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. :(
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