While the long-term outlook for agriculture is bullish, dairy producers face short-term financial challenges, Rod Wautlet, Agri-Business Consultants LLC, told producers attending the 2017 Vita Plus Dairy Summit, Dec. 6-7, in Madison, Wisconsin.

The dairy industry is volatile and unpredictable, and that isn’t likely to change. Dairy managers must embrace and adapt to that mentality to be successful, Michael Swanson, ag economist with Wells Fargo, told dairy producers attending the 2017 Vita Plus Dairy Summit, Dec. 6-7, in Madison, Wisconsin.

In addition to keeping a lid on milk production growth, many dairy analysts believe exports will be key to reversing slumping U.S. milk prices. December 2017 exports helped lay the groundwork for 2018, according to Alan Levitt, U.S. Dairy Export Council (USDEC) vice president of communications and market analysis.

Proponents of California’s entry into the Federal Milk Marketing Order system (FMMO) received an unforeseen delay when the USDA announced it would wait for a U.S. Supreme Court ruling regarding administrative law judges before moving forward.

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Despite mounting pressures on milk prices, the size of the U.S. dairy herd is expected to grow in 2018. It has a head start, with cow and replacement heifer numbers up a combined 80,100 compared to a year earlier, based on USDA’s semiannual estimate of dairy cows and heifers. Meanwhile, prices for both replacement and cull cows have been weaker.

A year ago, dairy “groundhogs” were poking their heads out of barns and milking parlors, optimistic 2017 would bring better financial times – a prediction that didn’t last. The USDA’s latest price and margin reports foreshadow a more cautious outlook for 2018.

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December 2017 U.S. milk production turned in another modest increase, up just 1.1 percent compared to the same month a year earlier. Troubling, however, is that the number of milk cows increased and is now at the highest level since August.

Projected milk prices aren’t good, and insurable margins using various safety nets and marketing tools aren’t much better, according to Alan Zepp, risk management program manager at Pennsylvania's Center for Dairy Excellence (CDE).