While it has been taking place for a long time, the fact that large numbers of dairy farmers are going out of business has just captured their attention. Several local TV and newspaper stories surfaced last week lamenting the fact that in approximately 10% of Indiana dairy farmers went out of business in 2018. The stories behind these failures are heartbreaking, which is one of the reasons the media has picked up on the story.
“Just walking around here, it’s like the rapture happened and we didn’t go,” Johnson County farmer Joe Kelsay told an Indianapolis television station. Last fall he had to sell all his 500 dairy cows, ending 6 generations in the dairy business. Kevin Benter, of Jackson County, is another former dairy producer who was forced out of business. “I get asked every day if I miss dairy farming,” Benter told a Columbus newspaper. “It’s unbelievable how much I miss it.” All farm failures are unfortunate and emotional, but dairy farmers even more so since dairy producers have a real emotional connection with their cows. Selling a dairy herd is a lot like breaking up a family.
The reasons for the downturn in dairy are many, complex, and varied. Industry experts blame a drop in milk consumption caused by increased competition from other beverages, especially those calling themselves milk. Dairy farmers blame large, mega-dairy operations that milk thousands of cows each day. While there is truth in both these statements, there are many other reasons, some caused by dairy producers themselves.
No other sector of agriculture has made more advancements in efficiency than the dairy industry. Every year for the past several decades, milk production per cow has increased. Thus, even with a continued decline in milk cow numbers and a decline in dairy farmers, total U.S. milk output continues to grow. This keeps the wholesale price of milk low and gives large dairy operations a competitive advantage over small producers. The lack of an effective government safety net program for dairy is the result of a divided dairy industry that cannot speak with one voice on policy issues.
Consumers are also to blame, not just for drinking more almond milk, flavored water, or Diet Coke, but for refusing to put a higher value on milk. Whenever the retail price of milk creeps up, consumers are the first to scream. They expect the dairy case to always be full and to always be cheap. At my local Target store, the everyday price for a gallon of milk is 99 cents. Considering what it takes to produce a gallon of milk and deliver it fresh to a retail dairy case, that is a ridiculously low price. Target may be taking a loss in order to get people into their stores to buy their other overpriced food items, but it still reinforces in the mind of the consumer that milk is a low-cost commodity.
Almost every state is seeing dairy farms disappear, and this trend is not likely to change. The price outlook for milk in 2019 is not good. Milk production continues to rise while demand continues to fall. Some say just getting people to drink more milk will solve the problem. Some well-meaning groups have even launched what they called the 10 Gallon Challenge. This was for each of us to buy 10 gallons of milk to donate to food banks. In addition, the USDA has reversed an Obama era rule that banned some milk from school lunches. While measures like this will help some, it is a drop in the milk bucket.
U.S. Milk production in the 23 major states during November of 2018 totaled 16.4 billion pounds, up 0.8% from November 2017. To drink our way out of the dairy crisis would mean a lot more milk would have to be consumed to have an impact. While some dairy operations will find a specialty market they can produce for, the sad reality is more and more dairy producers will shut down in the coming year.
What is happening in the dairy sector is happening in most other sectors of agriculture. The farm economy is moving into two different sectors: the commodity sector and the high value specialty sector. While the transition will be painful, in the end, both will present opportunities for different scale operations to be successful.