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February 24, 2009 3:29 am

Tough times

Written by Tribune Staff

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Holstein cows at George's Dairy Farm west of Powell pause to pose while eating hay cubes Wednesday morning. Some of George's top production cows can produce up to 15 gallons of milk per cow per day, with a farm average of 8 gallons per cow per day. Tribune photo by Carla Wensky

Dairy producers up against high costs, spiraling prices

Dairy farmers are finding that dropping wholesale milk prices are no match for steep production costs, including high prices for feed, fertilizer and fuel.

Dairy farmer Scott George said the sputtering U.S. Economy is squeezing out dairy farmers. But consumers probably won't see lower prices for dairy products at retail stores, he said.

George, who operates a dairy farm between Powell and Cody, is a veteran dairy producer, a member of the board of directors of the Wyoming Beef Council and recently was elected vice chairman of the National Cattlemen's Beef Association Federation of State Beef Councils, the first Wyoming beef producer to hold that title.

George's family sent 55 good cows to slaughter two weeks ago, loading them on two semis. He said it was not the usual scenario of culling the worst cows from the herd.

“We always cull our worst ones,” he said. “These were good, solid cows.” But with prices low and production costs high, they had to go. “I wouldn't have sold them otherwise.”

George said a big dairy near Cheyenne is preparing to send 2,797 cattle to slaughter through a program called “Cooperatives Working Together” that offers producers financial incentives to get out of the industry.

Nationwide, the high number of dairy cows going to slaughter will likely affect the beef market, George said.

“It'll put pressure on the beef market because of more supply,” he said, but there's little choice.

“There's no market for replacement cows now,” George said, “not even heifers.” A year ago, a producer could sell a bred heifer for around $2,400.

“Now it's like $800,” he said.

According to the U.S. Department of Agriculture National Agriculture Statistics Service regional office in Cheyenne, the number of dairy cattle in Park County has remained at about 900-1,000 range in January of each year from 2000 to 2008, the most recent year for which statistical information is available.

The Georges and other dairy producers sell milk by hundredweight, 100 pounds of raw milk, or about 10.3 gallons. A gallon of milk weighs 8.9 pounds.

Prices have dropped from $15 per hundredweight to $10, and George said prices are forecast to drop to $9 or even $8 per hundredweight.

Meanwhile, corn prices shot up from about $2.50 per bushel to $8 last summer, George said. Cottonseed, a nutrition-packed fodder, is also way up.

Cottonseed helps boost milk fat production by giving the cow fiber, protein and energy.

George stopped buying cotton seed at $188 per ton.

“Last time I checked, it was $450,” he said.

Distillers grains, a byproduct of ethanol production, have also dried up as ethanol plants go broke, George said.

“Everything is just in flux,” he said, “because the economy has tanked the way it has.”

The Georges grow most of the hay they need for their herd, but other producers have to buy it — and it's scarce and dairy quality feed with a high relative feed value is expensive, he said. Add in high fuel and fertilizer costs, and it's a cost some dairy farmers can't pay.

The Associated Press reported in June that fertilizer costs nationwide had increased as much as 228 percent since 2000, partly because of a global surge in demand. Between 2001 and 2006, global demand jumped 14 percent, an amount equivalent to the entire U.S. market, according to The Fertilizer Institute, a Washington D.C.-based trade group.

The demand for fertilizer has been driven by an increasing world population and a growing middle class in developing nations that wants more grain-fed meat and more diverse diets. The United States has lost more than 40 percent of its capacity to produce nitrogen fertilizer since 1999 because of the high cost of natural gas.

In Idaho, George said, a dairy producer managing a herd of 10,000 cattle this winter refused a load of hay he had ordered because the bank wouldn't approve his operating loan.

U.S. dairy farmers were exporting about 13 percent of their production, mostly in dried milk and cheese products, George said, but the strengthening dollar means exports are falling. Because of the uncertain economy, fewer people are eating out nationwide, which means less demand for butter and other restaurant dairy supplies.

“Our prices have just tanked here in the last month and a half,” George said. But don't look for much relief at the grocery store, where dairy prices probably won't go down much.

“We don't have much control over the price in the store,” George said. “The consumer won't see a big decrease in the price of dairy products.”