How much longer can dairy farmers survive?

Three years of low prices test dairy farmers' ability to survive

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Ohio dairyman Matt Saul
Matt Saal, of Sterling Heights Dairy, said one way to improve the U.S. dairy market is to improve trade. He believes there’s opportunity in the export market, if deals can be reached. (Chris Kick/Farm and Dairy photo)

Dairy farmers know to expect years of low milk prices and big price swings. In the past decade, milk prices have swung from lows of $10 per hundred pounds, to record highs above $20.

The problem is when prices stay low, year after year, as they’re doing right now.

Over the past three years, the all-milk price has averaged below $18 per 100 pounds, the first time that’s happened since 2006, when feed costs began to rise. And, according to the latest market summary from the U.S. Department of Agriculture, based on January information, the all-milk price this year is forecast at $15.80-$16.60 per hundredweight.

Scroll down to read options for dairymen to do during this time of low prices.

“It’s pretty clear that we’ve got more producers on the ropes this year than we’ve seen in the last two to three years,” said Mark Stephenson, director of dairy policy analysis at the University of Wisconsin.

Volatility continues

Dairy producers saw a good price in 2014, topping $20/hundredweight. But prices were much lower from 2015 through 2017, and 2018 is off to a rough start.

“We’re now going into the fourth year of these relatively low prices and we’re seeing substantial (carryover) declines,” Stephenson said.

The continued lows have farmers eating into their equity, and looking for any way they can to reduce inputs and increase their profit margin.

“Somehow, we’ve got to figure this out,” said Jim Rowe, a Tuscarawas County dairy farmer whose family operates Jimita Holsteins.

dairy cows in freestall barn
(Farm and Dairy photo)

Rowe said there are ways producers can borrow more money, if they must. He said it’s important to keep paying businesses like veterinarians and dairy service providers, because “if the majority of their customers are dairy, they’re probably not in the greatest shape either.”

Keep the best

One of the biggest things a farmer can do, he said, is make sure you sell any cows that are underproducing, including those cows that have become “your pets.”

“This might be the time when we’ve got to be a cold-hearted cow culler,” he said.

But producers have to be careful not to cull too many cows, or they’ll hurt the future of their herd genetics, said Knox County dairyman Paul Haskins.

Another area producers can save is with equipment — fixing up what is broken and limiting new purchases.

“Things are tight and people are more in the mode of fixing stuff up instead of buying new,” said Haskins, who milks about 100 Holsteins near Butler, Ohio, and serves as the president of the Ohio Holstein Association.

Haskins said that each dairy farm’s situation is different, but what it all comes down to is being more efficient.

Dairy policy experts and farmers seem to agree that the over-arching problem is supply and demand. There’s simply more milk on the market than there is consumption.

Milk per cow

Over the past 10 years, per-cow production has increased by 1 to 2 percent a year, or about 13 percent across all 10 years, as a result of better genetics and cow management, according to USDA. For 2017, the average cow produced 22,938 pounds of milk.

“We continue to get more and more efficient at producing milk,” said Andrew Sandeen, a dairy educator with Penn State Extension.

The increases are also geographical, and vary from state to state. In Ohio, total milk production increased a little more than 1 percent in the past year, according to information provided by dairymarkets.org, a market analysis program managed by Stephenson.

Pennsylvania saw a nearly 2 percent production increase, while nearby states saw much higher increases, like Michigan (5.2 percent), Indiana (3.08 percent) and Kentucky (4.85 percent).

State to state

Because milk can move freely across state lines, it can sometimes flood the market for under-producing states. But dairy experts like Stephenson say that’s the nature of commerce in the U.S., and it’s protected in federal law.

He said one thing Michigan could do is increase its own milk processing capacity, which might keep more product from moving into Ohio. But in the end, he said the overall dairy market would still feel the impact of higher production.

Expanding trade

Another option could be to send more milk into Canada and Mexico, and overseas, but trade agreements are in a state of flux, as President Donald Trump is re-negotiating the North American Free Trade Agreement with Canada and Mexico, two of our largest trade partners for farm commodities.

Matt Saal, whose family runs Sterling Heights Dairy just outside Sterling, Ohio, said opening up the export market could be the answer.

