"> FALL FARM: Decent milk prices, offset by higher input costs - eDairyNews-EN
Bowman dairy farmer Kent Whetsell has been milking cows for about 20 years.
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He has seen a little bit of everything over two decades and has been able survive the ups and downs of the dairy business.

This year had the added challenge of a world trying to come to grips with COVID-19 and its various impacts.

Whetsell said 2021 has proven to be a little bit better than 2020.

“Last year, it was pretty tough,” he said. “This year all the supply chain issues have been worked out.”

For example, last year Whetsell said farmers were told they had to cut about 10% of production because plants could not keep up with processing.

“So many farms had to dump milk because of the supply chain issues,” he said.

Currently, Whetsell milks about 175 Jersey cows on his farm on Landsdowne Road, where his operation helps to provide goods and product for Low Country Creamery across the street.

The creamery produces whole milk, chocolate milk, Greek and Swiss yogurt and buttermilk. Much of the farm’s production goes to Charleston restaurants and coffee shops.

One relative constant in dairy is lower-than-desired milk prices.

“They are not terrible right now but they are not where they need to be,” Whetsell said. “For us, we are getting about $19 to $20 per hundredweight (cwt). “I would like to see them around $22 to $24.”

Fluid milk prices are up actually slightly over the last couple of years. In March 2018, prices got as low as $13 per cwt. Milk prices were as much as $24 (cwt) back in 2014.

In addition to lower-than-desired milk prices, another issue facing dairy farmers is input costs.

“Feed prices are very high right now,” Whetsell said. “They are the highest over the past 10 years.”

For example, soybean is about $450 a ton. Typically, it is under $300 a ton.

“I don’t know what our costs will be in the next six months,” Whetsell said. “Everything is so volatile. It is not getting easier.”

Overall, Whetsell said the dairy market is generally up while fluid milk demand is down.

“People are consuming more dairy products now than ever before,” Whetsell said. “The pounds of dairy products per capita have been increasing with such things as yogurt and cheese.”

Market dynamics

Clemson Extension Associate Professor of Agribusiness and economist at the Sandhill Research and Education Center Dr. Adam Kantrovich said that at the farm level, the mailbox milk price (MMP) is an important factor. The MMP is the price that a dairy producer will see, plus or minus costs associated with hauling and any other local differentials that may exist.

Locally, the region saw a mailbox price increase through the first six months of 2021 of about $2 per (cwt) more than this same time last year.

Kantrovich says South Carolina dairy producers were seeing a slight positive adjustment for the Class I (beverage) milk price compared to others within the region providing a slightly higher price.

“But unfortunately for some South Carolina dairy producers, this may be offset by the higher cost of hauling the milk from the farm,” he said. “This is an issue of seeing fewer dairy producers and fewer cows; the cost of hauling milk increases.”

Dairy farmers for the early half of the year saw increasing milk prices as the economy began to open compared to last year.

“However, we are again beginning to see a slight pullback in prices,” Kantrovich said. “Cheese prices have begun a downward trend when compared to the same month of the previous year and a downward trend compared to earlier in the year.”

Nationally, cheese production continues to move forward and for August is up over 4% compared to August 2020. In fact, Kantrovich says August was one of the highest cheese-producing months in nine years.

Cheese prices for the year, however, have been declining.

“Looking into 2022, indicators are that cheese price should hold relatively steady, also barring any major shifts that would change present demand,” he said.

Butter production and butter stocks are also down compared to last year.

“Indicators are looking for a steady to a slight potential increase in butter price as we move into and through 2022, but we will need to see continued growth in demand,” Kantrovich said.

Looking ahead, Kantrovich says 2022 could see a potential pullback of prices based on per-cow production increases.

Shipments of condensed and dry milk products this July and August as compared to last year have decreased.

“The positive is that we have also seen stocks down, which we hope will negate any negative effects of shipments,” Kantrovich said. “As we come out of the pandemic and hopefully an attempt to resolve any continued trade war issues, we could see an upside, but right now that is a big if.”

“As of right now, it is most likely to see steady to a slight decrease in milk price at the farm as we head through 2022 pending any major disruptors, good or bad,” Kantrovich said. “The positive right now to holding milk prices steady is the decrease in cow numbers nationally as well as the state with the amount of milk per cow not increasing as fast as expected.”

