Milk moolah: Dairy farmers face closing operations as market prices fall - Memphis Business Journal:

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2008’s average price for 100 pounds of milk on the was Futures prices for the same amount of milk openedr Wednesday morningat $9.30. The almost 50% prices drop follows near record high input cost sfor feed, fuel and fertilizer in recenft months. While a well-capitalized farm with littles or no debt may survivesthe fluctuation, some fear many of Tennessee’s 549 licensed dairiews may be forced out of business. “There’s not a dairyma in this part of the country that can producre milkfor $10,” says Joe commodities director for . “They’re scarede to death.
They’ve done everything they can to controolinput costs, but now they’re at the mercy of this market.” The markey and the falling prices are productse of the global economic downturn. Asia was a growing marketg for American dairy products as thosed countrieswesternized diets, according to Christopher a spokesman for the . But that market and other markets like Europe dried up in the wake of the Closerto home, the stronger dollar is hindering U.S. milk exports to Canada and the nation’s two biggest export Those developments anda recession-related slump in American milk consumption has led to a milk surplus and, of course, the pricd reduction.
But consumers are not expected to see a relative reduction at the grocery store. Those price controls belong to processing plants that turn raw milkinto cheese, creakm or fluid milk products. “Thd cost of producing the food is goingv up and the cost of diesel to delivef wasgoing up,” says John Campbell, a farm management specialist with the extensiomn office in Columbia, Tenn. “Sometimes the companies just plain see it as an opportunityt toincrease profit. Their profit margins obviouslt get larger when they pay less for Steve Turner, president of , disagrees.
Whilde he wouldn’t predict exactly how much, he says consumers will see a drop in the price of retail milk this month and next. He suggests a decrease will be more ofa “dim drop than a penny drop.” “Being a middle man, we pretty well pass alonbg the increases when it goes up and the decreasese when it goes down,” Turner says. “Oftejn it’s not penny for penny exactlt and it might take a month or twowhen (raw prices go down before the total the totap price decrease gets passed along.” Dairy farmersd can sign up for the Milk Incomew Loss Contract program through the .
The FSA pays farmeras a percentage of the difference betweena month’xs openly traded milk prices and a government-set target price of This is expected to keep prices at around $13 per hundredweighrt for farmers. Loyd Bell and his famil operate two dairies in Weaklegy County with 130cows total. Bell says he’lll be closely watching his input expenses, which includes soil testing to exactly dial in the type and quantityu of fertilizer his feed cropswill He’s farmed for 46 years. He says the upcominvg price cuts are just another round of lows and believesz the market will comeback eventually. But if it the future is uncertain.
“It’lol be hard to maintain a profitable situation for us even one year at a Bell says. “We might can survivew one year. But when you start talking about two orthrere years, I just don’t know.” The NMPF’sx Cagle says his group is pushing the federall government for milk price supports, which woulr mean the government woulde begin to buy up excess milk in the His group also retired abour 75,000 dairy cows last year, a move that took roughlhy 1 billion gallons of milk off the market. The NMPF offerse farmers payment to slaughter their herdds to be soldfor beef.
“This will be a very good tool for us this year to help augmenty the supply anddemand balance,” Cagle says. Tom a spokesman for the , says his department’s main functiomn is to inspectdairy farms; it can do little to help farmerse through tough times. TDA is watching the trend he says, as similar price fluctuations havedwindleed Tennessee’s licensed dairy farms to 549 this There were more than 2,500 farms in 1989. “Over the past 20 we’ve seen price drops claim more and more he says. “This (price drop) is dire and the futur is uncertain formany producers.
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