We’re seeing signs of optimism out West

Hoard's Dairyman: 

We’re seeing signs of optimism out West

Date: 
Fri, 09/03/2010

The deep financial cuts suffered by Western dairy producers last year still have a long way to go before they heal, but attitudes out there really do seem to be getting better.

In recent weeks, we’ve visited producers in Texas, New Mexico, Arizona, and California. No one is close to doing cartwheels, but at least some optimism has crept back into their attitudes. It’s an important start.

The nice run-up in cheese prices (more than 20 cents per pound) at the Chicago Mercantile Exchange during July and August is one reason. Continued high cull cow prices are another. Generally moderate feed prices complete the picture. The only damper are Class III milk price futures that extend into 2011, which seem determined to stay at meek levels.

Producers continue telling us the same things about their herds and businesses:
– Cow health is excellent and reproduction has been outstanding this summer.
– Mostly mild temperatures have made for much smaller than normal production drops.
– Cost cutting steps taken in 2009 as a matter of survival remain in place and have probably become a regular part of management.
– Debt is now keenly recognized as a dangerous four-letter word.

Our diagnosis is that the traditional Western dairy response to financial upturns – herd expansion – has suffered a crippling blow of its own. When good times do come back around, we expect that much of this generation of producers will be content to repay debt and mend their safety nets against future downturns.