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Farmers cut costs as milk prices fall

February 23, 2009|By ANDREW SCHOTZ

WASHINGTON COUNTY -- Dairy farmers are bracing for a sharp drop in milk prices.

The projected imminent decrease is beyond the pale of the normal ebb and flow of the market, observers say.

In 2008, the price of fluid milk, the kind seen on supermarket shelves, averaged about $18, according to Amber DuMont, the director of corporate communications for the Maryland & Virginia Milk Producers Cooperative Association. That's per hundredweight, a standard unit of measurement.

The price dropped to $15.74 last month and $10.72 this month.

In March, it's projected to be around $9, DuMont said.

The expected 50 percent drop is the latest leg of the roller coaster that is farm life. The decline is acutely felt in Washington County, Maryland's second-highest dairy-producing county, and follows a few good years of milk prices.

Washington County has 151 dairy farms, making milk the county's top farming category, ahead of fruit and grains, said Jeff Semler, an agriculture and natural resources agent for Maryland Cooperative Extension's local office.

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"On the surface, it looks worse than anything we've had in the recent past -- I'd say, the last 10 years," said dairy farmer Galen Long of Long DeLite Farm near Williamsport. "(But) we haven't exactly hit rock bottom yet."

Semler said the new crunch tests farmers already doing what they can to cut costs.

"We're just about as efficient as we possibly can be, in my opinion," he said.

Long said it's challenging to find a "happy medium" when buying feed or gauging production.

"Sometimes, the best thing is say a prayer," he said.

Long said he sees a "glimmer of hope" as some expenses have come down, although not as much as milk prices.

Donald Beard, who is milking more than 200 cows on Highpoint Acres near Boonsboro, agreed that farmers have streamlined operations as much as they can.

But since farmers have to look somewhere for relief, Beard said he'll put off purchasing new machinery.

"We have to fix up what we've got," he said.

He said he's thinking about switching to chicken manure as a nitrogen source, which also might save some money.

Fertilizer prices have soared in recent years, Semler said.

Diammonium phosphate, for example, cost $252 a ton in January 2007, but cost about three times as much last year. The cost of potash, which is used for fertilizer, doubled during that period.

But Long said fertilizer costs are dropping again, and fuel prices even more so, giving farmers some breathing room.

DuMont said a decline in milk prices isn't unusual on its own.

"It's just that the drop is so significant," she said.

She said strong growth in U.S. exports in recent years took pressure off domestic supply-and-demand variations.

However, the European Union cut back on subsidies, and Australia and New Zealand have rebounded after lean years of drought, she said.

Lower foreign demand and the poor domestic economy have combined to hurt dairy farmers as milk prices fell, she said.

U.S. exports increased for six straight years, according to a news release issued this month by the U.S. Dairy Export Council.

Dairy export sales in 2008 were 25 percent higher than in 2007 and twice what they were in 2006.

But, in the second half of 2008, exports dropped 21 percent from the first half, the news release says.

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