June 22, 2004

 

 

US High Milk Prices Due To Loss Of Producers

 

The recent increase in the price of milk and milk products could be explained by fewer dairy cows and fewer dairy farmers.

 

"For the past two years we've been getting prices like we did 25 years ago,'' said Mac Pate, who has operated a Blount County dairy for 55 years. "It's been a depressed business.''

Pate also said increased production may push prices down in the upcoming months.

 

He said many farmers quit due to falling profits, and disease concerns put a halt to cattle coming from Canada.

 

"Enough people finally went out of the business, and the closing of the Canadian border resulted in a shortage of milk in the United States,'' Pate said.

 

Normally many heifers (young cows that have not born a calf) would be shipped into the United States from Canada. But due to mad cow disease cases, no live animals are being allowed across the border.

 

The price of milk is determined by supply and demand, and the short supply caused prices to rise.

 

"In May, milk sold for a little over $19 for each hundred pounds (equivalent to 12 gallons of milk) and they say it will be essentially the same for this month, and next month they expect it to go down $3,'' Pate said.

 

Pate said milk prices are expected to fall because dairy farmers, mainly in the West, have done things to increase production. This includes milking three times a day, where they had been milking only twice a day, and providing a higher quality of feed for the dairy cows.

 

Pate pointed out the farmer gets only 30 cents of each $1 spent on milk at the store. The rest goes to the processor and the store that sells the milk.

 

"For seven months in 2003, the farmer only got $12 to $13 per hundred pounds of milk, which was basically the price paid in the early 1980s,'' he said.

 

"It's always going to be a very competitive business. I expect in the future most of the milk we use will be produced in the West and shipped East. There are feed advantages and environmental advantages in the West,'' Pate said.

 

"Some of the herds in the West have 10,000 cows,'' he said.

 

The conditions in the West are similar to the large feed lot operations.

 

According to U.S. Department of Agriculture figures, the number of dairy cattle in Tennessee and Blount County is decreasing.

 

As of January 1, 2004, Tennessee had 77,000 milk cows, down from 84,000 in 2003.

 

At the beginning of this year, Blount County had 1,100 milk cows, down from 1,300 in 2003.