News

Chicago Fed says dairy struggles continue

The Chicago Fed’s February report confirms financial stress on dairy farms is ongoing.

Senior business economist David Oppedahl says challenges in the dairy sector in Wisconsin and Michigan have depressed land values there.  Ag bankers in their quarterly survey say there was an increase in voluntary liquidation on dairy farms, and the financial stress and difficult winter weather has many ready to sell.

Ben Spitzley, who leads GreenStone Farm Credit Service’s dairy team, tells Brownfield over the past decade Michigan’s dairy industry increased the milk supply by nearly 80 percent and the sector has been caught in a price pinch for at least the past four years.

“Fourth quarter of 2018, there was improvement in powder and butter prices.  That helps Michigan dairy producers.  The outlook for 2019—there’s some positive trends that we see.  I get excited about all this new investment that’s going into processing.”

He says nearly $900 million in dairy processing projects in the region are providing hope the situation will adjust for the better.

The Fed’s report says land values were steady for the year, but down slightly after adjusting for inflation.

Ag credit conditions deteriorated again in the fourth quarter for the district, which includes Wisconsin, Michigan, Indiana, Illinois and Iowa.

Bankers say non-real-estate ag loan volumes should be higher in the first quarter of 2019 as more operating loans and loans guaranteed by the FSA are expected to increase. The number of loans for grain storage, farm machinery, feeder cattle and dairy, however, were forecast lower.

AUDIO: Brownfield interview with Ben Spitzley