June 7, 2004

 

 

Dairy Prices Top Up In US State

 

The price of milk, which last year hit rock bottom prices not seen in 23 years, is finally returning US Vermont dairy farmers a profit. In truth, the price of milk has hit all-time highs in recent weeks, and might actually have peaked.

 

Big increases in fuel prices, which in turn affect fertilizer prices, and record-high feed prices are taking a big chunk out of the fatter milk check.

 

Farmers say they are paying off bills and doing repairs and making investments they put off for the past two years while they tried to survive prices reminiscent of the 1970s.

 

The rising cost of milk is being attributed to what national authorities describe as a "perfect storm," the combination of a number of unforeseen factors that have pushed milk prices to an all-time high.

 

A gallon of milk at retail has risen between 50 to 60 cents, and in some areas is approaching the unheard-of price of $4 a gallon. Milk-drinkers, and other milk consumers, such as ice cream makers and cheesemakers, are feeling the pinch, and are passing on some of the price increase to consumers.

 

Robert Wellington, chief economist and vice president at AgriMark, one of New England's largest dairy cooperatives, said most of the factors are international. He said that nationwide, milk production is down 2 percent.

 

Wellington said the booming Chinese economy is buying up a tremendous amount of American soybeans, driving up the price of feed for American farmers, who, in turn, have reduced the amount of grain they feed to their cows, which cuts milk production.

 

Monsanto, the drug company that makes the synthetic milk-production hormone known as BST, is having severe quality control problems at its plant in Austria that makes the injectable version of the drug, further reducing milk production. Wellington said that Monsanto is producing about half the hormone that it normally does.

 

The Canadian border has also been closed to shipments of replacement heifers to American dairy farms because of the discovery of mad cow disease in an animal in western Canada; fewer cows produce less milk.

 

And finally, dairy cooperatives banded together last year, raised $50 million to buy dairy cows and slaughter them, to reduce the surplus of milk, he said.

 

Louise Calderwood, Vermont's deputy secretary of agriculture and a dairy farmer, said the state's farmers were using their bigger milk checks to catch up.

 

"Last year, for the last 18 months actually, the price was so horrible, farmers deferred equipment repairs and upgrades and others ran up significant open accounts," she said.

 

"Another thing, while the price of milk is nice, the price of fuel and fertilizer and feed are all up significantly. Thirty percent of a farmer's budget is feed and it's very expensive right now," she said.

 

Soybean meal was going for $180 a ton, and now it's closer to $300 a ton. "That's a big jump," she said.

 

With the higher price of milk, farmers are getting about $1.90 per gallon of milk, Wellington said. A year ago, they were getting $1.10 for every gallon.

 

The rest of the price of milk goes to processing and retail costs, which average 50 cents each per gallon.

 

Farmers complained that while they were getting record low payments, the price of milk in the stores never declined.

 

"They pass along the farm price, but it's very rarely passed back," he said.