October 18, 2007

Rise in demand for US milk products keeps dairy farms in business

Higher milk prices have helped many US dairy farmers who incurred losses due to low milk prices out of debt this year.

 Milk prices have been declining since late 2004. An estimated 300 to 500 farms in New York closed down last year due to low milk prices, according to the New York Farm Bureau.

Retail milk prices are up 18 percent since the start of the year as higher production costs and rising demand supported price increases.

Wholesale prices rose on average from US$13 to US$21.80 in the same period, according to the USDA.

Higher corn prices due to the rise of the ethanol industry pushed up feed prices and hence forcing farmers to raise milk prices. Growing global demand for processed milk products, especially from Asia, was also responsible for the spike.

Growing demand from China, Saudi Arabia and Mexico meant there was a growing market for US milk products while the weak US dollar made US products cheaper.

While analysts are counting on profitable dairy operations for the next few years, farmers are sceptical: most have been used to years of ups and downs in the dairy cycle.