Posted on 06/14/2009 4:08:34 PM PDT by Born Conservative
WAYMART - Joe Davitt's tone curdled as he discussed the trough in milk prices.
"We're the only self-employed business that has no say in what we get paid," Mr. Davitt, 39, said Wednesday as he gazed at a cluster of Holstein cows feeding in the barn at his 145-acre farm. "I can't afford to quit because what the cows would bring wouldn't be enough to cover my debt."
A slump in milk prices is taking dairy farmers to the woodshed. Expenses exceed milk payments at many dairy operations.
"There were times before when the prices were low, but the costs were never so high," said Arden Tewksbury, a farm lobbyist from Meshoppen. "This is the worst cost squeeze we've ever had."
Pennsylvania dairy farmers have watched average prices drop by 33 percent in the last year, while production costs dipped only 8 percent. State farmers who took in an average of $19.90 in April 2008 for 100 pounds of milk received $13.40 this April for the same amount, Penn State University data show.
"You've got very low product prices and high input prices," said James Dunn, an agricultural economist at Penn State. "This is like walking into a coal mine and the ceiling keeps getting lower and the floor is getting higher. There's not much room for you."
The crisis follows a thriving period for the dairy industry from early 2007 to mid-2008, when Pennsylvania farmers consistently received more than $20 for each 100 pounds of milk produced, a standard industry measure that is equivalent to 11.6 gallons. Droughts in Australia and New Zealand and the weak dollar drove international demand for U.S. dairy products to 11 percent of total output in 2007 and 10.8 percent in 2008.
But the worldwide recession is souring international milk demand. The U.S. Department of Agriculture predicts a 27 percent drop in U.S. dairy exports this year.
"There's too much milk in the market," Dr. Dunn said. "Consumers aren't going to drink our way out of this predicament."
U.S. milk production hit 190 billion pounds in 2008, up 11 percent from 2004, USDA reports.
"We have to produce less milk in this country or sell more to change it," said Lou Hawley, a Montrose-area dairy farmer.
"Farmers are really in a difficult position," said Paul Manning, owner of Manning Farm Dairy in North Abington Twp. "Basically, the only way they can make more money is to produce more product."
Mr. Manning, whose family operates five regional dairy stores, is insulated better than most during the downturn.
He runs the farm with his three sons and they grow 95 percent of the feed for their 80 milking cows.
The dairy store chain, though, has cut the half-gallon price of whole milk to $1.60, down from $1.90 in January, and Mr. Manning is changing his bottle supplier to reduce expenses.
Mr. Davitt also is cutting costs at the Waymart-area farm he bought from his grandmother in 1996, where his 45 cows produce 500,000 pounds of milk annually. Feed prices have jumped 6 percent this month, so he cut purchases by 200 pounds daily and feeds his cattle more hay and silage.
He barters with other farmers for labor and materials and multi-tasks to control expenses.
"You have to be a carpenter, a vet, an accountant, a mechanic," he said. "Instead of replacing something, you fix it."
Fixing the crisis, though, probably requires fewer dairy farms and cows. The dairy cattle population will drop to 8.9 million in 2010 from 9.3 million in 2008, USDA projects.
"We're going to lose small farms because of the downturn in prices," said Mark Stephenson, an agricultural economist at Cornell University in Ithaca, N.Y., who has followed the dairy industry for 30 years. "In my working career, I've never seen a worse year than this one."
Leon Simansky, who lives near Mr. Davitt's farm and raises calves on his 240-acre property for dairy farmers, knows what a tough year it is. Fifteen months ago, he charged up $2,200 for heifer calves. Today, they're selling for $1,200.
"I'm cutting timber on my property to pay for my fertilizer," said Mr. Simansky, who has been farming for 26 years. "There's no profit in this. We're stuck."
Some farmers hope federal legislation will help. In April, U.S. Sens. Bob Casey and Arlen Specter introduced a bill that would link milk payments to farmers' production costs.
"Some sort of supply management might be our salvation going forward," said Mr. Hawley, the Montrose-area farmer. "A lot of people are on the edge."
Consumers benefit
Retail milk prices in the region have dropped 29 percent since they peaked 19 months ago.
The minimum price of a gallon of whole milk hit $3.90 in November 2007, according to the Pennsylvania Milk Marketing Board. This month, the regional minimum is $2.77.
I can’t wait for those low prices to hit the shelves...
Total BS. The price of milk here has been going up and up and up... just like the price of all the other food we buy. Where is this mythical market in which there is an oversupply of food that is causing prices to come down.
