had to dump milk because processing plants were at capacity. The Boston blend price hit a low of $13.47 in May but has since recovered to a forecasted $18.17 for July. The Agri-Mark forecast (as of July 7, 2020) is for an average of $17.28/cwt. for the current year. This will be lower than 2019, but not nearly as bad as some earlier projections indicated.
  • Farms that were struggling last year will continue to do so in 2020 and some may consider exiting, especially those that have high levels of debt.
  • National milk production for Q1 2020 increased by 3.1%, due to increases in both number of cows as well as milk per cow. However, this largely reflects increases in production prior to the impact of COVID-19. May 2020 milk production decreased by 1.1%, year-over-year.
  • In the Northeast, most dairy cooperatives have implemented supply management programs disincentivizing excess milk production in an effort to bring production more in line with demand and processing capacity in the current situation. These programs vary by coop, but most involve a higher price for the bulk of the farm’s production (80-90%), and a much lower price for milk production in excess which often has been marketed at distressed prices or hauled long distances to find a market. Thus, producers have both a price impact (lower prices for the bulk of their milk production) as well as a volume impact (receiving little or nothing for a portion of their production). This has resulted in a reduction in their top-line revenue.
  • Government-based risk management / support programs will prove to be critical for some farms. The Dairy Margin Coverage program (DMC), and Dairy Revenue Protection (DRP) programs will pay out significant amounts of money for at least the period from April-June. However, only about 19% of the milk production in New York has this risk management protection.
  • The USDA Coronavirus Food Assistance Program (CFAP) paid out $1.1 billion in purchases and direct relief for dairy farmers across the country as of July 6. This includes $116 million in direct payments to 2,205 dairy farms in NY.

In summary, 2019 was a relatively good year for dairy, but 2020 will bring some stress to dairy producers, particularly those with inadequate risk management and/or excessive debt levels.


1  Agri-Mark Price Forecast
2 Upstate Niagara Price Forecast