The news was loaded this morning with issues going on around the country regarding the milk price. Here are some of the top stories, along with some other reader opinions regarding the milk price situation.
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Letter to the Editor -
I support the price stabilization program proposed by Holstein USA or some form of it. My parents just quit farming six months ago and I am keeping my dozen or so cows at a local dairy. My dream is to dairy farm as is my wife’s, who is not from a farm. I would only like to milk 100 cows and feel that I should have the right to do this and make a decent living. Anybody who knows me knows that I love cows and dairy farming. I do not feel I should have to milk thousands of cows to dairy farm. Doing nothing is not an option, if the big keep getting bigger soon there will only be corporate farms left. The problem is the large dairies expand during the good times to make the most money possible or take advantage of the high prices, thus putting too much milk on the market driving the prices down. The biggest problem is when prices crash, the large dairies still add cows, they think they are making themselves more efficient by getting more cash flow and spreading out the costs over more units or cows. What these guys don’t realize is when there is already TOO MUCH MILK, these guys dump more milk into the market, thereby suppressing the prices further and making the downturns longer. The funny thing is they blame it on their neighbor who added 1000 cows when they themselves have added cows. We are all to blame for this problem of supply and demand. Enough is enough, we need a program to keep cow numbers in check or milk production in check, or at least farmers looking out for each other instead of affecting our neighbors negatively. I may have offended a few people, but I have heard these concerns over and over again from many a small dairyman, under 500 cows these days. Thanks.
Sincerely,
Lance Hansen
Sedro-Woolley, WA
holshaft@hotmail.com
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Hot off the wires -
From Bloomberg.com
June 22 (Bloomberg) — Dino Giacomazzi, whose great-grandfather started the Giacomazzi Dairy in Hanford, California, in 1893, said he had no choice but to sell 100 cows, or 11 percent of his herd, in the past four months. Rising feed prices and a world surplus meant it cost as much as $17 to produce $10 of milk.
“Producers are in an absolute state of panic,” said Giacomazzi, 40. “To spend 100 years building a dairy business and see much of that equity disappear in a year is very troubling.”
Farmers plan to shift the pain to consumers. The National Milk Producers Federation in Arlington, Virginia, will pay dairies to slaughter 103,000 U.S. cows in coming months. Milk futures prices will double next year to a record $23 per 100 pounds (43.5 kilograms) as the herd shrinks by 171,000 head, the most since 1989, said Michael Swanson, a senior economist at Wells Fargo & Co., the largest lender to U.S. farmers.
The cuts will lead to the first two-year drop in output in four decades and higher prices in 2010 for butter, cheese, milk and the non-fat dry powder that’s a benchmark for global exports, according to U.S. Department of Agriculture forecasts. Futures for delivery in September 2010 trade 56 percent above today’s prices on the Chicago Mercantile Exchange.
Retail butter prices may rise above the record of $3.937 a pound and cheddar cheese may top $5.097 a pound, according to Jerry Dryer, 65, the editor of the industry newsletter Dairy & Food Market Analyst in Delray Beach, Florida.
‘Big Spike Up’
“We could easily see $20 milk again next year,” said Richard Bradfield, a vice president of the dairy business at International Ingredient Corp., a manufacturer of specialty feed products in Fenton, Missouri. “The longer these low prices last, the greater the potential for a big spike up in prices as dairies make larger cuts.”
Farmers are culling herds because exports plunged 26 percent in the first four months of the year, supplies rose and the cost of corn, the primary feed ingredient, averaged almost $4 a bushel.
At Tulare County Stockyard Inc. in Dinuba, California, more than three fourths of the cows Giacomazzi sold were purchased by beef processors including Cargill Inc., owner Jon Dolieslager said. Many smaller dairies that bought animals at auctions last year are out of business, he said.
Sold for Beef
“The Giacomazzi dairy is unique because of its reputation for taking care of its animals and the long history of superior genetics,” said Dolieslager, who also auctions hogs, beef cattle, goats, sheep and horses. “Less than 2 percent of dairy cows we sell will go out to other dairies.”
“No one is making money producing milk,” Wells Fargo’s Swanson said by telephone from Minneapolis. “The milk price remains well below the total cost of production.”
