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Serving: United States
red barns behind lush green cornfield
MORE MONEY: Dairy farmers saw a reprieve from low milk prices in 2019 with the November Class III price climbing to $20.45 — the highest in five years.

Focus on tackling debt in 2020

Catch up on bills and delay making purchases.

With a new year and a new decade just around the corner, soon we can turn the page on 2019.

The year brought plenty of challenges, including record precipitation that delayed and even prevented planting crops, and made the harvest season a nightmare for many farmers, as corn averaged 23% moisture. As of Dec. 1, only 66% of corn for grain and 86% of soybeans in Wisconsin had been harvested.

Not all bad

But a number of good things happened in 2019. Crop farmers continued to receive trade aid. All farmers benefited from continued low interest rates. Dairy farmers saw a reprieve from low milk prices with the November Class III milk price climbing to $20.45 — the highest in five years. Milk prices in 2019 are on pace to average $2.30 per cwt higher than during 2018. While the Class III price is expected to average $17.50 the first six months of 2020, that’s $4 per cwt higher than it was last February. Milk prices are predicted to average $1 higher per cwt in 2020 than in 2019.

The continued reduction in the number of U.S. milking cows and moderate increases in the average production of milk and milk solids per cow have been important supply-side contributors to higher milk prices. Good domestic demand growth and improved cheese exports have also been positive. These developments more than offset a 1% drop in overall dairy exports, some recent softening of U.S. butter prices, and deteriorating dry whey prices thanks to China’s swine fever epidemic and the continuing U.S. trade war.

The Dairy Margin Coverage program offered reasonably priced protection to dairy farmers when the difference between the all-milk price and the average feed cost fell below a certain dollar amount selected by the farmer. Dairy farmers earned more than $300 million from the program in 2019.

Paying bills

While many farmers will have more money in their pockets in 2020 than they have had in a few years, I think they should put off spending money and focus on tackling debt and paying off bills. Nobody knows how long higher prices will last, so use the opportunity in 2020 to catch up on bills and pay ahead on farm loans, if possible.

You can always replace the old pickup truck or update your milk house or machine shed, or take a much-needed family vacation in 2021 instead. Your vet, feed mill, seed dealer, bull stud, farm equipment dealer and your lender will appreciate your efforts, and your financial future will be that much brighter.

Here’s to a prosperous and happy new year!

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