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Production costs prevent dairy price celebrations
MISSISSIPPI STATE -- Dairy farmers would like to celebrate June as dairy month by toasting near-record prices with a glass of cold milk, but they can't afford it.
Bill Herndon, agricultural economist with Mississippi State University's Extension Service, said skyrocketing production costs have more than narrowed the gap between profit and loss; they have eliminated it. At the same time, the price of milk at the grocery story has climbed steadily, averaging near $4.50 per gallon, up from about $2.80 per gallon in 2003, and is expected to remain high through 2009.
“Thankfully, farmers are receiving near-record high prices of just under $20 per hundredweight for milk, but what they earn is more than offset by feed costs,” Herndon said. “Costs for a 16-percent crude protein dairy ration have basically doubled from $5 per hundredweight in the third quarter of 2006 to almost $10 per hundredweight in the second quarter of 2008.”
The milk-feed price ratio is the U.S. Department of Agriculture's benchmark for determining profitability for dairy farming. Herndon said the ratio in April reached its lowest level since USDA began using that benchmark in 1985.
“This April milk-feed price ratio indicates that farmers are not currently covering their cost of production. Despite high milk pay prices, they are making less money than ever,” Herndon said. “That means we are not likely to see expansion in the dairy industry. In fact, we are likely to see contraction.”
Walthall County Extension director Lamar Adams said strong milk prices have provided a slight reprieve from the large numbers of Mississippi dairy farms closing in recent years.
“The strong prices have slowed the rate of decline in herd numbers, but when prices drop again, more herds will go,” Adams said. “Farmers are seeing sharp increases in all their input costs, including fertilizer, fuel and feed. Management decisions continue to be important for farmers to minimize losses.”
Adams said an upcoming field day will target some key factors impacting dairy producers.
The Statewide Dairy Field Day is June 25 in Tylertown at the Southwest Events Center Conference Facility. Topics include gender-selected semen; corn silage management; dairy budgets, policy, pay prices and input costs; dairy calf health; and grazing management.
The Southwest Events Center Conference Facility is located at 29 Highway 48 East in Tylertown. For more information, contact Adams at (601) 876-4021 or firstname.lastname@example.org.
Herndon said the outlook for milk prices is driven by demand. Domestic use remains strong despite the high costs for dairy products, but prices are mostly driven by international demand.
“The weak U.S. dollar makes our products more affordable on international markets and will continue to bolster milk prices through 2009,” Herndon said.