Effects of milk prices reach far beyond the dairy – eDairyNews
Countries United States |5 febrero, 2018

Business | Effects of milk prices reach far beyond the dairy

Source: https://www.fredericknewspost.com/news/economy_and_business/agriculture/effects-of-milk-prices-reach-far-beyond-the-dairy/article_79c39596-263c-53d9-b2fb-bf2352bafc3f.html

If you are involved in agriculture in 2018, you are well aware of the fact that times are not the greatest.

Beef prices are mediocre, grain prices are low, and milk prices are downright awful. Frederick County has seen the effects of low milk prices, but this is also a much larger, national problem.

There are several reasons for the prices being what they are, but it comes right down to too much supply and not enough demand. The increased supply comes from the fact that we are producing more milk per cow — through feed, management and genetic improvements — than ever before.

Demand is a different story. Fluid milk consumption continues to decrease, and it is certainly not helping things that imitation products are allowed in the dairy case at the store. Consumption of cheeses, butter and yogurt have all trended upward, but the problem is that they don’t keep up with supply.

Frederick County has led the state for many years as the top dairy producer with the most cows and the most milk production. In 2002, there were 171 dairy farms in the county, and if you skip to 2007, there were 131. As of December 2017, Frederick had 75 dairy farms, and we have lost two since then that I am aware of. You can see the trend here. It is sad to see a proud Frederick County industry lose farmers at such an alarming pace.

Along with it goes the heritage that shaped Frederick’s rural landscape. But the decline of dairy is not just a loss of landscape and heritage; it is a real economic loss too. Few people realize that the economic impact of one dairy farm goes far beyond the farm lane. In many cases, a dairy will have several full-time employees representing multiple families’ incomes, but it goes even beyond employee salaries. A dairy almost always has a plumber or electrician on speed dial, a veterinarian they regularly have out, a nutritionist they consult, a feed or seed salesman, the trucking company that hauls the milk, and on and on. That one farm is like a hub that supports other businesses in the community. While the loss of one farm won’t bankrupt these other businesses, the loss of many will.

What is a farm to do? There are a lot of options a dairy can consider when faced with economic or market uncertainty. It can try to cut costs, it can expand and spread fixed costs over more cattle, it can sell the cows and make the transition to grain farming, or it can sell the farm.

None of these options is the golden ticket to profitability. Most operations have few expenses left to cut, so the first to cut are usually family living expenses. There may be alternative cropping systems that would cut costs, but any mistakes there could end up costing more. The next option is to expand and spread the fixed costs over more animals. The problem with that option is that expansion requires more land to produce the needed feed.

In Frederick County and Maryland as a whole, farmers cannot compete for land with developers or investors. There are also prohibitive regulations that are unique to Maryland that farmers in other states may not face. So, what if a dairy wants to transition to grain farming? That presents its own challenges with current grain prices being low as well. Let’s take an example of a 200-cow dairy farm. Assume that farm has 500 acres to grow all of its own feed and have some left over to sell for added income. That same dairy would have at least one or two families making a living from those 200 cows. If they sold the cows and raised grain on the remaining 500 acres, it would generate enough income for a decent part-time job for one person. That leaves only selling the farm. Unfortunately, that is what it often comes to. If sold to a developer, land that once produced food now only produces more mouths to feed.

There is one option I didn’t mention: A farm could potentially process and sell its own milk and other dairy products. This can mean a higher price paid for a farm’s milk. On-farm creameries, however, are perhaps the hardest way to make a dairy farm profitable. Farmers who wish to process their own milk should ask themselves if that is something they truly want to do. Installing a creamery strictly as a response to low milk prices is a recipe for failure. I do not want to discourage those who wish to process their own milk, but I would like them to succeed in processing by asking the right questions upfront.

If you’ve read this and realized that I have offered no real solutions, you’re right. There is no easy answer. That is the problem our dairy farmers face. They hang on and hope to weather the storm while continuing to produce a safe, healthy product that will end up on the shelves of your grocery store. We are very fortunate that when we go in the store, the shelves are rarely if ever empty, and we have our farmers to thank for that. So I ask you to think of your dairy neighbors and the hard work they put in every day of the year to produce the food we eat.

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