“Low prices are really about trade,” he said. “There’s tons of products here in the U.S. that need to get consumed because we’re not exporting it.”

Saal’s milk buyer, Dairymens, recently cut most of the premiums it offered farmers, and other milk buyers have done the same.

“I think the only thing we can do is try to limit our expenses,” Saal said. “It’s tough. I don’t enjoy these times, but it is what it is.”

Stephenson said it’s unlikely low prices will continue, but if they do, they’ll continue to put dairy farms to the test.

“I don’t think it is the new norm, but it’s a longer down cycle than we’ve had in a long time,” he said.

The low prices have led some producers to the ultimate decision of selling out, but even that isn’t easy. There may not be enough money left to cover expenses, and it could mean the end of a way of life that’s supported the family for generations.

“Everyone has to realize that it’s a hard decision to sell cows,” said Rowe. “You’ve still got to get up every morning and see that barn empty.”

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7 options for dairymen in a tight market

Here are a few things that dairy farmers and dairy experts say can help during this time of low prices:

  1. Sell some equipment. If you need money now, you might be able to sell some farm equipment or machinery that’s not essential to your operation. There’s no use keeping something around if you’re not going to use it, especially if it is depreciating.
  2. Cull weak or under-performing cows. When your paycheck depends on milk production, you need a quality herd of cows that are earning their keep. Look at each cow critically and ask yourself if you could do better with or without her.
  3. Raise some calves as beef. Instead of selling your bull calves, you may be able to realize some profit by feeding them out as beef. This depends on your feed availability and your capacity to house and care for additional animals, but it could add some value to your operation, especially if you find a good market for the finished animals.
  4. Watch your margins. The key to being profitable is to know your numbers and watch your margins. The price of milk does not necessarily determine the profitability of your farm. Profitability comes down to your ability to manage feed, labor and other input costs. If you choose, you can sign up for the federal Dairy Margin Protection Program, which protects against catastrophic losses and allows producers to buy additional margin coverage.
  5. Convert to crop farming. While you may want to continue dairy farming, you might be able to reduce the size of your milking herd and use some of your land to raise cash crops. Unfortunately, crop prices are low, as well, but you might be more profitable by selling crops than selling milk.
  6. Take a second job. Working off the farm can be challenging, but the benefits of a second income can greatly improve your financial situation. You might even be able to secure a job with paid benefits, which can help mitigate the cost of health insurance and retirement savings.
  7. Speak up for trade. Let your federal lawmakers know the importance of global trade, and the importance of exports for dairy farmers. Dairy exports represented 14.7 percent of U.S. milk production in 2017 and equalled $5.48 billion, according to the U.S. Dairy Export Council.

 

 

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Chris Kick lives in Wooster, Ohio. An American FFA Degree recipient, he holds a bachelor’s in creative writing from Ashland University. He spends his free time on his grandparents’ farms in Wayne and Holmes counties.

16 COMMENTS

  1. so the farmer gets !.25/ gallon. we pay $8.00per gallon
    time for he farmers to revolt. get government off our farms and away from our food
    and let the middle ma n loose some weight

    • You are the problem! Who are you and what does your opinion mean?! I am so sick of people like you spreading false information about something they know nothing about! You people wouldn’t survive a day working on a farm. Farmers work harder than anyone and often times for nothing. This is a way of life. Have a little respect. Talk to farmers. Learn a little.

  2. How’s about taking your land and plant a bunch of Almond and cashew trees. The future is dairy free. More and more people are aware of the rape,and baby calf stealing and murder that goes on now.Wake up and get on board.

    • No more and more people are removed from the farm and spread false information like yourself! I am disgusted that people like you have a belief in something and are able to spread it. It is unreal and devastating to our farmers that work harder than anyone and don’t have the time to sit behind a computer to defend themselves. And really? You think every farmer can just grow almonds? LOL!!! All the almonds in the world will not feed America or the world.

      • Almonds are 1 example… the farmer could also grow: potatoes, carrots, squash, peas, cauliflower, broccoli, beans, wheat, blueberries, strawberries, raspberries, oranges, apples, kale, lettuce, chia seeds, flax, avocado, tomatoes, peppers, rice, quinoa, celery, bokchoy, leeks, cucumbers, pecans, cashews, lentils, onions, peanuts, corn, … the list is ENDLESS!!!! EAT PLANTS!!

