By Argen Duncan: PNT Senior Writer
Area dairy farmers, like their counterparts around the nation, are struggling financially due to the global economic downturn.
Alan Anderson of Anderson Dairy near Portales said milk prices are low and many dairies, including his, are locked into high-priced feed contracts set when predictions for milk prices were much higher.
“Those two things that have come together in this situation are going to make it really hard for dairy farmers in 2009,” he said.
Anderson said dairy farmers are seeing monthly financial losses.
David Darr, vice president of sustainability and public affairs for dairy-marketing cooperative Dairy Farmers of America, said milk production in the United States and around the world continues to grow at a rate of 1 to 1.5 percent this year.
In 2007 and 2008, he said, the demand for dairy products increased in China, the Middle East and Mexico.
“Then as we’ve seen the economic crisis ripple from the United States to other countries, growth in dairy demand has slowed,” Darr continued.
As a result, less milk is being purchased than produced, he said. The U.S. has an increased supply, putting a downward pressure on market prices.
Anderson said milk futures, predictions of what the price of milk will be in the future, indicate this month’s prices will be half of what was expected six months ago.
On top of that, prices for fuel and feed are high. For example, Darr said corn prices are almost twice as high now as they were four years ago.
“Unfortunately, low-price cycles are part of our business, but this one is much more severe because the costs of inputs are much higher than they ever were before,” he said.
Anderson said dairy cooperatives in the Cooperative Working Together program are using member dues to buy whole herds from dairy owners who have decided to leave the business. The cows go to slaughter and the decreased milk production helps increase milk prices, he said.
Anderson plans to wait out the slump instead of selling his cattle. But he believes a some dairies in the area are leaving the business.
Darr said Dairy Farmers of America is trying to efficiently transport milk to decrease expenses. Additionally, the agency is working with a dairy promotion group to stimulate demand and provide education to the agriculture financial community, communicating the stress on dairies to help them survive.
“Futures markets would indicate an increase in milk prices in the second half of 2009, but based on the level of economic stress in the next two to three months, the price rebounds may occur sooner,” Darr said.
Until then, he said, dairy farmers are trying to care for their animals and pay their bills as best they can.