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Dairy farm financial picture was bleak worldwide last year

The slump in dairy farm revenues knows no borders. That was clear from
the data presented at the annual International Farm Comparison Dairy
Network conference held in Kiel, Germany in early June, says
agricultural economist Ed Jesse, one of three U.S. representatives at
the event.

“The conference began with the sobering observation that 2009 was the
worst financial year for dairy farmers across the globe since the
network began in 1997,” says Jesse, Director of Trade and Policy
Studies for the University of Wisconsin-Madison”s Babcock Institute
for International Dairy Research and Development.

“Preliminary results from representative dairy farms from 45 countries
showed that because of much lower milk prices, fewer than half of
those farms covered their full economic costs,” he adds. “Those losses
occurred despite lower costs of production in 2009 compared to 2008
due to lower feed and energy costs, improved efficiency, devaluation
of foreign currencies relative to the U.S. dollar and general belt-
tightening.”

Jesse says he sensed that analysts from other countries are more
upbeat than their U.S. counterparts. While the rapid recovery of world
milk prices that started in the fall of 2009 stabilized dairy farm
economics in most countries, the United States, the recovery hasn”t
been as strong, he notes.

“Milk prices in the European Union, Brazil and Argentina all have
increased more than in the United States,” he says. “They”ve seen a
steady upward trend since the beginning of the year. We started out
that way, but our upswing has petered out.”

The final results of the IFCN farm analysis work will be published in
the 2010 IFCN Dairy Report available in October.

This year, for the first time, IFCN endeavored to forecast world milk
production for 2010 and 2011, based on individual estimates from
participating nations. It”s the only global forecast available that”s
based on estimates provided by individual nations, Jesse says.

Based on the assumption that prices for milk and key dairy inputs will
remain near mid-2010 levels, conference participants forecast world
milk production will grow by 12 million metric tons in 2010 and by
another 18 million in 2011. This suggests that 2010 will be a recovery
year, while 2011 milk production growth will match that seen in 2005
and 2006.

For the United States, milk production was forecast to increase by 1
percent in 2010 and 1.5 percent in 2011. These projections should be
viewed as preliminary since the IFCN is still developing its outlook
methodology, Jesse cautions.

Founded in 1997 and headquartered in Kiel, the IFCN is a research
network connecting dairy economists from 85 countries representing 96
percent of world milk production. Financial support comes from major
global milk processors and suppliers of dairy inputs.

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