"Producers will receive record-high
prices for the next couple of months, but the returns will be
short-lived," said Mike Hutjens. "While milk hit its highest price
ever -- $20.45 per hundredweight -- on May 4 on the Chicago
Mercantile Exchange, August futures prices are $15.89 and continue
to drop, with November futures at $13.20 and January futures at
And, he added, producers can expect to
lose about 20 percent of the present price bonanza to higher feed,
fuel and energy costs.
Earlier this spring, Hutjens attributed
the rising dairy prices to a conjunction of several factors,
including fewer cows and less milk being produced, a 50 percent
reduction in the supply of a growth hormone used to stimulate
production, and the closing of the Canadian border due to a mad cow
disease outbreak keeping over 80,000 replacement dairy heifers in
"When people ask me what the future
holds, I ask them to tell me what the weather will be like this
summer," he said. "While futures prices now indicate a decline in
milk prices, hot weather could change all that. We don't know if we
will have weather hot enough to cause heat stress in cows, thereby
decreasing their production. We also don't know if the growing
season will be favorable for corn and soybean prices.
"Bad weather for crops could impact
dairy producers since 50 percent of their costs involve feed, which
is reliant on corn, alfalfa and soybeans."
Hutjens also believes the current high
level of dairy prices is likely to affect consumer demand.
"Demand will likely dip due to the
prices, especially for products like cheese, butter and ice cream,"
he said. "We're already seeing a response by manufacturers who are
using smaller containers for yogurt and ice cream. We may also see
subtle changes involving the amount of butter or cheese used in
prepared food products like pizza."
Producers should pay down their bills,
reduce indebtedness, get a handle on production costs, attempt to
lock in lower prices for feed and "get ready for the fall in
prices," he said.
top of second column in this article]
Illinois producers have a mixed bag of
good and bad news to sort through in June Dairy Month, he noted.
"On the good-news front, in the last
five years, Illinois dairy cows have doubled their production and
are catching up with the national per-cow average," he said.
"However, the number of dairy cows in Illinois is dropping, and we
have not increased the total amount of milk produced in the state.
In effect, Illinois dairy producers are losing market share."
The average dairy herd size in Illinois
is 86 cows, compared with a 1,865-cow herd in New Mexico, the
nation's leader. Illinois cows produce on average 18,441 pounds of
milk, compared with 23,333 pounds for Arizona cows, which top the
"We see that some Illinois producers
are becoming more interested in lowering input costs through better
use of pasture," Hutjens said. "We are also seeing some expansion in
the Illinois dairy industry."
Looming in the future is a new
challenge Hutjens predicts will be critical for Illinois dairy
producers. It's called a quality assurance program. Increasingly,
these are being demanded by consumers and are now being piloted in
California, a major dairy state.
"Quality assurance is basically the
consumer telling the producer that he or she wants to be assured
that the animal products produced on the farm are safe, that the
animals are treated in a humane and environmentally acceptable
manner, and so forth," said Hutjens. "Conformity is measured by an
independent third party.
we will see supermarkets pushing these programs and putting a seal
on a gallon of milk, for example, indicating it came from a
quality-assured farm. We get one or two calls a month here at the
University of Illinois from consumers wanting to know if this type
of product is available. The quicker Illinois producers do it, the
better off they'll be."
of Illinois news release]