Hope returns after year of dairy losses
MILWAUKEE — Only months ago, dairy producers were slaughtering an average of 50,000 dairy cows a week because a milk glut made it impossible to sell their milk for what it cost to produce. Now, with prices improving, dairy farmers are reversing course, saying they'll produce as much milk as possible this year.
It's a wise strategy, according to most industry experts. Milk prices are expected to rebound in 2010 thanks to improved U.S. sales and a recovering export market, so producing as much milk as they can may be the best way for dairy farmers to make up last year's losses.
Farmers from California to New York say they plan to do just that. In Wisconsin, for example, one dairy is expanding from 4,000 cows to 8,000, a move that might have seemed ill-conceived during last year's recession.
"Our goal today is to have our facility full," said Jim Ostrom, a partner with Rosendale Dairy in eastern Wisconsin. "In this industry, you can't make money without having your facility at capacity."
The average dairy farmer needs to earn $15 to $16 per 100 pounds of milk to break even. Prices languished at $12 last summer, their lowest point in seven years, before slowly climbing back to a nationwide average of $16.50 last month.
Industry watchers expect prices to continue to increase this year. That's because demand for milk products within the U.S. is slowly returning, and countries that had trouble affording American milk last year are regaining the means to import more, said Bob Cropp, an emeritus professor of agricultural and applied economics at the University of Wisconsin-Madison.
"As the world economy improves, I think we're looking at something close to $17 in 2010," Cropp said.
Despite this year's better outlook, dairy farmers nationwide say their optimism is guarded. The price crash in 2009 was so dramatic that milk producers say it'll take time to regain confidence.
Jessica Ziehm, a spokeswoman for the New York State Department of Agriculture and Markets, said some farmers had such steep losses last year that they will be happy to break even this year.