“Changing consumer demand will also play a role in this, as well as international trade issues that began a few years ago have not yet been resolved,” Kantrovich said. “Given the many issues globally, we will continue to have to live in a bit more of a dynamic market situation.”

Kantrovich says government price supports have proven beneficial to dairy farmers again this year.

“This has provided some additional taxable income to producers, but it still may not be able to assist in the longer-term outlook for dairy prices and profitability nationally and here in South Carolina,” he said. “Without the USDA program payments, it is very possible we would have seen a higher loss in 2020 of cows and dairy farms than what was seen.”

Milk production, declining dairies

Lower cow numbers and the stress of summer heat and humidity have reduced milk production.

According to the latest statistics and the latest Appalachian Federal Milk Marketing Order information available as of August, South Carolina had produced approximately 6,721,632 pounds of milk with about 35% of that production coming from three farms in one county. These are farms that sell milk through federal marketing orders, which account for about 63% of milk sold.

While nationally milk production has increased slightly, local dairy farms and cow numbers continue to decrease.

“Between 2019 and 2020, it is estimated that South Carolina lost about 2,000 milking cows (almost 16.7% of the state’s herd),” Kantrovich said. “I expect to see a further reduction in South Carolina milking cows for 2021, but hopefully not as much of a drop as we saw between 2019 and 2020.”

Kantrovich says one of the biggest challenges for dairy farmers this year has been maintaining a dairy herd in a time of decreasing farms and cow numbers.

“This includes everything from replacement heifers to nutritionists and milk hauling,” Kantrovich said. “Another issue is going to be the cost of feed ration input costs for those dairies that purchase much of their feed ration vs. raising it.”

He said with an increase in feed costs there is a narrowing of input costs and milk prices.

COVID and the farm

Kantrovich says the oversupply of milk experienced in 2020 as schools were closed required some changes in packaging to fit consumer purchasing.

“Most of these issues have subsided with the reopening of schools,” Kantrovich said. “There are still occasional issues due to labor and logistical challenges throughout the food chain system.”

Kantrovich believes home consumption will decrease from last year as students are back to in-person school and consumers are dining out more often.

Another issue facing dairy farmers is hiring and labor.

“Even with some farms significantly increasing the wages paid, it is just difficult finding help and keeping them on the farm,” he said.

Kantrovich says in order for dairy farmers to survive into the future, they will have to think “outside of the box.”

“This will include looking for additional opportunities, methods of marketing, adding value to their milk, possibly working with other dairy producers in new ventures and expansions,” Kantrovich said. “And above all, you need to be above average to make sure there is enough income for retirement and the ability to successfully bring the next generation on board for the long haul.”

Uncertain dairy future

Kantrovich says the dairy industry’s challenges go beyond this year.

“It is difficult to get the next generation to remain on the farm due to long hours without seeing an economic benefit,” he said. “It is simply very difficult for smaller to medium-sized dairy producers to continue to build their net worth with such a narrow margin, if any, of profit or cash flow.”

“It simply takes a much higher number of cows being milked to raise a family as it did just a couple of decades ago, let alone if you want to bring children and their family back to the farm,” Kantrovich said.

According to the 2017 agricultural census, Orangeburg County ranked second in South Carolina in the number of milk cows at 3,100. The census shows the county has 20 dairy farms.

Despite the decline in dairies over the years, Orangeburg County ranked second in South Carolina in total milk production in 2012 at 48.5 million pounds, according to Southeast Dairy.

The dairy business in Bamberg County, like the rest of the state, has decreased significantly since the 1980s.

There are 10 dairies remaining in the county. The county ranked third in the number of milk cows at 1,800.

Calhoun County does not have any dairy farmers and has not had any for several years.

The Sandy Run Dairy is situated in the northern part of the county just off Interstate 26 at Exit 125 on S.C. Road 31, but the cows that produce the milk for the ice cream it makes and sells are raised outside of Calhoun County.

Fonterra has developed an innovative process for recycling water removed from milk during the evaporation process at its Maungatūroto site. The water passes through a wetland which acts as a natural bioreactor before it is treated further on site.

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