Milk @ $15 – Are You Taking Advantage of it!
Chuck Schwartau of the University of Minnesota Extension Service has a great post of how the trend in milk prices has changed over the last several months. It is no secret that dairy farmers having been hurting for close to a year now and a common statement was “If milk was at $15,00 per hundredweight, we’d be in good shape”. During this past year, it seemed $10 was much closer than $15.
Well, the trend has changed. In past few weeks, there have been several opportunities to contract for Class III milk at the $15 range for January and February delivery. Chuck indicates that milk has only been over the $15 level about 10% of the time, so make sure to take advantage of these prices now.
One option is to use a Put as insurance. This locks in a floor price, with the price you pay for the put being your insurance premium. These contracts can be costly, but if you have premium milk, it may be worth locking in the floor price.
A dairy farmer can also use contracting services if they belong to a cooperative. It appears that profitable dairy farming is here and you need to take advantage of it while you can.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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