The milk:feed ratio is already in the toilet, and now ag economists are saying that milk prices will be terrible through the first half of 2009 before “improving” to merely lousy in the second half of the year. The reasons are several, including reduced dairy exports due to the high value of the U.S. dollar relative to some other currencies. And we’ve had a couple of good years in the dairy business, which almost always pushes milk production. Now we’re in a recession, and people aren’t eating out as much. Fewer trips to Pizza Hut, reduced cheese use.
As I’ve traveled around the country on various speaking/consulting junkets it’s interesting to see how this “dairy depression” is being viewed by various dairy farmers and others in the industry. A recent Cornell University report noted that at the current cost of milk, one dairy farmer wasn’t even meeting variable costs. When this happens would the farmer be better off selling the cows? Obviously that depends on how long this situation continues.
Some farmers at a dairy conference I recently attended in Indianapolis had a much more optimistic view; they said that dairy farmers had it pretty good for quite a while, and it was time for the inevitable downturn, that when even the poorly-managed dairy farm was making money it was a sign of a change on the way. Easy for them to say, perhaps, because these were among the best dairy farm managers, but they did have a point. One of our previous U.S. Secretaries of Agriculture once said that when egg prices get high enough “even the roosters start laying ‘em”. These farmers weren’t happy with low milk prices, but neither were they planning any drastic measures, and a few even said that they’d come out of the other side of this mess lean and mean and ready to roll again. After reading all the doom and gloom it’s a rejuvenating to listen to farmers like this. (And since today is my 66th birthday I can use all the rejuvenating I can get.) Of course, like the recession even though who see the light at the end of the tunnel don’t quite know how long the tunnel is…