Dairy Farmers In Trouble Part 2
Dairy Farmers In Trouble Part 2. I’m Greg Martin with today’s Line On Agriculture.
Chris Galen with the National Milk Producers Federation says they have been asking USDA to come to the table with some solutions to help out dairy producers here in the
GALEN: I think that anecdotally we are hearing that. I don’t know that it’s showing up yet in statistics. I think a lot of people are talking about it but other than those going through our CWT program where we had about 390 farms retired this spring and I’m sure we will have a few hundred more here with this new herd retirement we are conducting in July it’s a little hard to say how many people are actually being forced out.
Galen says that even so there are other factors that are making it more and more difficult to stay in business.
GALEN: What we do know is that lenders are making credit less available, they’re looking at the on-going trough in milk prices and they’re saying I’m not going to continue extending your equity and farmers are burning through a lot of equity right now so I think it’s not so much a question of if a certain number of farmers go out, just a question of when.
As everyone knows there are cycles when it comes to these things and sometimes they are pretty extreme. Galen says there will be a healthy dairy industry as this starts to rebound but it’s not happening as fast as they’d like. On the obverse side, is there a chance that the dairy industry will cut back too far?
GALEN: Well that always seems to be the case doesn’t it, that we’ve seen a lot more price volatility in the past 12-15 years and that we tend to overshoot both on the lows which is what happened back in 2002 and 2003, the last time we had an extended and very deep price trough and then we saw record high prices in 2004. And we saw a little bit of a price trough in 2006 and then we saw record high prices in 2007 as well as the first part of last year.
And while prices are low for dairy products Galen says that’s not the only factor.
GALEN: We have probably record low profitability. It’s not so much that prices are absolutely low, as low as they were 6 years ago; it’s just that the input costs now are so much higher. The cost of corn is still close to $4 a bushel and oil is still $60 a barrel and you didn’t have that back in 2002 and so it’s the profitability equation that’s very, very difficult.
That’s today’s Line On Agriculture. I’m Greg Martin on the Northwest Ag Information Network.
