It should come as no surprise that the dairy industry drives a large portion of the Northwest agricultural economy.
According to the 2017 Census of Agriculture, which was just released last month, the region’s dairy farms had production valued at $4.2 billion.
By comparison, the next largest ag sector in the three Northwest states was cattle and calves with a production value of about $2.7 billion.
In third place were apples at $2.4 billion, potatoes at $1.83 billion, hay at $1.81 billion and wheat at $1.3 billion.
While these are large numbers, they are also subject to volatility. Several years ago, the price of wheat spiked at more than $10 a bushel, only to drop by half.
Nearly every commodity faces volatility. No one knows that better than dairy producers, who find themselves on a roller coaster that has sent milk prices spiraling past $20 a hundredweight one year only to splash down below the cost of production the next.
Most recently, much of the industry’s story has been written in red ink. Milk prices have lingered below break-even and are just now starting to rebound.
Why? The answer is complicated.
At the top of the list of factors is a trade war with China and several trade agreements that have been promised or negotiated but have not gone into effect.
With trade suffering, so has the dairy industry. The cyclical price swings have been exacerbated as some production meant for export stays and weighs on the domestic market.
In the meantime, take another look at that list of the Northwest’s top commodities, and you’ll find at least two others related to dairy.
Cattle and calves are impacted by dairy, whose cattle enter the market when they are culled. If excess dairy cattle are culled during a down milk market, it depresses the price of beef cattle, too.
In the 2017 census, for example, Idaho had about 2.4 million cattle and calves. About 25% of them were dairy cattle.
Hay is also impacted by the dairy industry. Though a lot of Northwest-grown hay is exported, a lot of it is also purchased by dairies in the region and in California. If dairy prices are low, they can depress demand and hay prices.
Again, looking at Idaho, 5.8 million tons of hay was produced in 2017. Much of it went to the state’s 603,817 dairy cows.
The fact that many other parts of agriculture are interconnected — wheat prices tend to track those of corn and other grains, for example — means that no commodity is an island.
That’s especially true when trade and the impact of overseas competition and currencies are factored in.
That’s why when you ask a farmer or rancher “How’s it going?” you better have plenty of time for the answer. It’s is far more complicated than you might think.