After the difficult few years that the nation’s dairy farmers have been through, Collin Peterson said many might be skeptical of the advice he shared with First District Association members Saturday.
“People have given me a hard time for saying this, but I think if you’re a young person, and you want to get into dairy, there has never been a better time, in my opinion,” Peterson said. “And I’ve been around this business for 40, 50 years. There’s never been a better time to get into this business than now, if that’s what you want to do.”
Peterson credited First District Association leadership with the bold statement they made by pursuing a massive expansion of their Litchfield processing facility.
"For a change, things are looking a little more positive for the dairy industry than the past," he said. "I want to commend you ... you guys provide great leadership in putting these new improvements on your plant and moving you in the right direction."
That optimism is especially strong for young people considering a future in dairy, Peterson said, as a combination of factors have opened the door to potential success.
A significant factor is the Dairy Margin Coverage Program, which provides dairy operations with risk management coverage when the national milk price and the average cost of feed falls below a certain level.
The safety net provided by the program, in addition to other economic factors, give prospective young farmers a solid base upon which to build their business, Peterson said.
For someone considering entering dairy farming, it is a classic example of buying low.
“You’ve got barns sitting empty that you can lease,” Peterson said. “You’ve got cows that have been relatively cheap. You can work things out with your neighbors to provide feed. So, you can get into this without really putting any capital into it. You can take the margin coverage to the bank and use it as financing.”
Peterson said the original Dairy Margin Coverage Program was “screwed up” in the 2014 bill that created it. He said he thought at the time that “$6.50 above feed cost was too good,” an opinion shaped by $7 per bushel corn.
“So we ended up not having a safety net that worked, and some people that got burned,” Peterson said. “It’s been somewhat of a change to get people to look at the new Dairy Market Coverage that we put in the last farm bill.”
The new program has a milk margin-minus-feed-price of $9.50 or less, which has proven to be a much more palatable number for most dairy farmers, Peterson said. The program also included a 25 percent discount if farmers signed up for five years. About 75 percent of dairy farmers nationwide enrolled for five years, Peterson said.
“It paid out a number of months this last year,” he said. “If the futures prices hold as they were being projected, there probably won’t be as much payout next year.”
As bright as the picture might be for someone looking at getting into dairy farming today, the scene is considerably darker for those who got into the business the past three or four years.
“If you’re a young guy that started out at that time, you’re probably behind the 8-ball,” Peterson said. “That’s a problem. There’s probably not enough profit in dairy to get you out of that situation.
“But if you start off and don’t have any debt and you can put together the right situation, I think … you’ve never had a better opportunity,” he added. “I think you can make it work.”