Persistent low prices mean dire days for dairy

For more than 75 years, Americans have observed Dairy Month in June. But this year, dairy farmers themselves don’t have much to celebrate. Many are facing serious economic challenges that may put their farming future in jeopardy.

Milk prices are the leading culprit. Worldwide, there is too much milk and not enough room for it, and prices have plummeted to profit-pinching lows. Of course, farmers are used to wavering milk prices. In the past decade, the pendulum has swung from lows of $10 per hundredweight to record highs above $20. A bad year every so often is one thing. They can weather that by equity and savings. The problem is when prices stay low, year after year, as they are right now.

To make up for low prices, farmers produce more milk, contributing to the problem. It’s a double-edged sword, but production is one of the few things farmers can control.

Recently, we’ve seen the ugly side of supply-versus-capacity in other states, where some farmers have lost their markets without warning. Just this spring, around a dozen farm families in Tennessee got an out-of-the-blue notice that they were being dropped from Dean Foods in 90 days. The company cited overabundance of milk in the market as the reason. Friends of mine in Wisconsin went through the same thing last year when Grassland Dairy Products severed ties with them and more than 50 other area farms.

In Missouri, farmers are feeling the pinch, too, although not as severe as some states, according to Joe Horner, University of Missouri Extension associate in agricultural economics. Here in the Show-Me State, most of dairy farmers are members of milk-marketing cooperatives, such as Dairy Farmers of America, Central Equity Milk Cooperative and Prairie Farms. And, as MFA folks know firsthand, cooperatives take care of their members. They’re not likely to drop contracts unless something drastic happens, even though some have recently instituted restrictions on how much milk can be shipped to better manage supply and maintain processing capacity.

“Many dairy farmers become co-op members for defensive purposes,” Horner said. “There’s definitely an advantage to having a financially solid co-op on the other end and knowing the milk check will be there.”

Following trends in other states, the number of dairy farms here is decreasing faster than the number of cows due to consolidation and expansion. As of January 2018, Missouri had 84,000 milk cows, down more than 30,000 from a decade earlier. Currently, some 964 permitted dairy farms operate here.

Our cover story features one of those dairies, operated by the Corlett family in Willard, Mo., for more than 70 years. In recent years, however, they’ve diversified to provide extra income. They haven’t given up on milking cows, but they’re raising beef cattle and row crops and considering value-added ventures. There’s no magic solution to improve profitability on the farm, but such diversification may be one answer.
Despite the dire situation of many smaller family-run dairies, industry experts tell me that there are reasons to be optimistic, especially here. Missouri is ideal for expansion or relocation of dairy operations and processing plants. We have an ample water supply and affordable grazing lands. We have abundant, accessible transportation. And we’re located in the middle of the prime milk production region.

As Horner reminded me, too, dairy farming is a long-term proposition, and producers are accustomed to its cycles. Just as history has shown, he expects prices to eventually climb back from the bottom. The latest USDA forecast shows that there might be light at the end of the tunnel. Milk prices are expected to be $16.20-$16.70 for 2018 and possibly higher in 2019.

As the dairy industry continues to consolidate and evolve, farms of the future must find their place in this new order. Now may be the time for producers to consider reinventing themselves, whether that’s expansion, diversification, value-added products, agritourism, organic production or other opportunities. It also may be in the farmers’ best interest to be more active in their marketing cooperatives and have a stronger voice in what happens to their milk when it leaves the farm. Those measures can help protect against the next down cycle.

I was glad to hear experts say it’s not all doom and gloom for dairy, but there’s no denying the seriousness of the situation for our milk producers. Keep that in mind the next time you pour a glass of milk, add a slice of cheese to your sandwich or enjoy a bowl of ice cream. Our dairy farmers deserve our support and encouragement during these tough times.