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Compeer Financial: Dairy farms remain strong but cautious about expansion

A lender says most dairy farms have been financially healthy during this ag economic downturn, but they’re reluctant to expand or make capital investments.

Curtis Gerrits is the Senior Animal Ag Lending Specialist for Compeer Financial.  He tells Brownfield most of the time when milk prices are good, farmers are upgrading or expanding by building barns and parlors.  That’s not happening as much now.  “Where we’re sitting today with the amount of milk production that is out there, especially in the upper Midwest, Wisconsin, Minnesota, Iowa, our processors are at a point where their farmers are doing such a great job and getting great high-quality milk and a good amount of milk out of those animals that our processors are relatively full.”

Gerrits says other factors are also making dairy expansions more difficult than they used to be.  “Especially with a little bit higher interest rates that are out there.  Obviously, the higher cattle prices that are out there, and the construction costs have gone up, especially after the COVID series so the world is just a little bit different than what we’ve experienced in the past with this streak of milk prices.”

Gerrits says dairy producers are also seeing signs of smaller milk checks soon, which also has them being cautious about spending and borrowing.  He says many dairy producers are paying down loans with available cash.  “We’re seeing these farms taking their profitability and putting it to good use and building up their working capital.  So what I mean by that is maybe they’re taking their cash and paying down their lines of credit as much as they can.”

Gerrits says crop farmers are struggling, but most dairy farms are in a good spot financially.

Gerrits spoke to Brownfield during World Dairy Expo in Madison, Wisconsin.

AUDIO: Curtis Gerrits discusses dairy finances with Brownfield’s Larry Lee during World Dairy Expo in Madison, Wisconsin.