U.S. output increased to a record 16.73 billion pounds in May as cows on average produced 1,804 pounds each, the most ever, the USDA said June 18. A gallon weighs 8.6 pounds.
Wholesale milk fell 51 percent in the past year and reached $9.93 per 100 pounds on June 19 on the CME. The USDA forecasts average cash prices this year will drop 34 percent, the most since the agency began keeping the data in 1980. While corn fell to $4.195 last week from a record $7.9925 a bushel in June 2008, it’s still 54 percent above the decade average.
Cheese, Butter
Cheese prices on the CME have fallen 43 percent in the past year to $1.1175 pound, while butter dropped 17 percent to $1.215. The retail cost of cheddar cheese rose 4.7 percent to $4.605 a pound in May from a year earlier, government data show. The average supermarket price of butter fell 15 percent to $2.778 a pound last month from a year earlier.
“Wholesale butter and cheese prices could rebound $2 a pound next year,” as the herd declines, Dairy & Food Market’s Dryer said. “Low prices are not going to last because we will see inflation across the board next year.”
In California, the largest milk-producing state, dairies lost $1.07 per 100 pounds in April, compared with profit of $11.23 in July 2007, based on feed costs and milk prices, USDA data show. In January, the state was the most unprofitable in at least six years of record-keeping.
“We’re all in survival mode,” said John Gailey, 35, the general manager and a part owner of the 4,000-cow the Milky Way Dairy near Visalia, California. Gailey cut his herd by 400 head, or 9.1 percent, since March. “I’m surprised we are not hearing about more people filing for bankruptcy.”
24-Month Wait
It takes about 24 months and $1,600 to feed and care for a dairy heifer before it starts producing milk, Gailey said. The price of a young cow ready for milking has dropped by half in the past year to $1,200, he said.
Farmers spent most of the past decade expanding to meet rising global demand.
Futures peaked at a record $22.45 in June 2007 as a drought in Australia and New Zealand, the biggest exporters, curbed supplies. Demand increased in Asia as economic growth allowed consumers to switch to more protein-based diets.
U.S. exports jumped to a record 2.55 million metric tons last year (653.7 million gallons), up 16 percent from 2005, and the value of the shipments rose 25 percent, according to the U.S. Dairy Export Council in Arlington, Virginia. Overseas sales accounted for 11 percent of U.S. production, more than twice the share of 2002, the council said.
By the end of 2008, with the global economy in the first recession since World War II, U.S. milk production had grown to a record 190 billion pounds and the dairy herd was at a 12-year high of 9.315 million cows, according to the USDA.
European Protests
When global prices sagged, European farmers sought government aid and disrupted food supplies. Eight hundred producers from across Europe protested in Brussels last month, and in parts of France grocers ran out of cheese and yogurt because of farmer protests.
Dairy Farmers of Britain Ltd., the U.K. cooperative, filed for receivership this month after firing workers and closing dairies. Dairy Crest Group Plc, the biggest U.K. producer, lowered its milk price in April to 26.28 euro cents per liter ($1.40 a gallon), reflecting a 32 percent drop since October, according to the Web site of the Dutch farmers’ organization LTO-Nederland.
U.S. dairies are trimming the herd. The kill in the week ended June 6 rose to 60,800 head, 35 percent higher than a year earlier, according to USDA data. This year’s cull is up 13 percent from 2008.
Accelerating Cuts
Reductions may accelerate because government payments to small and medium-sized farmers begin to run out this month, said Sherman Toone, 58, a third-generation producer with 350 cows and 1,800 acres of wheat, barley and alfalfa near Grace, Idaho.
“This is the worst I’ve ever seen the imbalance” between feed costs and milk revenue, said Toone, whose grandfather started with 25 cows in 1923.
U.S. milk production will fall 1.3 percent to 187.5 billion pounds this year from last year’s record, and to 186.4 billion in 2010, the first back-to-back decline since 1969, the USDA said June 20.
Prices probably will rise at least 25 percent by the second half of 2010 as production slows and consumption rebounds with an improving economy next year, said Kelvin Wickham, the managing director of global trade at Auckland, New Zealand-based Fonterra Cooperative Group Ltd., the largest dairy exporter.
“We do expect prices to trend higher toward the back half of the year,” Jack Callahan, the chief financial officer at Dallas-based Dean Foods Inc., the biggest U.S. processor, said June 2 at a New York conference. Shares of Dean Foods rose 2.1 percent this year, beating the 1.1 percent drop in the Standard & Poor’s 500 Index.