  3. Thank you for your honest post about the struggles dairy farmers are facing. My husband is a 3rd generation dairy farmer. The struggles are catching up. He wakes every morning 3:30-4 a.m. and at this point feels like he is working for nothing. With the farm bashing and milk bashing, the milk prices, all of it is beyond depressing. This is his livelihood. He loves those cows with everything he has. He has a pet cow that loves hugs and kisses and rubs. With the state of the industry right now he will probably soon have to say goodbye to her…he can no longer afford to care for her as she hasn’t produced in about 7 years. And these people above just saying how easy it would be to switch h right over to plant based milk? It’s terrifying that they use the term easy and comical all at once. Farmers not only supply food, but they are a huge part of making the economy grow. I wish people like the above commenters could live a day in my husbands life. If they still didn’t agree with the practice of dairy…fine. But I guarantee they would have some respect. If they didn’t? This world is going to hell faster than we know. My husband is what America needs. America needs more farmers. They are selfless. My husband works 100 hours a week, has so many skills in welding, mechanics, works along with veterinarians, works with nutritionists, does all the crops, cares and loves every single cow on our farm. And STILL finds the time to be the best father to our 3 children. Our 3 children who love growing up on the farm, who love those cows, who may have to see their fathers world get crushed because he may have to end up selling all the cows and moving on in life when generations before him lived this life and passed it down not knowing that people would evolve to be bat shit crazy and blame the farmers for all their problems. It couldn’t possibly be additives and preservatives in food or all the JUNK that is available to eat. So much more to the picture. I so thankful I married into this life…I was just as removed as the next but I have learned so much. I only wish more people would learn and get their facts straight before typing ridiculousness about almond milk. For now on this Saturday I will hope that the milk market will improve, I will hope my husband makes it, I will hope my future grandchildren can see the farm still standing with cows, I will hope my husband doesn’t kill him self from the stress of keeping up with it all, I will hope this wholesome way of life doesn’t go extinct, I will on this Saturday morning wait for my dairy farmer who went into work at 2 a.m. today to get home for our sons basketball game…and yes he manages to help coach too! I will then watch him go right back to work when the game is done. Wholesome good family man…but yes let’s continue to bash him.

    • We are also Dairy Farmers who love our cattle. We work countless hours!! We both have had off the farm second jobs making our days an additional 8 hours longer on top of farming 24/7. The thing that I think people do not understand is this is also our HOME. I too am sick of the vegan explosion. If you want to eat a brown bean that is processed until it is white then by all means DO IT. Just do not ruin our lives because we drink something different. It had gotten to the extreme! Yes we all believe in something different, but just because you and I do not agree does not mean my life should be ruined because you believe yours is correct. Drink what you want! Feed your family what you want!! And let your fellow man do the same!! I too am thankful I married into this life. It is a wonderful way of life to live and eat what you grow and raise. It is AMERICANA! Thank you and hang in there! We Dairy Farmers need to stick together!

      • How can u say “we love our cattle” when you STEAL their calves, STEAL their milk, then send them off to the slaughter house to DIE too soon. Dairy farmers are disgusting animal abusers.

  4. First off plant based milks provide only limited nutrition and are actually bad for you. They contain many additives humans can’t even absorb. Cow’s (or mammal) milk is nature’s most complete source of nutrition for a human (mammal). Ultimately the choice is yours. Here are just a few facts to consider:
    Soy has hormonal (progesterone) effects that alter male and female reproductive organs. Heart Healthy has just removed soy milk from its list. The calcium in soy milk is calcium carbonate, often from seashells. This calcium is not absorbed by the human body. Almond milk has little nutrition, is full of fat, and almonds are not sustainable. Look up how many gallons of water it takes to produce one almond.

    Humans are mammals and we all know so are cows. Did you know the cow has been called the Foster Mother of the Human Race? You can live longer on milk alone than even water. Why not drink a natural product, the way nature intended. The cow is not hurt in milk production. If a cow is hurt, she will not produce milk. Most dairy cows are well cared for. There are always exceptions, like those who abuse their dogs. You here about he few bad guys, not the 38,000 plus dairy farms that do things right in the USA.

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