Hutchinson’s Dairy Day drew quite a crowd to Library Square Friday to celebrate a cornerstone of Minnesotan agriculture.
While visitors lined up for milk and ice cream, or to see the dairy cows soon to be milked as part of a competition, one guest — U.S. Rep. Collin Peterson — chatted with locals, area legislators and a reporter over lunch.
Dairy margin coverage
When Peterson visited Litchfield two months ago, he urged dairy farmers to stay in the game in expectation of an upcoming Dairy Margin Coverage Program, which replaced the Dairy Margin Protection Program.
Farmers who enroll receive payments when the income-over-feed-cost margin falls below a selected coverage level, with coverage ranging from $4 per hundredweight to $9.50 per hundredweight.
Farmers can sign up next week and receive coverage retroactive to the first of this year.
Peterson said the program is especially appealing to new farmers.
“If you’re a small dairy farm, this program will guarantee you can stay in business the next five years,” he said. “If a young guy wants to get into dairy farming, this is the best time I’ve seen in my career.”
The margin coverage can be locked in for five years for small farms, and those who enroll for five years can receive a premium discount.
“You can guarantee a gross income for five years,” Peterson said, noting the reliability should be appealing to banks.
That, in addition to lower prices to buy cows, equipment and property, means someone looking to start may have a good chance to get their foot in the door, Peterson said.
Looking ahead, Peterson said he’s worried about the soybean market.
“It’s going to be really bad, I feel, next year,” he said. “You’ve got a perfect storm.”
With China having killed a major share of its hogs due to swine fever, the home of half the world’s hogs is suddenly importing much less soybeans than in previous years.
“And you add the tariffs on top of it and the weather,” Peterson said.
He said he believes bankers around Hutchinson are still willing to provide financing for now, but further west in the state the problem may be more pronounced.
“I am expecting next winter will be bad,” he said. “Maybe it will be two winters from now. But I expect we are heading for a crisis that will be equivalent to the one we had in the 1980s.”
Though markets haven’t looked friendly for a few years now, farmers have been able to receive financing.
“But when you really have a problem is when the bank says, ‘You’re done,’” Peterson said. “It costs so much to farm now that you can’t do this without outside financing.”
To make matters worse, farmers are planting less because it isn’t profitable. But such a decision may lead to future problems as it appears tariff relief will not count toward unplanted acres.