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Depression of the Dairy Market

Thursday, December 6, 2018 - 7:00am

Host: Amanda Stone, Dairy Specialist

Today, we’re talking about the depression of the dairy market. Hello, I’m Amy Myers and welcome to Farm & Family.  Today, we’re speaking with Dr. Amanda Stone, Extension Dairy Specialist

Amy Myers: As we all know, agricultural families are facing challenges.  What are some major challenges?

Dr. Amanda Stone: Dairy farmers are struggling to make ends meet and are eating up the little equity they have left to simply stay in business. The main problem is a prolonged period of low milk prices. Prices right now are so low that they are about what they were in the 1980’s, but input costs are much more than they were 30 plus years ago. The last time producers were paid a reasonable price for their milk was in 2014. There’s currently more fluid milk on the market than there is demand and that is driving down the prices. People are also consuming less milk than they used to and are opting for the less-nutritious alternatives. The latest stressor is the tariffs that are altering export options.

Amy Myers: Why is milk price so low and what is the impact?

Dr. Amanda Stone: A dairy farmer’s income is dependent on the price of milk, which they have no say in. Milk price is set at a federal and state level through a very complex system that depends on imports, exports, what the milk is going to be processed as, farm location, and other things. Fluctuation in the price is normal, but looking at past cycles, the price really should have bounced back to a decent level by now. We are seeing many dairies go out of business throughout the nation as a result of this, but the southeast is being hit the hardest because we are a completely fluid market, meaning that all our milk goes to the milk you drink, not cheese or butter. The impact on the producers going out is that they’re losing their business in a time where they have already sold off so much of their assets to attempt to stay afloat so they are left with very little. Not to mention the mental/emotional hardships of this decision – most dairy farms have been in business for generations so being the one to lose what your ancestors worked so hard for is really unfathomable – and it’s not easy for them to just go out and get a new job because they typically are almost to retirement age and their skillset is completely farming-related. The impact on the ones staying in business is that they don’t know what tomorrow will bring, they probably are struggling to feed their own families, and they are slowly losing grip of something they have poured everything they have into.

Amy Myers: Is there any way for producers to alter things on their own farm to help get milk off the market and raise the price for everyone?

Dr. Amanda Stone: This is a difficult question because dairy producers want to help the whole industry so that they can stay in business, but they also need to help their own farm – again so they can stay in business. If a producer sells cows or lowers milk production per cow, he or she will be making even less money. If that production gets too low, their milk cooperative may also decide that their level of production isn’t worth their resources to pick up and they may be taken off the milk route, meaning they have no one to get their milk to take to the processing plant. Most people know what they’re going to get paid each year, even each paycheck, but dairy producers send their milk off and won’t find out what they got paid for it until the next month when their milk check arrives. Dairy farming had added complexities because the cost of production is only so variable and it is very difficult to be brought down to a profitable level right now. Cows need to be fed well, housed in a clean environment, milked multiple times a day – and producers care about these cows like they’re family so they can’t mistreat them and still sleep at night. Milk is also a perishable product so they can’t just hold onto it and wait for a better price before marketing it. Some other agricultural producers have this benefit, but dairy producers can’t store the milk on their farm for more than two days.

Amy Myers: How can we find more resources, or stay updated on challenges and opportunities we face in the agricultural industry?

Dr. Amanda Stone: I encourage everyone to buy as much milk as you can to rid the shelves of it a bit. The milk produced in Mississippi will have code 28 to start the 6-digit number on the carton so you can make sure you buy milk that was produced here to support local farmers. You also can buy directly from farms that process their own dairy products. I also encourage you to talk to your local dairy producers. Ask them what’s going on and learn more about the industry so you can maybe think of your own way to help.

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