|
|
Colville, Washington |
Thursday, March 11, 2010 |
|
|
|
|
Dairymen struggle with low prices, slump in demand |
|
|
|
Wednesday, 24 June 2009 |
Depressed prices not seen since 1961
BY JAMIE HENNEMAN
S-E Staff Reporter
Area dairy farmers are having a bit of déjà vu this summer, as the price they are getting for their milk has not been this low since 1961. The price revisitation does not have a nostalgic feel, however, as the cost of 2009 inputs far exceeds the $8 a hundredweight dairies are currently fetching for their milk.
The latest drop in price has been yet another curve on the roller coaster of markets affecting farmers everywhere over the last two years.
Early in 2008, dairymen in Stevens County were receiving $25 a hundredweight for their milk, but that declined slightly in the summer months of 2008 to $17-$18 a hundredweight.
While the demand for milk in 2008 created a welcome net gain for milk for farmers, but prices were also high on inputs like hay and gas, which gave dairymen little opportunity to get ahead. Then the economy started to slump last fall and a lack of demand and a surplus of milk has driven prices to a low not seen for nearly 50 years.
“One of the things really affecting dairymen in Washington is that the economy in China has slumped, making less demand for milk. Also the recent melamine contamination in China has scared those consumers away from milk altogether,” said dairywoman and Dairygold representative Julie Loveall. “Our producers were also gearing up for the expected production loss from phasing out rBST (the growth hormone given to cows to increase milk production), so we had this wall of milk to sell about the time demand declined.”
Dairies throughout the West are now drowning financially in the surplus of milk, causing the closure of some “mega dairies” that were milking 1,000 cows or more in western Washington and Idaho.
“The irony here is that a couple of years ago, Pfizer and the USDA came out saying that the large scale dairies were the future, but under these circumstances, the ones making it are the small dairymen who are putting up their own hay and milking their own cows,” said Loveall.
Being able to have some control over the price of dairy hay or silage is an important factor to staying solvent, said Loveall, since hay prices went as high was $250 a ton last year, down to $200-$220 a ton this year. Three years ago or more, hay of the same quality could be found for $125 ton or less.
“The big dairies are heavily dependent on outside inputs like hay, grain and labor,” Loveall said, noting that the mid-size family dairies with an average of 250 cows seem to be weathering the storm best.
Loveall and her husband, Bruce, are keeping their dairy afloat by keeping debt low and by enlisting the help of their four children who are home-schooled and help milk the cows on rotating shifts.
“We looked at the situation and decided instead of paying an outside person to help us milk, we might as well pay our kids,” she said.
While in-house solutions are working well for some dairymen, a cooperative effort is also being made to decrease the amount of milk on the open market.
Coop program works to decrease cow numbers
As part of a program called Cooperatives Working Together, milk producers pay a 15 cent per hundredweight assessment on their milk sales in order to fund a program that aims to control dairy herd numbers in the U.S.
As the milk supply grows beyond the demand, the CWT program offers “buy outs” to have dairy cows sent to slaughter to reduce the amount of milk on the market.
The CWT program this spring will send 103,000 cows to market, taking two billion pounds of milk off the shelves, along with 200 million pounds of cheese.
The excessive number of lactating cows can be attributed to several factors, including the availability of sexed semen that allows dairymen to breed specifically for heifers that will then become lactating cows. Some dairies have moved towards almost all-female herds, giving them few options when milk prices crash.
The CWT program has had varied results on keeping the supply of milk prices stable, said Loveall, and some changes have had to be made to the program.
“The program is now withholding 20 percent of the payout to producers participating in the program to make sure they don’t get right back into dairying as some have done in the past,” she said.
CWT negatively effects slaughter cow market
While dairymen hope to benefit from the CWT program, other producers seem to issue a collective groan when a new round of dairy buyouts are announced.
Beef producers hoping to salvage a return on unbred or old cows by selling them for hamburger often see the slaughter cow prices depressed by a buyout, since it puts a glut of cows on the market.
Cattleman Don Dashiell who works part-time at Stockland Livestock sale yards in Davenport, said the calling price for slaughter cows in late May was $47-$48 per hundredweight, but since the CWT announcement the prices have plunged to the $38-$39 mark.
“We all knew the buyout was coming, so it wasn’t a surprise and lots of producers tried to get rid of their slaughter cows in May,” he said. “But the $50 a hundredweight you may have hoped to get this summer for slaughter cows just isn’t going to be there.”
For beef producers, selling slaughter cows is a necessary part of herd management where the rancher is essentially trying to recoup his investment in the cow. In order to do that, $49-$50 a hundredweight is generally hoped for.
However, on other age animals like calves and steers, Dashiell said the key to profitability is often size.
“If your marketing strategy is to come to the sale and take whatever you can get that day, there isn’t much room to complain,” he said. “But by early contracting the sale of calves, for example, you can often get a better price.”
Dashiell said the ideal number for a group of cattle to sell at one time is around 70 to 80 calves, which will make a 50,000-pound semi load of cattle of similar size. The ease in transporting a semi load of similar animals from the same ranch is attractive to buyers hoping to minimize transport expenses and a lack of uniformity.
“A lot of it is about marketing and not having a leverage of debt against you,” he said. “If you are leveraged against, you’re sunk.”
|
|
Last Updated ( Wednesday, 01 July 2009 )
|
|
|
