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April 1, 2009 - 2:18pm

Genesee County dairy farmers being squeezed by low prices, high production costs

posted by Howard B. Owens in business, agriculture, dairy.

Local dairy farmers are hurting, according to Dean Norton, president of the New York Farm Bureau.

Prices have plummeted -- because of decreased demand for dairy products at home and abroad -- while costs have increased substantially. 

Currently, milk is selling for $10.50 to $11.50 per 100 weight (about 8.5 gallons), while the cost of production is $15 and $16 per 100 weight.

Last year, milk sold for about $20 per 100 weight.

"The area economy stinks and it's a tough year," Norton said. "Receipts are down and individuals might be exiting the dairy industry."

Exports have dropped and domestic demand has been driven down as people eat out less during the recession, so there is shrunken demand for dairy products.

To help address the plunging prices, Cooperatives Working Together (CWT) has initiated a herd retirement program, which will help reduce the number of milk-producing cows and lower supply.  Bids must be postmarked by May 1.

Dairy farmers throughout the nation are hurting according to The Rural Blog:

“The number of dairy cows being sent to slaughter has risen by about 20 percent from last year, as desperate farmers cull their herds and sell at fire-sale prices,” Sue Kirchoff writes for USA Today. “Adding to the problem, banks are less willing or able to extend farmers’ loan payments amid the financial turmoil.” John Murawski reports for the News & Observer in Raleigh, "Several dozen dairy farms in North Carolina are expected to go under this year." (Read more)

The National Dairy Federation has called on President Obama to aggressively address the problem, or thousands of jobs could be lost.

There are several reasons for the implosion: oversupply, falling export demand and continued high prices for supplies such as feed,” Kirchoff explained. “The dairy sector in the past has been less prone to huge price swings than other areas of agriculture, but that’s changing as the industry relies more on the markets and less on government programs.”

Agriculture Secretary Tom Vilsack announced a program to buy 200 million lbs. of nonfat dry milk surpluses for domestic low-income programs.

Neighboring Wyoming County is being especially hard hit by the downturn in the dairy market, according to a story by Tom Rivers.

The $60 million in reduced revenue is compared to 2008 prices, when dairies averaged about $17.50 per hundredweight. This year the prices are forecast to average $12.80 for the year. The prices are expected to climb above the current $11 level and top $14 in September, which is still below most farms' production costs.

The county's 47,970 cows, which outnumber the county's residents, produced $178.9 million worth of milk products in 2007, by far the most in the state.

"The market is saturated and these prices are likely to be with us until mid-summer," Norton said.

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