Dairy farmers caught in the web of falling milk prices

New York, February 17: With milk prices continuing to touch frightening lows, it has resulted in increasing woes for dairy farmers across U.S.

Plunging milk prices, soaring feed costs and an over-supply of dairy products have compelled a large number of Valley dairy farmers to sell their dairies and look for alternatives.

Milk prices are about nearly half of what it costs farmers to produce it. Dairy farmers are getting as little as $9 per 100 pounds of milk they produce while they are paying more for feed. They are losing money with each load of milk they sell.

No wonder, more than 60,000 dairy farmers in the United States are left with no option but to sell off their cattle or leave the family dairy farm behind altogether following a steep drop in milk prices.

Hank Van Exel, a second generation dairy farmer in Lodi, said, “We're getting hit by all barrels. Last summer, we were getting about $18.50 for every hundred pounds of milk. And now our base price is about $9.90.”

Being unable to feed the dairy cows, the farmers feel compelled to turn the animals into hamburgers. Destructive economic forces due to global recession have moved farmers into a state of economic uncertainty. The uncertainty is likely to force some farmers out of the industry and has put a question mark on the future of dairy farming community.

“We don’t know what to do. We won’t make payroll next period,” Mark Speltz, who has farmed for 32 years, said. “It just makes you wonder why you’re even doing it. It’s never been this bad.”

Milk prices have witnessed a decline of 35 percent in the last two months, which means a decline of more than 50 percent from the last summer.

With milk prices seeing the worst in 20 years, coupled with skyrocketing operating costs, dairy farmers are being killed in the present market scenario. It may drive many people out of the dairy business, with new farmers and those going for expansion of herds being the worst hit.

“The world economy has caused a drop in the demand for milk and this has caused a negative impact on the price of milk the farmer receives,” says Doug Crowell, a second-generation farmer who operates the family farm at Towns Corners in Arkwright. “The gross revenues I receive are not meeting my gross costs,” he stated.

Finance is, undoubtedly, the biggest challenge faced by area farmers. And there seems to be no respite from this, at least for the next couple of months, as the predictions indicate a steady decrease of milk prices.

“Right now, you know, we're not making money,” said Keith Poch, a farmer who owns more than 60 dairy cows in Marathon County. “To keep going now, there isn't a farmer out there that doesn’t have to borrow money.”

Just like many other dairy farmers, Poch is acquiring debt as he is not making enough money from milk to cover his operational costs. “Our livelihood is milking cows,” he says hoping that the present crisis does not last long.

The reason, according to industry analysts seems to be simple- low consumer demand and too much milk in the industry. The analysts at the University of Wisconsin see no respite from the present crisis at least for the first half of 2009. And even later, the prices will be just enough to cover operational costs.