Just last year, milk prices started skyrocketing as China had poor milk production and needed to begin importing milk. The United States Dairy Farmers were happy to help China with their milk production crisis. However, now that exports are back to normal, milk prices are crashing. Talking with Dairy farmers today, they mentioned their checks were going from 25 cents per hundred down to 15 cents per hundred. Other farmers mentioned similar slides in prices. Meanwhile, other farmers see the price slide and are being asked to pay 5 cents per hundred to pour milk down the drain. Why would we pour milk down the drain? To stabilize milk prices. While customers will be happy to see the gallon of milk return to $3.00 prices, farmers will be not so appeased.
With the large cash crop Ag sector crashing also, in its second year down, Ag producers were hoping to cash in on getting more dairy farmers to buy new equipment. Looks like the Ag equipment companies are in for a long hard year. I expect more layoffs coming in manufacturing plants this year as well. Last year Deere lead the way with thousands of layoffs. I think this will be a good year for anyone looking to get new farm equipment as companies will be giving away their equipment for bottom dollar prices to maintain cash flow and minimize layoffs/downsizing.
In 2013, the Ag Equipment Industry saw its highest volumes of Combines ever sold in the United States. Coming off that peak this year, with grain prices coming back down to more normal levels, the industry is seeing a pullback in demand for the large combines this year. However, not all is lost this year for the Ag Equipment sector. In fact, timing couldn’t be better, as the Dairy Industry is having its best year on record this year with prices reaching all-time highs. For the past decade, Dairymen have barely gotten by. Today, they are stronger than ever and poised to cash in on the high prices. Flush with cash, these Dairy operations will be investing in new Hay & Forage equipment for providing for their herd’s needs. The investment from Dairymen will help offset losses in Combine sales for Ag Equipment companies. New Holland stands to see the biggest gain this year, as they command the Hay & Forage market with their Best in class equipment and patented technology.
Why are milk prices so high this year? Well, China likes Milk, and they typically get most of their milk from in the country or New Zealand, both of whom had droughts this past season. Thus, they have begun importing dairy from the United States. This has driven the price of milk to an all-time high. Will the prices remain and for how long? Well, I think by the end of the year prices will begin going back to more normal prices and that this will be a short lived extravaganza for Dairy farmers.
Thus far, farmers seem to be happy with the steady year, average prices are good with great yields and are preferred over years with high prices but also high risk for collecting good yields. Dairy farmers have cash again, and that helps the other farmers be better able to make better marginal sales on their commodities.
Questions remain though for the future of the Ag Equipment Industry. Where will technology and testing and everything lead the industry? Will equipment keep getting larger? Will the future in low labor cost drone type equipment? Or will the industry start moving back to smaller, lighter, less compaction equipment?
What direction do you think the Industry should go in? I’d love to hear your thoughts!