As milk prices slump, farms cope

“Normally, in the past, it’s been a three-year price cycle,” Winona County Farm Bureau President and dairy farmer Glen Groth said. Ups and downs are normal, but people are still waiting for the next upswing. “Everybody thought they’d see some decent prices in ’17 … Well, that never materialized and hasn’t shown any great signs of promise. So what’s happened is we’re in for a great period of breaking even or losing some money. That’s what’s stressing people out,” Groth stated.
At $17.80 per hundredweight of milk, the 2017 average milk prices in Minnesota were nearly a dollar below the 10-year average of $18.62, according to data from the USDA’s National Agricultural Statistics Services (NASS). Those relatively low prices got substantially worse in the first quarter of 2018, falling to $15.90 and $15.50 in January and February, according to NASS data. The federal base price for class II milk fell to a paltry $13.44 per hundredweight in February — the lowest it has been in the last five years, according to the USDA National Agricultural Marketing Services (AMS). It moved in the right direction in March — up to $13.88 — but it is still $2.16 less than last year’s average. The base price for class I milk in April is $14.10, according to AMS.
“You hear a lot of guys talking they need $17 or $18 to break even. Well, if you’re at $14, that’s a lot of money every day a guy could be losing,” Mark Vick said.
Vick runs the Lewiston Sale, Inc., livestock auction, and last Thursday, his staff corralled more than two dozen milking cows out onto the auction block. They were part of a complete herd belonging to a local farmer who made the heavy decision to sell the herd and get out of the dairy business. In the last few years, Vick has observed an increase in the number of local dairy farmers selling their herds and quitting. “I’d say in the last four to five years, you’re seeing small 40-50-cow herds just dwindling away,” Vick stated. “The little dairies — they’re just making it miserable for them. They’re raising the trucking [fees] on them. It’s just hard,” he said. “The bigger guy has a lot tied up and he needs to stay in,” Vick added.
Groth and Vick said that many of the farmers selling off herds are at or near retirement age anyway. Maybe they figure they can make as much money raising crops or driving tractor for their neighbor, Vick explained. “It doesn’t mean their farming career is over,” Groth said. “Some people in their 50s and 60s — the physical toll of a small dairy is catching up with them, too. So raising some beef cattle is easier on them.”
Eugene Hansen milks 50 cows in Warren Township. “It isn’t the feed costs that are killing us right now; it’s the fixed costs,” he said. It is the cost of property taxes, land rent, health insurance, and veterinary bills that are making dairy farming so tough, Hansen explained. It is not even the prices, per say, Hansen said. Although milk prices are in a prolonged slump currently, the 10- and 15-year trend lines show a gradual, slight increase in milk prices. The problem is that slight increase in milk prices is not keeping pace with overhead costs; it is being outstripped by big hikes in property taxes, health insurance, and a host of other bills, Hansen explained. “That’s what our problem is,” he said.
“Eugene’s exactly right,” Groth said. “While you can see a slightly upward trend [in milk prices], the upward trend has been more pronounced in other things: the cost of feed, the cost of taxes, the cost of fuel. Whatever input you’re buying, they’ve all seen upward trends … That’s why margins aren’t any better now than they were before.”
Winona County dairy farmers are not alone in feeling the crunch of small or negative profit margins. AMS’ Central U.S. dairy report put it in news-ticker-style language: “Fluid milk contacts are again reporting that more farm closures are looming in the Upper Midwest. Some dairy farmers are set to auction their herds as early as the end of this week. The ripple effect from dairy farms being let go both in the Midwest and Mideast part of the country is expected to be felt far and wide.”
Hansen went so far as to compare the crunch dairy farms are experiencing right now to the 1980s farm crisis. Instead of double-digit interest rates forcing farm closures, it is overhead costs, Hansen stated. “I think it’s a whole lot more serious than anyone is willing to admit,” he said.
“They’re not even disastrously low milk prices, it’s just not enough for people to get ahead,” Groth explained. Groth said that a lot of farmers will be thinking, “I was going to replace this piece of equipment this year, but I’ll put it off. I was going to pay off this loan this year, but I’ll put it off.”
By: CHRIS ROGERS
Source: Winona Post
Link: http://www.winonapost.com/Article/ArticleID/58782/As-milk-prices-slump-farms-cope