March 21, 2011

 

US dairy farmers still struggle in unstable sector

 

 

Most US dairy farmers are still struggling following the consequences of several disastrous years even as milk prices continue to rise and exports to Asian markets have expanded.

 

After milk prices plunged and farms began going under, Agriculture Secretary Tom Vilsack said a year and a half ago that the industry needed restructuring and his department would look at its programmes to see what changes could be made to help create more stability.

 

A committee the USDA formed in 2009 in response to the crisis issued its recommendations this month, but no legislation has been written yet. Agriculture officials say it's forthcoming.

 

That's not a lot of comfort for farmers like Jamie Bledsoe of Riverdale, who saw his income drop by US$2 million in 2009 and had to sell off about 300 cows to pay his bills. Many dairy farmers used up savings and sold property they had accumulated over 15 or 20 years, he said.

 

Now, they're being squeezed by high corn prices and an inability to get loans to buy feed for their cows. The situation is particularly bad in California, where most dairy farmers don't grow their own hay and corn.

 

Nearly 250 dairies in California have gone under in the past three years, and more are expected to close this year, said Michael Marsh, chief executive of Western United Dairymen. California is the nation's No. 1 milk producer, followed by Wisconsin and Idaho.

 

The crisis started when milk prices that had been driven up by demand in developing nations plummeted from a high of US$18 per hundred pounds in 2008 to about US$12 amid the recession in 2009. Farmers began slaughtering their cows to try to cut production. At one point, an average of 50,000 cows a week were being killed in an effort to reduce the milk glut.

 

This year, milk is expected to average about US$17 per hundred pounds. But farmers aren't doing much better than before because federal subsidies for ethanol have created a big demand for corn among biofuel producers and prices have skyrocketed, said Ray Souza, a California farmer who serves on the USDA's Dairy Industry Advisory Committee. About a third of the US corn crop now feeds car engines, not cows, and Souza said feed accounts for about half of dairy farmers' expenses.

 

Tom Barcellos, who runs an 800-cow dairy in Tipton, said farmers used to be able to borrow against their herds to get money to buy feed, but the value of cows has slipped, making it hard to get credit. Many dairy farmers now have barely a truckload of feed left, he said.

 

"It's hand to mouth. They have no feed, they have used up equity, and they have to buy a load of feed at a time to try to hang on," he said.

 

Dairy farmers are usually optimistic about bouncing back, he said. "But we never expected it would take this long to recover."