Roadblocks to Rally
Fonterra’s Wickham cautioned that even a smaller herd may not be enough to turn the market around as rising subsidies and government stockpiling in the European Union and the U.S. delay the recovery.
“People haven’t been buying the stuff, that’s the problem,” said Lloyd Downing, 61, who farms 560 cows on 187 hectares southwest of Morrinsville, on New Zealand’s North Island. “It’s not until the American economy comes right that we’ll start doing any good.”
The U.S. economy contracted three straight quarters, including 5.7 percent in the first quarter. Economists expect a 2.7 percent contraction in 2009 before growth resumes in 2010, based on the median of 62 estimates in a Bloomberg News survey. In the European Union, where growth was 0.63 percent last year, the economy will shrink 4.2 percent in 2009, a Bloomberg survey of 17 economists shows.
Global milk-production growth will likely slow to 0.5 percent to 0.7 percent in 2009, in line with the increase in consumption, Fonterra’s Wickham said.
Chinese Demand
China, the world’s third-largest fluid-milk consumer after India and the U.S., is recovering after melamine contamination last September slashed domestic output. Consumption growth that averaged 13 percent the past three years will likely return to pre-melamine levels by the end of 2009, Lausanne, Switzerland- based Tetra Pak Group, the biggest maker of milk and juice cartons, said in a June 1 report.
China increased imports of milk powder and other dairy products after the government shut 19 percent of the nation’s 20,393 milk-collection stations between November and April, the official Xinhua New Agency reported June 3.
“It only takes a relatively small amount of difference in production and we’re going to have a significant affect on international prices,” said Lachlan McKenzie, who owns a 600-cow dairy northeast of Rotorua on New Zealand’s North Island and is chairman of Federated Farmers’ Dairy Section.
New Zealand Exports
New Zealand exported 50.8 million kilograms of milk powder to China in the three months ended March 31, more than four times as much as the same period a year earlier, according to Statistics New Zealand. Dairies are the country’s biggest export earner, accounting for about 20 percent of trade receipts, government data show.
Whatever happens with demand, a recovery won’t be possible without a cull in the industry, said the Milky Way Dairy’s Gailey.
“We are in a depression right now,” he said. “I have to be an optimist that the dairy farmers can get together and find a way to reduce the cow herd about 5 percent so that prices can recover quickly.”
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Raising support
Fax the USDA: Save America’s Dairy Farmers
Since December 2008, the price that farmers are paid for the milk they produce has dropped over 50 percent — the largest single drop since the Great Depression — to a point far below the cost of production. This unprecedented collapse in prices has occurred in large part due to market manipulations and increased foreign imports by milk industry giants.
Already banks across the country are cutting off farmers’ access to credit and at least two dairy farmers have committed suicide in California. The latest estimates are that the crash in domestic prices might lead to the loss of up to 30 percent of the remaining dairy farmers by the end of this year — as many as 20,000 family dairy farmers could be off the land by the end of this year.
The loss of this many family farmers across the country will have a devastating economic impact on rural America, erasing over $52.7 billion of economic development in less than one year. Even worse, the loss of domestic supply will also create a serious gap in U.S. food safety as processors dramatically increase foreign milk protein concentrate (MPC) imports from countries such as Mexico, India and China — countries which have much lower food safety standards than we do.
Today we’re asking that Secretary Tom Vilsack, head of the United States Department of Agriculture, halt this injustice and adjust the price of milk paid to farmers to “reflect the price of production” by invoking his authority under Section 608c (18) of the Agricultural Marketing Agreement Act of 1937. This legally mandated “floor price” should be at least $17.50 per cwt (a cwt is the standard measure for milk producers).
Send a free fax to Secretary Vilsack today to let him know that you support America’s family dairy farmers. We must stand by them so they can continue to produce a safe product that not only nourishes our children, but also our rural communities. Without a fair price for their milk, they can do neither. Now is the time to embark on meaningful reforms in dairy pricing to ensure that a disaster like this never happens again.
Visit http://act.credoaction.com/campaign/vilsack_milk/?r_by=-1998633-Oeiwfhx&rc=paste for more information.
