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In the farmers' favor

Record high milk prices are helping producers, but are far from a cure-all

Record high milk prices are helping producers, but are far from a cure-all

September 23, 2007|By HEATHER KEELS

HAGERSTOWN - Come to think of it, Ralph Shank doesn't know how much milk costs in stores.

When he wants a glass, he takes it straight from the tank where he collects about 1,000 gallons a day from the 150 dairy cows on his family's farm on Wagaman Road in Hagerstown.

At the Food Lion store about a mile up the road off Sharpsburg Pike, Heather Morningstar, 32, of Hagerstown said she paid $3.69 Thursday evening for a gallon of whole milk, more than she can remember ever paying before.

In fact, a survey of milk prices in 30 cities nationwide by the U.S. Department of Agriculture's marketing division estimates the national average price for a gallon of whole milk is $3.87, a record high. In Baltimore, the average earlier this month was $4.09.

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Shank doesn't need to walk into the store to tell that something is going his way: He can read it on the check he gets each month. The price he has gotten per 100 pounds of milk has almost doubled over the past year, from $13.24 in July 2006 to $24.01 this July.

But that doesn't mean his financial worries are over.

"The thing about this year is, yes, our price is up, but for the past two years, our prices were nowhere near what we're getting now," Shank said.

Supply and demand

The price farmers get for milk is set by a federal milk market, but, as with other products, it's influenced heavily by supply and demand, said Amber DuMont, spokeswoman for the Maryland and Virginia Milk Producers Cooperative.

A drought in Australia, a dominant dairy-producing nation, and restrictions on dairy exports from European countries have combined with a growing demand for dairy products in China to raise the demand on U.S. markets for exports like powdered milk and whey, DuMont said. This, in turn, raises the price of liquid milk and other dairy products at home, she said.

But last year and the year before, the story was very different.

Over the past two years, Shank said, he's had to delay repairs and borrow money just to stay in business.

Costs going up

Now that the milk market has shifted in his favor, he's trying to pay off the money he borrowed, but it seems like he's spending more money on new expenses than on paying off debts.

For one thing, there's gas prices.

"When fuel goes up at the gas pump, it goes up to us," Shank said. In addition to fueling up tractors and equipment, he has to pay to ship his milk to processing plants across the region.

"Every time fuel goes up 5 cents, they get an increase which comes right out of our check," Shank said.

Then there's feed. Shank feeds his cows a mix of corn, alfalfa, hay, wheat and oats. Normally, he gets some of that from the land he owns and rents to his cousin, but this summer, the farm was hit by the drought. Where cows once grazed, now there is only dry, brown dirt. Shank's already dipping into his "winter hay," but the bottom line is that he is having to buy more crop than usual.

And that cost is going up, too. As the demand rises for corn to use in the production of ethanol, Shank has seen the price of corn go up about 75 percent over the past year. While last July he paid $105 a ton, this July he paid $185 a ton.

Price up, price down

He's not the only one feeling the squeeze. Many farmers have been forced to leave the business over the past few years because of rising production costs, DuMont said.

"The increase in prices on farm side is a welcome relief given increased cost of production," DuMont said. "Finally, their patience and their ability to make it through that tough two-year period is paying off."

Many farmers are praying the higher prices will continue for a few more months, but Shank isn't optimistic.

"What goes up always comes down, and the highs are never very long," Shank said. "If anything, it's one good year followed by two bad years, followed by one 'eh...' year."

But when the price does come down, Shank still plans to get up each morning to milk the cows, whatever it takes for that to happen.

"We grumble, we growl, and we keep on going," he said. "You're never going to get rich milking cows, but it's a way of life. I don't know what else I'd do."

Changing prices

September 2006:

For a gallon of whole milk, you paid (30 cities average): $3.15

For a gallon of milk for liquid use, farmers got 89 cents

September 2007:

For a gallon of whole milk, you pay (30 cities average): $3.87

For a gallon of milk for liquid use, farmers get $1.80

Sources: United States Department of Agriculture, Maryland & Virginia Milk Producers Cooperative

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