Perspective and Projections for the Year Ahead

Milk price values, though declining, currently sit above the five-year average, suggesting 2023 milk income will potentially fall between 2021 and 2022 values. Additionally, the ability to reinvest in the operation last year after several years of tight margins has re-energized most producers. To maximize opportunities in 2023, producers need to focus on two key factors: controlling costs and engaging with risk management options.

Current outlook indicates margins will be slightly below the five-year average for most of the year, with a gradual return to average margins around $9/cwt by Q4 2023, as shown in Exhibit 10. Current conditions show slight improvement in milk price with a drop in feed commodity costs, which may improve this prediction. External influences expounding price volatility on milk and feed will dictate how margins perform for the near future. Producers should implement risk management options, such as Dairy Margin Coverage and Dairy Revenue Protection, to help mitigate these challenges.

Sources: United States Department of Agriculture, National Agricultural Statistics Service, http://www.nass.usda.gov

United States Department of Agriculture, Agricultural Marketing Service, http://www.ams.usda.gov

CME Group, Agricultural Futures and Options, https://www.cmegroup.com/markets/agriculture.html

In conclusion, dairy farms in Horizon Farm Credit’s territory have unique opportunities to remain relevant to the dairy industry. Farms that monitor costs, evaluate long term opportunities, and have contingency plans are poised to thrive and grow their operations. Business transitions continue to be a growing topic of interest and will dictate the growth or contraction of the industry for the next several years.