FCC: Dairy farmers should see revenue gains again in 2021

Dairy farmers should see revenue gains in 2021, according to the latest forecasting from Farm Credit Canada.

The ag lender and industry analyst released its forecast for the sector last month, noting that not only should dairy farmers’ net revenue increase this year, it also went up last year. Estimates of gross revenues in 2020 were higher than in 2019, and total expenses were lower.

While early reports of milk dumping got a lot of attention, overall milk production in the P5 milk board (which includes Ontario) increased in 2020.
And there’s reason to be optimistic about 2021, FCC noted. With the dairy commission boosting the butter support price and the expectation of food services reopening by the latter half of the year, revenues could jump by as much as $1.80/hectolitre, or just shy of two cents per litre.

But there are headwinds. Strong grain prices are good news for farmers who sell grain but not for farmers who buy it. A revenue boost also relies on food services actually reopening, as well as US milk prices stabilizing. They’ve played a bigger role here since CUSMA tied the price of Class 4a milk to the US price for non-fat dry milk.

The overall economic recovery will play a role as well. COVID-19 has caused a massive worldwide recession, one of the largest in history, and Canada’s GDP shrunk by about 5.5 per cent last year. The Bank of Canada is forecasting about 4 per cent growth for this year, but that’s contingent on vaccine distribution.