Rising costs outpace milk prices
Updated: Thursday, June 07, 2012 12:10 PM
'It could be the end of some producers,' dairyman warns
By CAROL RYAN DUMAS
Idaho dairymen continue to see their profit margins erode, and some say it could get worse.
"It's too much, with the milk price and what we're paying for feed. We're losing another $1.50 to $2" per hundredweight of milk, said Tony Vander Hulst, co-owner of West Point Farms in Wendell, Idaho.
"It could be the end of some producers," he said.
Depending on a cow's milk production and age, dairymen are feeding 55 to 65 pounds of feed a day, at a cost of more than $7 a day per cow. The breakeven price is running about $17.50 per hundredweight, but Magic Valley dairymen are only getting about $15 for Class III milk headed for the cheese vat, he said.
USDA's Agricultural Prices Report on April 30 put the April national all-milk price at $16.90 per hundredweight, down 30 cents from $17.20 in March and down $2.70 from April 2011.
That reduces the milk-to-feed ratio to 1.45, the lowest since June 2009. The ratio is a measure of how many pounds of feed can be purchased with the value of a pound of milk.
A ratio under 2 generally means dairymen are losing money or are on the margin, University of Idaho Extension Livestock Economist Wilson Gray said in an earlier interview.
Vander Hulst said things started going south in the dairy industry about three months ago. And the way things are shaping up with growing milk production and the economy, a lot of dairies nationwide could go out of business. Others agree.
"Things are very tight. Looking forward, it looks even more bleak," said Adrian Boer, a Jerome Idaho, dairyman, and a board director of Northwest Dairy Association and National Milk Producers Federation.
The May 3 futures price on Class III milk for June was $14.32. At $14 to $14.50, Idaho dairymen will be losing $3 a hundredweight on milk, he said.
"The country is swimming in milk," he said. "We have to cut back."
Co-ops in the West have implemented production bases, but the entire industry needs to cooperatively cut production, he said.
"We can't do it as individuals," he said.
Until something on the order of the proposed Dairy Security Act, with its supply-management provision, is put in place, dairymen are at the mercy of each other, he said.
"I didn't think we'd be where we're at today," after the devastation of 2009 when prices fell and producers were hit with high feed prices, he said.
But it's inevitable with the glut of milk internationally, to which the U.S. is a big contributor, he said.
Prices received by producers
Commodity April 2012* March 2012 April 2011
Milk (cwt.) 16.90 17.20 19.60
Alfalfa hay (ton) 207.00 201.00 161.00
Corn (bu.) 6.14 6.35 6.36
Soybeans (bu.) 13.80 13.00 13.10