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Lessons for All From Dairy in Sioux Falls

Producers see better times ahead and need to increase working capital.

"Surprisingly positive" is how many people described the mood dairy farmers who attended the recent Central Plains Dairy Expo in Sioux Falls.

"We're hanging on now," said one producer who did not want to be identified, "but it's going to get better."

Prices have been below the cost of production for many milk producers. But Bob Cropp, University of Wisconsin professor emeritus who spoke at the event, said he expects prices will begin to recover as the global economy improves.

In the meantime, milk producers are trying to reduce their burn rate – the amount of money they are losing every month. They are also looking to where they can get the get the money they need to stay in business. Cash reserves and equity in land, cattle and facility are all being drawn upon.

There are lessons for everyone in agriculture in what dairy industry is going through, said one banker.
Prices can collapse more quickly than you expect, if the right factors come together.

You need more working capital and more aggressive risk management strategies – both on the input and output sides - than ever before to survive price cycles.

"It's the same for agriculture as it has always been," he said. "The numbers are just a lot bigger."

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