Washington dairy farmers struggle with milk surplus
ADNA, Wash. (AP)--The free-falling price of milk and high feed cost have forced many dairy farmers to begin to "lay off" some of their cows in an effort to make ends meet.
In this rough economy, even dairy cows are feeling the effects of downsizing.
"You just got to look at how feed cost has come up," said Jay Gordon, executive director for Washington State Dairy Federation. "And cows that are getting on in years, or if there's any other reason she's not paying her feed bills, she's going to get laid off."
The only other job out there for a dairy cow outside the farm is the beef and hamburger industry, a business that always accepts applications.
Bob Larson, an Adna dairy farmer, has yet to start selling off a large percentage of his stock, but he's already sent 10 cows to the butcher, and plans to send three more this week.
Things still haven't been easy, and continue to get worse as the losses mount by the month.
"This is new territory for me," Larson said. "It's usually been a gradual drop, but we've seen a five to six dollar drop (in the price of milk) in a few months. It seems to me as far as losses, it's about $100 per cow a month."
With Larson's 170 cows, that's about $17,000 a month in losses, and he said that's on top of cost.
"Financially I'm pretty secure," Larson said. "I can absorb some losses, I've kind of prepared for it. But I can't absorb the losses for long."
After experiencing two good years, Larson said the bottom seemingly fell out of the price of milk.
In 2007, the average price of milk in Washington was $19.20 per hundredweight (cwt), or hundred pounds of milk, according to the United States Department of Agriculture. The price eclipsed $20 for seven months and went as high as $22 for three of those months.
That was a dramatic jump from 2006, when the average price per cwt was $12.60, and prices only topped the $14 mark once.
The good times continued into the beginning of 2008, but prices began to dive late in the year. Milk prices were at $14.50 per cwt in December of 2008, a fall from $21 per cwt in January.
In January of this year, the price of milk fell further to $13.20 per cwt.
"The decline started in November and December," said Chuck Hayes, a dairy farmer in Toledo and past president of the Washington State Dairy Federation. "We knew it was coming. There were some projections of the price drop."
Many factors contribute to why milk prices have fallen as dramatically as they have, but the main reason is based on supply and demand, Gordon said.
"A couple years ago, the world demand was good, and the dollar was weak," he said.
That put United States milk in high demand.
The market has since slowed and farmers have been stuck with a surplus of milk, driving down the price.
"As farmers we're balancing the world's bread basket," Gordon said. "But we're the ones that get the moldy bread when it's full."
Even with warning, there was little dairy farmers could do to brace for the impact or make changes to alter course.
"I'm pretty much lowball as it is," said Hayes on how it's hard to find ways to scale back his 100-cow dairy operation.
He has begun to feed his herd less, but that's the extent of the adjustments he is able to make.
Larson said he started to suffer financially in the summer of 2008 when he began paying $2,000 to fill up the 500 gallon tank on his tractor. In years past, he would typically pay $400.
To prepare for the hit that was coming, he started saving his feed and mixed up what he fed his herd in attempts to cut cost. But that and "beefing out" the bottom of his herd is about all he said he could do.
Organic dairy farmers have not been completely spared, but because of their contracts are looking to rebound from last year.
"We're hoping for a real good year," said Lonny Schilter, an Adna organic dairy farmer. "High feed cost hurt us last year, and low feed cost should help us. Where we're at, in the organics, we're excited about this year coming up. I feel for the other guys that are not organics. I'm seeing numbers and I don't know how they're going to do it."
Many in the conventional dairy market don't know what to do except hang on and wait until the turbulence in the market ends. But some predict a few dairies won't be able to survive the ride.
"I know a farmer in Clark County, and he told me 'Chuck, this is the first time I've ever been scared,' and he's been doing it all his life," Hayes said.