Although Wisconsin farmers are getting paid more for their milk than a year ago, they're not out of the woods yet, according to state officials who spoke at the Annual Ag Outlook Forum at University of Wisconsin-Madison on Jan. 20.
"Wisconsin dairy farmers lost $1.8 billion of equity in 2009," says Bruce Jones, UW-Madison ag economist. "The more productive you are, the more the price drop affected your bottom line."
According to UW Jones, the three main things that contributed to an erosion in dairy farmers' equity in 2009 are:
- Cash flow. Farmers averaged $5 to $6 less per hundredweight for their milk than what it cost them to produce it.
- Devaluation of cattle. Farmers on average lost $700 per cow. In January 2009, cows were worth $1,900 per cow. 2. By fall of 2009, cows were worth $1,200 on average or less.
- Land values softened. Farm values weakened slightly by 3%.
Paul Dittmann, director of the Wisconsin Farm Center, said there are still a significant number of dairy farmers across the state under severe financial stress.
"We know Farm Service Agency did a lot of restructuring of debt in 2009, WHEDA (Wisconsin Housing and Economic Development Agency) is cutting down on CROP loans," Dietmann said. "As a result, we know we will be getting a lot of mediation calls this year."
Dietmann said farm credit has gotten tight and it looks like it will remain tight throughout 2010. The inability to borrow money from a bank caused many farmers to turn to credit cards.
"We have farmers with well in excess of $100,000 in credit card debt at high interest rates up to 29%. We have a lot of vets, feed mills and custom operators not getting paid."
Those who owe the most are on farms where a spouse lost a job or they bought most of their feed, he said.
Dietmann says he is bracing for an up tick in farm foreclosures and bankruptcies in 2010.
"We haven't seen an increase in foreclosures or bankruptcies. We think that could be coming this year," he explained. "The banks haven't taken action yet."
Dietmann also looks for an increase in the number of farmers exiting dairying in 2010.
"I think a lot of farmers who were considering retirement in 2007 and 2008 who decided to delay retirement because milk prices were so strong will decide to sell out in 2010 because cow prices were too low to sell out in 2009."
High unemployment, especially in rural areas of the state, has also delayed retirements from dairying.
"A lot of guys stayed dairying last year because they looked around and have not seen a lot of jobs out there with unemployment so high."
Dietmann said a number of farmers will have no choice but to sell out. Longtime ag lender Gary Siporski who now works for Vita Plus agreed.
"There are farmers who still owe on 2009 crop loans and now they're coming in to borrow for the 2010 crop year and banks will have to make some tough decisions," Siporski said.
The stress farmers have felt during past year has taken a toll on both them and their families, Dietmann noted. Call volume to the Wisconsin Farm Center was up 51% in 2009 over 2008. The farm center had 4,457 calls in 2009 compared to 2,957 calls in 2008.