Some Wisconsin dairy cows may find themselves with less elbow room this year.

The number of dairy cows in the state grew by 3,000 last year. This was only the second year since 1985 that Wisconsin”s dairy herd didn”t shrink (the other was 1994). From 1985-2001, Wisconsin lost an average of 33,000 cows per year.

“The fact that Wisconsin added cows during 2005 is a sign of a positive turnaround for the state”s dairy sector,” says agricultural economist Ed Jesse, writing in the 2006 edition of Status of Wisconsin Agriculture, authored by agricultural economists and other faculty in the College.

“Equally important, milk yield per cow increased 4 percent, compared to a typical year-to-year gain of about 2 percent,” he notes.

The increase in milk cows is good news for America”s Dairyland, which in recent years hasn”t been able to produce enough milk to supply its dairy product plants. It”s also good news for the state”s agricultural sector in general. The financial health of Wisconsin”s farm sector continues to rest largely on the fortunes of the dairy industry. Milk sales accounted for 53.7 percent of the state”s cash farm receipts in 2004. Including sales of calves and cull cows, dairy”s contribution is over 60 percent.

Thanks to the combination of more cows and higher milk yields, Wisconsin”s milk production for the year was up 3.5 percent for the year to 22.9 billion pounds. In 2004 production had dropped 0.8 percent.

“Our percentage increase over year-ago levels was higher most months than the national average. I think this reflects a repositioning of our dairy cows – a larger share of them are now in more productive herds.”

But in terms of milk yields, Wisconsin dairy farmers continue to play catch-up. The state average is about 18,500 lbs. per cow – less than 95 percent of the national average. Last year”s boost in milk production didn”t cause a big drop in farm-gate prices, thanks to depleted stocks of dairy products, a 2 percent increase in domestic consumption and large exports of dry milk. Prices for Class III (manufacturing) milk averaged $14.05 per hundredweight – $1 below 2004 levels but $2 above the 5-year average.

But the increased production is now taking its toll. Milk production in the 23 major dairy states during February was up 5.5 percent from February 2005. By early March 2006, cheese prices, which drive manufacturing milk prices, were at or below government support levels, their lowest level since 2003. Butter, nonfat dry milk, and whey prices were also well below year-earlier levels. Monthly Class III futures prices through year-end are all below $12.00 per hundredweight.

“Not surprisingly, dairy farmers responded to the strong prices of the last two years by pumping out more milk than the market can absorb.” Jesse says. “This is leading to a build-up of stocks and sharply lower milk prices. With low milk prices and very high energy and fertilizer costs, Wisconsin dairy farmers will be tightening their belts in 2006.”