ForGot Milk?

February 23, 2009

WASHINGTON (Feb 23, 2009)—Open any major newspaper in the country and you’ll find countless stories of economic distress. Companies are shedding jobs, house foreclosures are on the rise, and the Dow plunges to new lows almost every day.

But there’s one story that’s hardly been told—a story that has a direct impact on the breakfast you likely enjoy while skimming the day’s headlines.

Farmers are still reeling from higher than normal input costs, but the prices they get for their crops are dropping like a rock. Nowhere is this more prevalent than down on the dairy farm.

The price farmers get for bottled milk has plummeted by 50% since last winter, with prices dropping 40 cents per gallon in the past month alone, according to the National Milk Producers Federation. But the cost of making milk has remained high.

This economic pinch is taking its toll on both dairy producers and their herds.

Joe Pearson with the Tennessee Farm Bureau Federation told a small, local news outlet that many of the state’s 549 dairies could be forced out of business if things don’t soon turn around.

“There’s not a dairyman in this part of the country that can produce milk for [current prices],” he explained. “They’re scared to death. They’ve done everything they can to control input costs, but now they’re at the mercy of this market.”

In California—the nation’s largest dairy state—the recent price drop represented the worst one-month slide in 54 years, forcing many producers to sell their animals for slaughter.

Industry officials predict more than 1.5 million of the nation’s 9.3 milking cows could wind up in slaughter houses before the year is done, as it becomes more difficult for farmers to make ends meet.

“This could just destroy our dairy infrastructure,” Mike Marsh, CEO of the United Western Dairymen trade association told the Associated Press earlier this week.

Dairymen from coast to coast agree it’s the worst crisis they’ve seen in three decades, when rural America hit an economic downturn that nearly crippled the country’s ability to produce food and fiber.

Leading up to that farm crisis in the early ’80s, commodity prices were soaring, farm incomes were on the rise, farmland values were climbing, and banks were happy to cash-flow farming operations which were starting to see escalating input costs.

Then, seemingly overnight, the economy tanked. Everyday Americans had fewer dollars to spend at the grocery store, commodity prices came crashing down, banks had less capital, and debts piled up as fuel, fertilizer and seed costs remained high.

Sound familiar?

And it’s not just the milk on your breakfast tray that’s experiencing a sense of déjà vu.

The wheat farmer who made that bagel possible, the corn and rice farmers behind those Corn Flakes and Rice Krispies, and the sugarcane farmer who makes it all a little sweeter have all seen revenue streams dry up recently.

Tom Buis, the president of the National Farmers Union, has even called on Congress to hold hearing and examine the current state of the ag economy.

“The farm economy has quickly deteriorated into a desperate situation for many and the anxiety for 2009 is high,” he explained. “Commodity prices have declined while input costs remain high, both worldwide and domestic demand for our products has decreased and a looming credit crisis threatens economic stability.”

Buis points out that current events have soundly disproven farm policy critics who continue to argue that last year’s short-lived high prices should sustain the rural economy for years to come.

“What they fail to recognize is the rapidly changed economy, the challenge of writing farm legislation during periods of higher prices and the unique challenges agricultural producers face on an annual basis,” he noted. “All of agriculture needs to come together to find solutions to the current economic crisis.”

The first step to this, farm leaders contend, is the proper and full implementation of the 2008 farm bill, which provides a safety net designed to give producers a fighting chance against the long odds they are seeing today.