Milk prices are high right now, and the upward trend seems to have not reached a ceiling. For example, the Class III milk price for the October contract on the CME has passed $23.50 per hundredweight (cwt.), and the December contract passed the $22 per cwt. mark a few days ago. This scenario reminds me of 2014, one of the years with the highest milk prices I can remember.
Anybody who understands dairy farming will also understand that having high revenues may be exhilarating to dairy farmers. After all, this holds for any business, right? First and foremost, high revenues provide relief to farmers under financial stress. In this regard, now is the best opportunity to “put the house in order,” meaning that the current scenario is a chance to revise and adjust financial indicators like solvency and liquidity. High revenues also help fix (literally speaking) equipment and facilities that are hard to address during financial stress. Fixing broken equipment and facilities in the present may allow cows to express their maximum potential and sustain revenue in the future when milk prices are not as high as they are now. Also, high revenues permit investing or expanding.
September 26, 2024
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