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July 14, 2008

Anonymous The Joplin Globe Mon Jul 14, 2008, 11:33 PM CDT

By Mike Surbrugg

msurbrugg@joplinglobe.com

PURDY, Mo. — Milk may do a body good, but milk producers say it’s not working for them right now. They say they are not getting rich from the rising prices consumers pay for a gallon of milk and other dairy products at the store.

Milk last week ran $3.60 per gallon in Joplin. A survey in June by the U.S. Department of Agriculture found prices for 2 percent milk ranged from a high of $4.28 per gallon in Miami to $2.91 in Cincinnati.

According to the USDA, dairy prices in May were up 11 percent from the May 2007 level; milk prices were up 10 percent; cheese prices were up 14 percent; and ice cream and related products were up 6 percent.

Larry Purdom, a Purdy dairyman who serves on various national and state boards and is chairman of the Missouri Dairy Association, said milking cows right now is a “pretty tough” business.

“The overall economics are really, really difficult right now for anyone involved in livestock production,” added Chris Galen, spokesman for the National Milk Producers Federation.

Twenty years ago, the average dairy producer saw 50 percent of the retail price consumers paid for all dairy products going back to their farm, according to Galen. Today, it is about 30 percent, although food milk producers still get about half that price while others, who produce milk for products such as ice cream and yogurt, get less.

The price to producers is at about $20 per hundredweight, which is 100 pounds of milk, or 11.6 gallons. That price is set by the federal government and adjusted monthly based on supply and demand and it is the minimum price the processor must pay the dairy farmer, Galen said. That means that milk producers, getting $20 per hundredweight under federal pricing structures, get about $1.72 of that $3.60 per gallon.

“The others in the distribution chain, which includes processors and retailers, tend to split the other 50 percent of the price,” Galen said.

‘Survival price’

“Two years ago I would have thought that would be fantastic,” Purdom said of the $20 payment.

But two years ago, fuel, feed and fertilizer prices were much lower. Now, he sees $20 per hundredweight as a “survival” price.

Purdom said he recently paid $750 a ton for potash to apply on land to grow alfalfa. It was about half that cost a year ago, he said. Dairy producers also pay a fuel surcharge of 80 cents for every hundred pounds of milk hauled from their farms. That is double from a year ago. Purdom said his hauling costs have increased from about $1,300 a month to more than $2,000 with diesel prices.

His cost for diesel fuel used in farm equipment has jumped from about $1,550 a load to $4,000.

Dairy farming is an “energy intensive” and “food intensive” business, said Galen. “It’s those corn, soybean and alfalfa prices that have just skyrocketed. ... This high inflation environment is particularly caustic for people who have to feed their livestock.”

While his daughter, Grace, fine-tuned the grooming given to Holstein heifers recently at the Newton County Fair, Joe Hilgenberg, of Neosho, described the crunch dairy producers face.

Hilgenberg said he has milked cows all his life, and the current situation is tough. Soaring prices send his costs to levels that surpass “decent milk prices,” he said.

Hilgenberg also said he works pouring concrete away from the farm “to pay for my hobby (milking cows).”

Much of the 150-cow heard dairy operation is handled by his partner, Tim Linger.

Farms drop off

That environment is making it tough for a business that already had seen a sharp drop in numbers in Missouri.

The National Agricultural Statistics Service reported that 30 years ago, in 1978, Missouri had 272,000 milk cows that produced nearly 2.72 billion pounds of milk. In 2007, the state reported a population of 112,000 milk cows and production less than 1.7 billion pounds.

Missouri milk production has slipped about another 8 percent from a year ago, Purdom said.

Southwest Missouri still remains one of the major milk-producing regions of the state, with Lawrence County one of the largest dairy counties in Missouri — second only to Wright County in fact — but the number of dairy farms in the area has fallen by about half or more. A 1987 agricultural census found 216 farms in Lawrence County had milk cows compared with 134 in 2002, when the last census was done. The number of Jasper County farms with milk cows fell from 100 in 1987 to 46 in 2002.

Purdom said a lot of milk producers want to take part in a program to sell out; meanwhile, few younger farmers are getting into the dairy business.

“We are a senior group,” Purdom said of dairy producers.

Tony Rickard, University of Missouri dairy specialist at Cassville, said rising costs are eating up dairy profits. The cost of feed is now close to what some dairy farmers receive in payment for milk, and monthly milk checks barely match monthly feed costs in some dairies, he said.

A big corn crop this fall could trigger lower feed costs and bring relief, he said.

Stacey Hamilton, an extension dairy specialist at Greenfield, also is advising dairy producers to make grass management the highest priority.

“A dairy needs to know how much grain it needs to supplement grass to get optimum milk production and profit. Increasing costs to get more production does not mean more profit,” he said.

The University of Missouri has a seasonal grazing dairy herd at its Southwest Center at Mount Vernon. That dairy serves as a model to encourage producers to adopt some or all such practices to lower costs. The dairy evaluates different forages and other practices that are adjusted to look at alternatives.

Hamilton is among those involved with the dairy. He said a system could be developed in the future that would automatically identify each cow that enters the milk barn to determine if she needs grain and how much at each milking. Such a system would require more money to install, but the payoff could mean improving dairy economics, he said.

Working harder

While there are fewer dairy farmers and milk cows in Missouri, the typical cow is working a lot harder. In 1978, the average milk cow in Missouri generated 9,996 pounds of milk per year. Last year, that stood at 14,982 pounds after climbing as high as 16,026 pounds in 2005.

Source: National Agricultural Statistics Service.