Being honest about milk contracting

Milk prices have already started to climb, and we're guessing that the cautious dairy farms out there are already starting to think about what to do if milk prices take another turn for the worse. We attended the Midwest Dairy Expo recently and had the opportunity to listen to Phil Plourd of Blimling and Associates. Plourd works with dairy producers and end dairy product users (buyers) to contract milk purchases. Plourd says that interest in contracting milk right now is pretty high. It's unfortunate though, Plourd says, because milk prices are still expected to climb. He does give some advice, however, “right when you’re not thinking about contracting milk is probably the right time to think about it," Plourd says. While that might seem pretty vague, he means that right when milk prices seem pretty good you tend to forget about a down-turn.

Plourd is pretty realistic and admits that milk contracting is not a get-rich-quick scheme. He says that contracting milk allows a clear budget to be formed— something attractive to the highly leveraged dairies of today. Plourd says, “It’s not about capturing the highs, but managing the volatility.” If you think you'll rest easier knowing exactly what you'll be paid, and are interested in watching markets closely, maybe this is something for you.

Plourd also shared a note of humor with the session attendees. "Why do dairy producers always root for their contract to be higher than the market price when they only contract 30 percent of their milk?" He's got a point; wouldn't you want to make more on the other 70 percent of your milk? It must be something about "being right."