Dairy producers struggle under low price pressure, high input costs

    Ames, Iowa (Nov. 24, 2008)- Domestic dairy producers have watched the prices they receive for their milk fall by nearly 30 percent in recent months. And, as prices they pay for feed and other inputs remain high, financial pressure is mounting in America's dairy land.
     "The Class III price for November milk will come in between $15.60 and $15.75 per hundredweight, yet the block cheese price is $1.76," said National Farmers Dairy Division Director, Brad Rach. That block cheese price would normally signal the Class III price should be $17.60, but that simply isn't the case this year. "The pricing system isn't working," Rach said.
     Analysts project a 1.2 percent increase in production next year, along with a 2.1 percent demand increase for fat-based products. They also anticipate a 3.4 percent demand up-tick for skim-related dairy products. Yet, Class III projections for next year predict a price of just $15.20. And, an All Milk price of only $15.75.
     "Industry consolidation is creating new challenges, dairy producers have fewer processors competing for their milk, and that may account for prices lower than the customary formula would indicate," Rach said.
     The organization urges producers to market together, and consider culling cows from their herd. There are 88 thousand more cows in the U.S. this year compared to last year. NFO urges cooperatives to work together to develop a more equitable pricing system.
     National Farmers is a group marketing and bargaining organization for the nation's farmers, ranchers and dairymen.