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Low Milk Prices Hurting Farmers

Those of us who like to eat, talk and write about funky cheese have a pretty good gig in Wisconsin. With 88 of the state’s 127 cheese plants today making at least one type of specialty cheese, (600 in all), there’s never a shortage of material.

Meanwhile, down on the farm, times aren’t so good. In fact, our dairy farms are folding up shop, dispersing cows, and moving to town to try and find jobs, one by one. A colleague at the Department of Agriculture told me last week – his head in his hands – that Wisconsin may lose 1,000 dairy farms by spring.
Since mid to late 2008, the price to produce the milk we all drink, eat in cheese and enjoy in ice cream, yogurt and various dairy products, has far outweighed what farmers are getting paid for it. This is not new news. Historically, milk prices paid to dairy farmers have always fluctuated – sometimes hitting peaks of more than $20 per hundredweight like they did in 2007, and then sometimes hitting $10 a hundredweight, where prices are hovering around now.
But never has the price paid to the farmer stayed this low for this long, and never has the price of input materials – food, fertilizer and fuel – stayed so high. Farmers I talk with say they’re losing $100 per cow every month. That means Farmer Wayne and his family down the road who are milking 80 cows are losing $8,000 a month. I can’t imagine working 18 hours a day only to dig myself deeper into debt.
Farmers are a hardy bunch. For the most part, they’re not complainers. They take the lumps as they come. But low pay prices, partnered with high cost prices, combined with never-changing relatively high retail prices are really beginning to stick in the craw of the average dairy farmer.
Why? Because retail prices for dairy products haven’t dropped in accordance with the prices paid to farmers, so consumers on average aren’t even aware of what farmers are being paid. No matter the price, only about 23 percent of the price of a gallon of milk ever makes it to the farmer. That means for a $3 gallon of milk, the farmer gets only 69 cents.
Pat Skogen, a small organic dairy farmer near Loganville, Wis., emailed me this week. (You know dairy farmers are getting desperate to get out information when they even track down the cheese bloggers for help). Pat says they sell their milk to a small local cheese plant and she’s thinking of starting a butter/cheese arm to the farm “because dairy prices really STINK right now.”
Pat says that milk prices paid to farmers today are at 1975 levels. A lot of things have changed in the last 30 years. In 1975, Pat started teaching school at $8,000 a year. A new Ford F250 for the farm cost between $7,000 – $10,000. Today, she’s a retired schoolteacher and a new farm truck can cost up to $40,000. Yet, the price being paid to a farmer for 100 pounds of milk is the same, at around $10.
“The cost of production of milk is around $18 per hundredweight. For a family living wage, we should be receiving $25 – $35 per hundredweight of milk. We are losing thousands of dollars each month. It is not the weather, floods or poor business sense. It is not supply and demand. If we received HALF of the $3.69 you might spend for a gallon of milk, we would be at over $21/hundredweight. So where is the other half going?”
Good question, Pat. I am not an economist, so I don’t know or pretend to know the answer. But a quick Google search shows the following:
1. Dean Foods Inc posted a 31 percent increase in quarterly profits this month, “helped by lower costs for raw milk.” — according to Reuters, Aug. 5, 2009.
2. Kraft Foods Inc reported a higher-than-expected 11 percent rise in quarterly profits this month as “the largest North American food maker benefits from price increases and cost cuts” — according to MSN Money, Aug. 4, 2009.
3. ConAgra’s consumer foods business is growing. In June, ConAgra said “earnings from continuing operations rose to 41 cents, compared to 18 cents last year, as the food maker benefited from lower manufacturing and supplier costs.” — according to the Wall Street Journal, June 25, 2009.
As the suits in corporate America and Wall Street reap the profits of low milk prices paid to Wisconsin dairy farmers, the farmers themselves are not the only ones suffering. The rural businesses who depend on dairy farms are already feeling the loss of farmer cash flow and payments.
Ralph Reeson, Pat’s husband, recently told the Reedsburg Times Press: “What happens out here impacts what happens in town. When we don’t have money, we don’t buy new trucks, we don’t buy more feed, and some stop even paying their insurance.” Even though Reeson, like most every dairy farmer is losing money right now, still plans on farming and milking as long as he can. His neighbor, Darrell Myers, agrees: “Most of us care enough where we don’t want to give up. We’d like to hang on. That’s the question a lot of us are asking. At what point do I give up?”
Let’s not make our dairy farmers give up, people. Talk to your farm neighbors and friends. Imagine what Wisconsin would look like without our farm green spaces and grazing bovines. Talk to your legislators and ask them to support Wisconsin dairy. Let’s do whatever it takes to keep families on their farms, milking cows, and producing the product most of us take for granted every day.
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