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Higher input costs put strain on dairy industry
By Karen Templeton
MSU Ag Communications
MISSISSIPPI STATE – Despite higher milk prices, the dairy industry struggles to make significant profits because of high production costs and lack of rain.
The current average price for milk is about $19 per hundredweight. In May 2010, the price was $15, up considerably from $11.60 in May 2009.
“The higher milk prices are welcomed on all dairy farms, but with increases in fuel, feed and fertilizer prices, dairy farmers are seeing very slim profit margins,” said dairy specialist Lamar Adams of the Mississippi State University Extension Service. “Farmers are faced with tremendous financial challenges in maintaining profitable production on their farms.”
Mississippi has 17,000 milking cows on 125 Grade A dairy farms. Two years ago, the state had 20,000 cows on 149 farms. Dairy farmers’ lack of significant profit in recent years is the primary factor causing the decline in the number of dairy farms and cows in Mississippi and throughout the United States.
“The industry continues to have to jump a number of hurdles, but recent increases in U.S. dairy product exports have added strength and stability to domestic dairy prices, ” Adams said. “The export market has helped prevent domestic milk prices from plummeting further. As the global economic recession continues to subside, demand for U.S. dried milk powder and other products increases among our trading partners.
“Increased exports help align our domestic supply of dairy products more closely with demand, resulting in improved producer pay prices,” he said.
Domestically, dairy markets remain volatile as the U.S. economy struggles to rebound.
“High-end restaurants serve a lot of heavy cream, cheese and butter, which has traditionally given the industry a boost,” Adams said. “But with the economic challenges faced recently, fewer people are frequenting restaurants, resulting in a decrease in demand for these and other dairy products.”
Many dairy farmers have culled some of their lower-producing cows to take advantage of higher cattle market prices.
“Between February and May of this year, we saw historically high beef prices,” said Richard Hay, MSU Extension Service director for Amite County. “Dairy farmers jumped on the opportunity to cull cows to help mitigate their feed and fuel costs. It has helped some, but budgets are still very tight.”
Dry conditions have plagued Mississippi’s dairy industry with an additional burden.
“There has been very little rain in April and May, and the high temperatures are robbing the soil of moisture,” Hay said. “This is contributing to lower feed production, particularly corn.”
Hay said many farmers are feeding their dairy cows hay and bale silage that is usually reserved for the fall months.
“The biggest milk production months are in the fall, right after calving,” he said. “Dipping into the fall’s feed supply may cause problems at a time when feed is needed most.”
Adams said that despite the problems dairy farmers have faced, most of them remain cautiously optimistic.
“It’s been up and down for the state’s dairy farmers,” Adams said. “But the industry remains flexible and ready to make informed management decisions as producers prepare to face additional challenges.”