A recent news release from the American Farm Bureau Federation stated that U.S. milk production is increasing while the number of dairy farms has declined 5.1 percent over the past year.
More than 4,500 farms have stopped producing milk since July 1999. Since 1992, we have lost 48,510 dairy herds (36.9 percent of our producing dairies). Yet milk production has increased an average of about 3 percent per month for the past year.
Ken Olson, American Farm Bureau’s dairy policy specialist, claims that current milk prices and projected prices for the coming months mean that financial stress will remain in the industry. He expects to see further decline in herd numbers in the near future, causing further stress on the dairy infrastructure (service, supply, credit, transportation, marketing and processing firms that serve dairy farmers).
Dairy farm managers continue to adopt new innovations in order to improve productivity of their cows, while at the same time increasing herd size to maximize milk per worker and per dollar of fixed costs.
Larger herds mean dairy managers work less directly with cows, crops and equipment, and more directly with employees. Adopting new technology means investing money. Increasing herd size is often the only way to justify the increased debt load.
You are running faster and getting further behind because over-production is depressing the milk price. You are struggling to learn how to manage people and adopt new innovations but there is too much month left at the end of the milk check.
The losses of dairy herds will continue until supply equates with demand. Some of you will be survivors. Ohio needs more milk every year. I believe the best place to produce this milk is right here in Ohio!
You are not going to like this, but in order to stay in business, most of you are going to need to produce milk at lower cost.
Many of you can significantly affect the price you receive by using milk pricing options and by improving the quality of your milk, but cost control is still the major area needing improvement on most dairy farms.
That means milking more cows that produce more per cow while reducing feed and other input costs. (Thank goodness we have low feed prices.) It means employing innovations that allow you to stretch your fixed costs over more cows and allow your workers to handle more cows effectively.
Yes, that means some of you are going to increase production while your neighbors face the grim prospect of going out of business. You must have the courage to weather this storm with the knowledge that if you hope to continue selling milk, you must figure out how to be profitable at today’s prices.
In most cases that means you must cut costs! If you can’t figure out how to do that, you will be out of business, too.
Right now is the time to take good care of old equipment, old cows and old facilities. Now is the time to be a tough sell for any new gadget or sure-fire additive or product.
Now is the time to get back to basic nutrition for your herd. Feed analysis and soil testing can return huge savings in purchased feed and fertilizer costs. Now is the time to make maximum possible use of the nutrients in manure.
OSU Extension agents and the northeast district extension Dairy Excel team are ready to help you meet these challenges. We are here to assist you with business analysis and budgeting. We can provide information on managing employees and getting the most from your investment in new technologies and facilities.
We can provide a variety of group and individualized helps, whether you milk 30 cows or 300. We will work with you to ease the transition whether you plan to be a survivor or leave the industry.
Maybe your best option is to stop dairying now or at some time in the foreseeable future. When feed, repairs and other account balances are increasing, you may need to be realistic and decide to stop the losses immediately.
We can help you determine whether you are losing equity in the business, a key factor in deciding when to quit. If you decide to leave dairy farming, what alternatives do you have for the farm? What are the tax implications of selling farm assets and paying off debt? Will you need to enter the off-farm work force? Dairy farmers have a variety of marketable skills, so please do not sell yourself short.
We can help you learn about and prepare for alternative enterprises on the farm. We can help you with estate planning and retirement planning.
Ohio needs its dairy industry. In 1990, the production and processing of milk in Ohio generated more then $4.5 billion and provided more than 23,000 jobs. If milk production migrates out of Ohio, so will the infrastructure that is needed to support this vital agricultural industry.
Dairy producers face severe challenges in 2000 and 2001, but the people of Ohio will always need dairy products. If your farm has a strong equity position, you can plan now to be one of the survivors after the current crisis is past and place your business in position to be profitable in the future.
(The author is an agricultural extension agent in Columbiana County. Questions or comments can be sent in care of Farm and Dairy, P.O. Box 38, Salem, OH 44460.)
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