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Banker expects less expansion and tighter dairy margins

An ag banker says he expects dairy farmers will be looking for additional ways to improve margins, and expansion is unlikely for most producers.

Dave Coggins with Nicolet National Bank says milk prices paid to farmers hit some historical highs in early 2022, but those milk prices have dropped off. “They’re still decent by a historical perspective but there’s just this question of what are the expenses that that farm needs to manage to help with their margins. Projections going into 2023 are a little bit more challenging with some of those inputs being a little more expensive.”

Coggins says it’s also tough for most dairy producers to expand to gain the efficiencies that come with larger-scale operations. “More milk can be a challenge in this environment. We are hearing of some expansions that are coming online but there’s still a challenge of being able to produce more milk and have a plant that will take that extra milk for you.”

And, Coggins says the higher cost of building or remodeling facilities is also slowing expansion plans.