Dairy industry braces for bust after 2014 boom

Associated Press

MADISON, Wis.

Milk sales set records in 2014, but plummeting prices are forcing some dairy farmers to spill the surplus down the drain.

Already disheartened by the current glut, which is due to global factors and overproduction, dairy farmers say they worry that futures markets predict dwindling prices in 2015. Over in the dairy aisle, though, shoppers are milking savings by the gallon.

“I guess I’m sorry if I’m hurting the farmer or the middleman, but I’m certainly delighted to pay under $3 a gallon,” said Michael Kleinhenz, of Madison, Wis.

Dairy farmers recognize the volatility of the industry. Less than a year ago, they struggled to meet global demand, and milk prices climbed to record highs — about $25 per hundredweight, or roughly the equivalent of a 10-gallon tank, according to Mark Stephenson, director of dairy policy analysis at the University of Wisconsin.

So, many farmers bought new equipment and expanded their herds to meet demand. But when China pulled back on its dairy imports after stockpiling milk powder and Russia imposed sanctions against the U.S. by halting trade, dairy farmers nationwide were left with a surplus, Stephenson said.

Every state has some dairy production, but California and Wisconsin anchor the country’s supply. The milk glut reached its peak in the Northeast over the holidays, when cooperatives asked farms to pour out some of their milk.

And with an excess of milk in the international market, prices for milk, butter and milk powder continue to drop. Market predictions for 2015 look worse, said Norbert Hardtke, director of milk marketing at Family First Dairy Cooperative in Madison, Wis., as prices are expected to drop through the spring — about $13.50 per hundredweight in March.