Wisconsin’s farm economy bucked a national downward trend and set key income and wealth records in 2014 with the help of dairy farmers who increased production as milk prices skyrocketed, according to a new report.
State dairy income increased by $1.2 billion in 2014 and that pushed farm profits in America’s Dairyland to a record $4.26 billion in 2014, four UW-Madison agricultural economists wrote in a report published Monday. The equity of Wisconsin’s farmers jumped 1.9 percent in one year to a record $64.4 billion.
“It was dairy’s year,” said Bruce Jones, one of the co-authors of the report that was published in advance of Wednesday’s Wisconsin Agricultural Economic Outlook Forum at Memorial Union.
Nationally, farm profits dropped 24.6 percent from 2013 because of big drops in corn and soybean prices that cut crop income by 11.5 percent, according to the report, which cited data from the Economic Research Service of the U.S. Department of Agriculture.
In Wisconsin, gross crop income dropped 12.1 percent to $3.75 billion last year, but that was offset by a 22.3 percent gain in gross dairy/milk income to a record $6.78 billion, the UW report showed.
“Nationally we’re driven more by the grain resources. Wisconsin is more than 50 percent dairy, and we were able to take advantage of those stronger milk prices,” Jones said.
The outlook for 2015 isn’t as optimistic, Jones said. Milk prices topped $25 per hundredweight last year but have since fallen more than $7, a level at which they are expected to stay through most of the year, he added.
“That will transfer into a significant decline in gross income, and that will result in a drop in net income,” Jones said.
Export concerns due to a stronger dollar and improved competition from New Zealand and the European Union also threaten dairy income. U.S. dairy exports dropped over the final six months of 2014 after experiencing big gains in the first half of the year, the report said.
On the grain side, corn prices are expected to stay low but steady through 2015 while soybean prices are expected to drop further.
Also, agricultural real estate in Wisconsin hasn’t appreciated like it has in other Midwest states, the report showed. Because of that, Wisconsin farm assets grew by only 11 percent from 2010 to 2013, while U.S. farm assets jumped more than 25 percent.
On the positive side, the report said lower oil prices will help state farmers, who can expect to pay lower prices for fuel as well as fertilizer and other costs in 2015. Farmers also can expect to continue to receive high prices for cattle taken to slaughter, which should contribute to smaller dairy herd sizes and “moderate” milk prices by the end of the year. The report predicted that cattle herd expansion should begin later this year because pasture conditions have improved along with profit opportunities.
Jones said he doesn’t believe 2014 will go down as an economic fluke in Wisconsin. “I really hope we see it again. It may be a few years away, but who knows? Maybe the conditions will someday come together and we’ll see strong milk prices coupled with strong crop prices,” he said.