Plummeting Milk Prices

America’s 57,000 dairy farmers witnessed elevated milk prices in 2007 and 2008. But as we entered 2009, decreased export demand, costly herd upkeep and oversupply caused milk prices to drop rapidly.

"Call it globalization,” said Roger Hoskin, a dairy analyst at the U.S. Agriculture Department's Economic Research Service. “When the export market is strong, they do well; when the export market is weak, domestic use is not enough.”

Besides selling it by the gallon, milk is sold for national and international use in processing other dairy products such as butter, yogurt and ice cream. Remaining product is converted to powdered milk, cheese and whey.

American Agriculturist
cites 2007 conventional milk prices at $20 per hundredweight while pricing today’s average at $11 per hundredweight. The average price for a gallon of milk has declined 14.7 percent in the past 12 months, from $3.87 to $3.32, according to figures from the U.S. Bureau of Labor Statistics’ Consumer Price Index. Dairy farmers are receiving 35 percent less than what they were paid last fall.

The health of commodity markets determines a dairy farmer’s dividends.

Unlike other farm sectors that can store excess product for future sale, dairy producers are forced to sell their product immediately.

Dairy operators are reducing herd sizes to decrease milk production and to save money on animal feed and care, and have also resorted to selling cows at fire-sale prices, or significantly lower-than-average market prices, to stay afloat. According to a USA Today article, there has been a 20 percent increase in cow slaughters from last year.

California, America’s No.1 dairy state producing $7 billion annually or one-fifth of the U.S.-milk supply, is receiving the blunt of the industry storm. California Gov. Arnold Schwarzenegger proclaimed June 2009 as “Real California Milk Month” in efforts to boost industry sales.

To assist a floundering market, the federal government is purchasing dairy products to normalize price levels and is allocating its purchases to national food banks and nutrition programs, as well as donation programs abroad.

The state of the U.S. economy isn’t helping matters. With increasing numbers of farmers in all commodities seeking loans, dairy farmers cannot depend on receiving financial assistance for security as in years past.

The National Milk Producers Federation (NMPF), a nationwide conglomerate of dairy farmers and cooperatives, is working to promote the demand of dairy consumption and the vitality of the American dairy industry.

How can the dairy industry reinvigorate interest in its products? Will milk prices stabilize if/when the global recession recovers? Should other farm industries be on the defense after witnessing the beef, pork and now dairy sectors experiencing a threatened existence?

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