Hmmm...I wonder if 0bama will take a page from FDR and call for the destruction of milk and milk cows in order to drive the price up*?
Would not put it past him.
*referencing the Agricultural Adjustment Acts.
Just wait until they impose the “Fart Tax”
I don't recall any farmers apologizing when prices were hitting $3/gallon (and we have cheap milk compared to a lot of places).
Wonderful. The feds will raise the price of milk even more. Can't anyone in this country do anything without asking the government to help them out? What about all the damn taxpayer subsidies we give to farmers now?
Low prices are hitting the shelves and people are buying. Funny how that works.
the rational mechanism that kept supply and demand in check was called “base”.
dairy farmers purchased the number of shares that they needed for the size of their herds.
20 years ago lawyers destroyed this system and kept the farmers’ money.
since then rapid expansions in herds and contractions have followed.
Here in Kaleeeeeeeeforneeeeeea we have price supports to keep the store price artificially high.
I’m in central Florida and I have to say I’ve seen a significant drop in the price of milk.
But dairy isn’t the only industry that is being pinched.
Obami will see to it that every self-employed and non-union shop suffers.
milk had been - at peak milk prices $2.89 a gallon at Aldi...last time i looked a couple of weeks ago, it was $2.19 or $2.29 a gallon. I don’t remember since I can’t stand the taste of milk from the store and therefore don’t buy it...
The article said — “Consumers aren’t going to drink our way out of this predicament.”
—
Well..., I’m going to try and help out there... LOL...
I can really go through the milk... a gallon here and a gallon there... :-)
I was told by a dairy farmer that what they get paid for milk depends on the price of cheese on the Chicago stock exchange.
There are USDA price supports everywhere. Not just Kalifornicate. In addition the dairies in Texas, New Mexico, and Kansas can haul one load of milk to Kali every period and receive Kali support price.
I’m a farmer and I stand up for the farmers, but it is a simple matter of supply and demand that you cannot put in an endless supply of mega dairies—2000+ cows— and expect the demand to keep up with it. They have 2 choices, either cut back the number of cows, or sell milk at a lower price to cheese and icecream rather than fluid milk. They knew the rules before they got in. The tail is now wagging the dog and it is gutting the little guys.
Hi Nully,
The reality is that the small producers, the fewer than 100-cow milkers are going to disappear in the not too distant future. Where I live in Idaho there were a dozen 50-cow barns in the area and over the last 10-years there is not one milker in the valley. However, in southern Idaho, there are many, many huge 5,000-head barns. The small producers just can not compete...and the reasons are many, but mostly associated with near-proximity to high-quality alfalfa. A lot of the southern Idaho barns are located in the middle of multi-thousand acre alfalfa fields and essentially are vertically integrated from hay farm to bottler. I’m sure they are hurting too, but they are so efficient they are the reason there is a glut of milk.
Premium saltines are now smaller. The sleeves used to “just fit” into our tin, now they fit with room to spare.
So less milk will be needed in the future. Two problems solved at once.
I suggest government intervention.
Oh, and we must announce this must be done immediately to address the greatest crackers and milk crisis since the Great Depression
/sarc
Contrary to popular belief, there is no free market for milk in the U.S. Milk prices are instead set through an archaic federal marketing order system, which determines a Basic Formula Price (BFP) for various milk classes (1-IV). Class III milk, which goes into cheese and accounts for 85-90% of the dairy market in states like WI, is the “prime mover” in the federal system, determining price differentials for everything else from drinking milk (Class 1) to butterfat (Class II), to nonfat dry milk (Class IV). And for decades, the Class III BFP was pegged to sales of 40 pound blocks and 500 lbs barrels of cheddar cheese traded at the National Cheese Exchange (NCE) in Green Bay, WI. Each Fri. at 10:00 am a small clique of cheddar traders would gather for a virtual auction lasting a mere 30 minutes.
Don’t know about Obama, but it’s been the plan of the USDA for some time now. And it has nothing to with “supply and demand” here in PA and many other parts of the country. Maximum and minimun prices are “set” by a regional milk pricing board and change from month to month and the actual dairy farmer gets precious little from the price you pay at the store. :(
So, grain prices are up, there's a lot of grass, and at the same time people have less money to shell out for milk and milk byproducts.
All makes sense ~ just do the math and pray for a warmer Earth.
“I don’t recall any farmers apologizing when prices were hitting $3/gallon (and we have cheap milk compared to a lot of places).”
Did you ask any of them how much of that $3 they were getting?
More recently I've noticed the price of extra sharp cheddar dropping. It's still higher than young cheeses like longhorn or pasteurized process american cheese.
