Lower Prices For Milk Hit Farmers Hard
Milwaukee — Charlie Jones got into dairy farming four years ago when the industry was on the mend after one of the worst downturns in recent history. Now he’s getting a taste for what it’s like when milk prices plummet and profits become scarce.
Jones milks 140 cows. He and thousands of other Wisconsin farmers recently enjoyed high milk prices, only to see them drop more than 30 percent this year.
“I would say we are right at the break-even point now, or slightly below it. Treading water would be a good term to describe it,” Jones said.
“It’s like buying a house when the prices are high, and then the market crashes. You still have the house, and you have to make the payments, but it’s not worth as much.”
Much of the United States now has too much milk, partly from dairy farms expanding their herds during the high prices in 2014. That has led some operators to take dramatic steps to bring supply in line with demand.
Earlier this year, dairies in the Northeast and Michigan dumped more than 30 million pounds of milk into waste systems, according to the U.S. Department of Agriculture, because the processors lacked the capacity or markets to handle it.
There have been hints that milk dumping has been considered recently in Wisconsin, but so far it doesn’t seem to have happened, according to dairy industry experts.
“My understanding is the plants are running at full capacity,” said Brian Gould, an economist with the University of Wisconsin Center for Dairy Profitability.
This has been a difficult year for many dairy farmers and the rural economy they support.
Imagine having a business where your income drops 40 percent but many of your costs keep rising, said Joel Greeno, a farmer and president of Family Farm Defenders, a national organization based in Wisconsin’s capital, Madison.
Fed up with the hard downturns in dairy prices, Greeno quit milking cows.
“You can’t survive paying $300 a bag for seed corn, and $600 a ton for fertilizer, and then have your milk price cut. . It’s not magic money,” he said.
Milk prices are set by complicated formulas and are influenced by overseas markets. Often, farmers have little say in the price they receive for their product.
“It makes me angry that nothing is being done to fix this pricing problem that’s been the scourge of the dairy industry for 30 years,” Greeno said.
Dairy farmer Jim Rosenow says his farm income is down about $400,000 so far this year, with most of the decline from lower milk prices.
Rosenow milks 550 cows, and milk production accounts for about $2.5 million in annual revenue on his farm.
“It’s hard to make up that $400,000,” he said of the drop in revenue from 2014.
Fortunately, his cattle feed costs are down from a year ago, Rosenow said. It doesn’t completely offset the sharp decline in milk prices, but it helps.
He also anticipated that high milk prices in 2014 wouldn’t last – so he built up his cash reserves and purchased some things in advance for this year.
“When times are bad, you start using that cushion,” Rosenow said.
“Out here in the country, the pain isn’t too bad yet because farmers are still riding last year’s great prices. But that will only last until about this fall when we have to start purchasing (supplies) for next spring’s crops.”
Glut Of Milk
The current price that farmers receive for their milk is about $17 per hundred pounds, roughly 11.6 gallons, down from $25 a year ago.
Dairy economists say the price will likely drop some more this year, partly from a decline in dairy product exports and a glut of milk in other countries.
Milk products from Europe are moving into Asia and Latin America, while the U.S. also pursues those markets.
The elimination of milk production quotas in Europe could make things worse for American farmers.
“It’s definitely a global market now,” said John Umhoefer, executive director of the Wisconsin Cheese Makers Association.
Dumping milk, while a rare occurrence, is very upsetting to farmers in both an economic and emotional sense.
“It’s just sad beyond belief. You have all of that work, all of that time, all of that money wasted,” Greeno said.
Selling their product at below-market prices also is distressing.
“Depending on how long this lasts, it will have a very detrimental effect on farmers in the Midwest, even if they’re not creating the glut,” said Mark Kastel, founder of The Cornucopia Institute, which advocates for family farms.
The dairy industry in the Northeast behaved like “drunken sailors,” Kastel said, as it flooded the market with milk.
“We are back in the mode of farmers struggling to recoup their cost of production. Now it’s a matter of who is going to survive this,” Kastel said.