Iowa Public Television

 

Tough Economy Hits Dairy Industry with One-Two Punch

posted on January 18, 2010


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For the last 20 years, dairy producers have ridden an economic roller-coaster of price volatility. Just in the past five years, dairy prices have shot to record highs in 2007 before falling dramatically amidst a global recession in 2009.

According to Bob Cropp, an emeritus professor at the University of Wisconsin-Madison, overexpansion and falling demand sent the dairy industry into a tailspin.

Bob Cropp, Professor Emeritus, University of Wisconsin-Madison: "The major factor was the loss in dairy exports. That's relatively new with the dairy industry because if you go back four or five years exports were incidental. Our buyers with the Asian markets, what have you, or Mexico, even our largest customer, exports all fell off and it was like putting another 5 billion pounds of milk back on the domestic market."

Collapsing export markets were the second jab of a one-two punch administered first by rising dairy inputs. Previously cheap feed for dairy cattle gave producers a reliable input price but uncertainty returned once skyrocketing grain prices ripped through the livestock sector.

Looking into his crystal ball, Cropp sees the coming years as an opportunity for an economic rebound in the dairy industry – particularly in the Midwest.

Bob Cropp, Professor Emeritus, University of Wisconsin-Madison: "There's some trouble areas out there but long term I come back and simply say that the economy will recover, rural exports are picking up. It's a bright industry for the upper Midwest. We'll come out of these tough times and so it takes some risk management skills but it's a pretty good industry."

 


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