Yeah, well, if you wanted to be dictator of the world, would you want to try to control 10,000 farms with 100 cows or 10 farms with 100,000 cows?
They sure aren’t charging any less at the grocery store for any dairy products!
I paid $1.79 for a gallon of skim today.
The choice is odoriferous
At the farm level. See my tagline, it holds true year after year.
You only think that because you don’t want to be dictator of the world.
“The dairy store chain, though, has cut the half-gallon price of whole milk to $1.60, down from $1.90 in January, and Mr. Manning is changing his bottle supplier to reduce expenses.”
“The minimum price of a gallon of whole milk hit $3.90 in November 2007, according to the Pennsylvania Milk Marketing Board. This month, the regional minimum is $2.77.”
Cry me a river, PA has set minimums for milk my entire lifetime and it leads to subsidized farmers who are out of touch with reality.
The price of a GALLON of milk at Basha’s in Phoenix is $1.39/gallon. If you can’t make it at $3.20/gallon in PA maybe you should just shut down. Produce something not subsidized.
Mid-Hudson dairy farmers face steep decline
Dairy processors, usually large corporations such as Kraft Foods, have released statements saying that today's profits make up for periods when wholesale milk prices were strong, as they were two years ago.
Big producers are making money and not farmers.
Framers DO NOT set the price of milk. See post 19. And 31.
Google up "Dairy Price Supports" sometime.
Tomatoes prices here didn't come down a penny. They speak with forked tongue.
Yes, but if you study the price support rules you find out that all a dairy has to do is deliver one load of Grade I or II Fluid milk to a bottling plant each pay period, and they get paid on fluid milk support price as opposed to cheese price. That was written in for the benefit of the California Dairies who expanded into the Eastern New Mexico Dairy Belt, Texas Panhandle Dairy Belt and Western Kansas Dairy Belt. They run one load of milk to the fluid bottling plant in Las Vegas or Los Angeles and they get paid bottled milk support price for all the other milk that they take to the cheese plant at Clovis, NM, Dalhart, TX or the icecream plant at Wichita, KS, because it was sold as fluid milk in Nevada or California.
Yep, the mom and pop corner stores are mostly gone, same is happening to the small farms.
These guys had better get themselves into a niche market fast.
Who said farmers set the minimum price? PA has a pretty powerful Dept of Agriculture.
From the article:
“The minimum price of a gallon of whole milk hit $3.90 in November 2007, according to the Pennsylvania Milk Marketing Board. This month, the regional minimum is $2.77”
Learn how to read.
We have farmers selling their farms that their families have owned since this area was settled. Farms are closing because they cannot compete with the big guys while getting told what their milk will sell for. Btw, milk has been sold according to others price rules since the 30's.
In my neighboring county, a family/group moved here from Denmark and set up a large milking operation in the middle of what once was a tillable field. That means, they built a house, the biggest damn barn you ever seen, feedlots, pastures, and various other appurtenances. They did this two years ago, so the economic climate must have been sweet for them to move to overseas and start everything from scratch.
Contrary to popular belief, there is no free market for milk in the U.S. Milk prices are instead set through an archaic federal marketing order system,
That was my point too.
Do search on Pennsylvania Milk Marketing Board, and find outl me who runs it.
And don’t bother posting ignorant stuff that has nothing to do with PA.
Ok. Sorry but most seem to be bashing farmers and they have nothing to do with what they get paid for their milk. I have seen several farms go under in my area in the last few years. It’s awful to watch grayhairs sell their herds and cry while losing their GGGrandfathers farm.
Pa is above federal regulations? You must be special.
ICE CREAM!
Ahhhh... yeah! I’ve been eating more of that, too... LOL...
I remember a TV news report about farmer’s dumping milk out because it was too costly to get to market and there was a major oversupply.
I don’t remember the state, could have been PA. This I don’t remember but price supports set minimums and if the there was no dairy willing to pay that price there was no place for the milk to go but down the drain. PA may have been forced to buy the oversupply to support the price, so the taxpayers may have paid for it.
Look at the price in AZ vs PA and it’s obvious the consumers are paying for it. 1/2 price in AZ vs PA.
Like you said, oversupply.
I was eating a bowl while I was posting, set me back a whole $1.49, and believe me it was nowhere near as good as Breyer’s, pretty bland even with strawberries.
I am not an expert, but I do rent to a dairy farmer. He is milking about 500 cows and he is not breaking even. Someone asked about the price of milk in the stores coming down. Not for a long time, the supply chain from the dairy to the store is taking their profits out. Many farmers will go out of business soon unless demand and prices increase.IMHO
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.