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No easy answers in dairy crisis
Agriculture is a significant economic contributor to our state and Utah’s dairy producers are no exception. In communities off the Wasatch Front, agriculture continues to be an important and stabilizing economic engine, especially during difficult times.
Today our state’s dairy farmers find themselves at an economic breaking point. They are currently facing the worst financial crisis in generations. Prices paid to America’s milk producers have plummeted by more that 50 percent in recent months while input costs remain high.
For consumers, the dairy industry’s red ink and financial deterioration means lower prices at the grocery store. But at stake is an important piece of America’s future food security. At a time when consumers are exhibiting greater interest in where there food comes from and how it is produced, America’s dairy farmers are the world leaders in producing the safest, most wholesome and highest quality milk and dairy products.
There are around 57,000 dairy farms nationally, but only about 260 operations remain in business here in Utah. This is a significant drop from even 10 years ago. Utah history teaches us the importance of self reliance and maintaining the ability to provide for our most basic needs. Utah dairies are made up of hard-working, multi-generation farm families – parents, children and grandparents – who are in the fields and barns everyday, without fail. These families are committed to a 24/7 business model that includes growing feed, caring for animals and milking twice or three times a day.
Milk prices hovering around 30-year lows are putting a tremendous strain on farm families. Cash reserves are depleted, lines of credit are exhausted and farm equity is being eroded.
It’s easy for economists and market analysts to identify the reasons for the price downturn. It’s a function of the market – current supplies of milk exceed the current demand for milk and other dairy products. Ironically, these are the same market forces that gave producers $20 milk in 2008.
Several factors are exacerbating this difficult situation. Domestic milk demand is down. A stronger U.S. dollar and the global economic crisis have made American dairy exports more expensive. Foreign markets have dried up. USDA reports dairy exports declined 53 percent the first five-months of 2009 compared to the same period in 2008. At home, Americans are eating out less! And restaurants account for about 40 percent of dairy consumption.
What’s difficult is identifying a strategy and course of action that will restore economic security to America’s and Utah’s family dairy farms. While Utah dairy numbers have declined, their importance has not.
Utah’s dairy farmers contribute nearly one-third of a billion dollars in farm gate sales and are the catalyst for nearly one-billion dollars in economic activity. Thousands of Utahns owe their jobs in processing, manufacturing, transportation and sales to our milk producers. An economically sound dairy industry is also critical to alfalfa farmers, Utah’s largest cash crop.
While contributing about one-quarter of the state’s farm income, those dollars coming from Utah dairies have a multiplier effect of 2.5 - 3 times as it cycles through rural communities. Each year a single dairy cow will produce more than 20,000 pounds of milk and contributes around $10,000 to the local economy.
Consumers who see three gallons for $5 a blessing are short-sighted. Retailers who suggest their current higher-than-warranted milk prices are a way of recouping last year’s losses from high wholesale prices are very narrow-minded. The average grocery store can assign overhead costs to 40,000 items. Dairy farmers have one item for sale – milk! Do retailers and consumers really think ten dollar per hundredweight or even twelve dollar per hundredweight milk will cover the costs of fuel, feed, fertilizer, electricity, land, labor and all the rest?
As the price-cost squeeze places more dairy farmers at risk – not to mention beef, pork, poultry producers and all the rest – is anyone concerned about who will feed more than 300 million American consumers? There is a thin green line - less than one million farmers and ranchers – protecting America’s future food security.
Some argue for the government to take a more active role in managing dairy supplies and setting prices. That approach has been tried. During the Carter administration higher price supports lead to government warehouses overflowing with milk, butter and cheese. In the 1980s, when the government got involved in reducing the nation’s dairy herd, the taxpayer funded whole herd buy-out is a program beef producers will never forget.
As a general farm organization, Farm Bureau must ensure all agricultural producers are treated fairly. The Utah Farm Bureau’s dairy committee represents leaders from across the state. Farm Bureau’s annual policy process provides opportunity to identify a long-term strategy that will bring positive and lasting change. Farm Bureau is committed to working with industry leaders to find ways to ease the pain dairy farmers are currently experiencing.
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