Market milks dairy farms

June 15, 2003|by JULIE E. GREENE

Dairy farmers are accustomed to milk prices dropping up and down for a few months, but who could predict the latest drop was going to last nearly 18 months and counting?

Milk prices have been so low it cost dairy farmers more money to produce a gallon of milk than they can make on that gallon so farmers are having to dip into their savings and tighten farming operations, some local farmers and extension agents said.

"People realize there's no light at the end of the tunnel," said David Herbst, of Misty Meadow Farm in Ringgold. "They're grappling for any ray of hope for relief."


That ray of hope may be the unusual unity many dairy coops in the nation are pursuing in an attempt to change the market by asking farmers to voluntarily reduce milk production. The theory is that if milk production is reduced the nation's supply of milk, which is at a surplus, may decline enough to get prices for farmers to rise again.

Milk prices for farmers have hovered around $10 to $11 per hundredweight of milk since early 2002, according to a chart displayed at a recent Maryland & Virginia Milk Producers Cooperative Association meeting.

Those prices are similar to prices 25 to 30 years ago, according to the coop graphic, agricultural extension agents and local farmers.

"I can guarantee you the cost of making that same milk is not what it was 30 years ago," said Washington County Agricultural Extension Agent Don Schwartz.

Prices have gone down because the national supply of milk exceeds the demand, farmers and extension agents said.

There's been less demand for dairy products, just as there has been for other consumer goods since the Sept. 11, 2001, terrorist attacks and the economic downturn that began shortly before that, Franklin County Cooperative Extension Agent Philip Wagner said.

Since the attacks, people haven't traveled as much, said David Roth, committee chairman for the Farm Service Agency in Washington County and area delegate for Land O'Lakes Milk Cooperative. The drop in travel has hurt the restaurant and travel industry, which are bigger users of dairy products than most people realize, he said.

Compounding the problem for Tri-State area dairy farmers has been the persistent rains this spring that have slowed the harvest and baling of hay used to feed dairy cows, farmers and extension agents said. That means many dairy farmers, who tend to grow their own cow feed, have had to buy more feed this season.

Belts tightened

The result of those low milk prices and increased rainfall is the tightening of financial belts for many dairy farmers.

"You can suck it in and take this stuff for a while but, long term, it's just not going to be good," Herbst said.

Colleen Cashell, executive director of the Farm Service Agency in Washington County, said three dairy farmers have gone out of business since last fall.

Schwartz and Cashell said some farmers have culled or reduced their herds. While sometimes farmers reduce the herd by selling the cows to other dairy farmers, more often it means sending them to the slaughterhouse for beef prices.

"Locally, I haven't heard of any sales scheduled yet," Schwartz said. "But if an old milk cow just isn't producing the way she should, especially with beef prices up a bit, those old girls are taking a trip to McDonald's.

To save money during tight times, Greencastle, Pa., area dairy farmer Nevin Martin said he may pay for a $15 sire for artificial insemination rather than for a $25 sire for his breeding program.

Martin also has been comparison-shopping to get the best deals on feed, fertilizer and seed. Martin said he buys supplies as he needs them, unless he can get a break by buying supplies in advance.

"It's tough. It's real tough to try to get crops in along with the low prices for milk," said Robert Smith, who operates a dairy farm on Big Spring Road with his two brothers. "It's just a tough break for farmers."

Smith said their reserve fund was gone long ago.

"We just do without a lot of things. You have to make do with what you have," he said.

Greg Wiles has the usual farm expenses plus a loan to pay off because he bought his parents' share of a Williamsport area dairy operation in December. Wiles said he still has to buy feed for cows and fuel for equipment so he had his credit extended.

"You can't always pay off a bill in 30 days," Wiles said.

Instead you stretch it to 60 or 90 days, he said. Some creditors are more understanding than others.

Helping farmers

The 2002 Farm Bill has helped or at least provided some relief, said local farmers and Cashell.

The Farm Bill's Milk Income Loss Contract set a target price for milk in the United States, Cashell said. Every month participating farmers subtract the average milk price from that target price and the federal government pays them 40 percent of the difference, Cashell said.

Farmers started getting the money late last summer, but the payments were retroactive to December 2001 so their first checks were big ones, Cashell said.

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