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Tough 2009 makes dairy farmers wary
By Patti Drapala
MSU Ag Communications
MISSISSIPPI STATE – Many Mississippi dairy farmers are wary about 2010 after the past 18 months proved to be one of the most financially challenging periods ever for the industry.
“2009 is a year most Mississippi dairy farmers would like to forget because of the huge financial hit they suffered as the price they were paid for milk plummeted about 40 percent,” said dairy specialist Lamar Adams of the Mississippi State University Extension Service. “Farmers lost about $1,000 per cow last year.”
The average cost of producing milk on Mississippi dairy farms in 2009 was $16 per 100 pounds, or hundredweight, and the average price farmers received for their milk was $14.50 per 100 pounds.
“One can see why dairy farmers have lost considerable amounts of money and equity from their farms in recent months,” Adams said.
The rate of decline in the number of dairy farms in the state for the past two years underscores this point.
“Mississippi had 20,000 milking cows on 149 Grade A dairy farms in January 2009, and at the onset of 2010, we were down to 18,000 cows on 129 dairy farms,” Adams said.
As a comparison, the United States had about 55,000 dairy farms operating in 2010, compared with 60,000 three years ago.
Even though milk prices began to improve in late 2009, they have not returned to profitable levels because of a slowdown in culling cows from herds and increased production per cow.
“Producers may not see appreciable increases in milk pay-prices until production declines or there is a tremendous increase in domestic and global demand for U.S. milk and dairy products,” Adams said.
Most market analysts are only cautiously optimistic that prices in the second half of 2010 will reach more than breakeven levels. Mississippi dairy farmers may not have much breathing room anytime in the near future.
Dairy farmers do not have much influence over prices, but they can minimize costs and improve herd management by culling nonproductive cows and replacing them with heifers bred for more efficient production.
“Many producers are changing their production emphasis from maximum to optimal,” said Extension area animal science and forage specialist Lance Newman. “While optimum production varies from farm to farm, it allows individual producers to carefully evaluate all aspects of their operation and develop management strategies to reap the greatest rewards from resources available to them.”
Tight profit margins make it critical for dairy farmers to maximize returns on every dollar they invest. The bottom line for farmers is to keep production costs as low as possible without jeopardizing animal health and productivity, Newman said.
Dairy farmers who constantly examine their operations for efficiency and are willing to be innovative have a better chance of surviving the economic downturn, he said.