Interest in milk pricing system could help dairy industry

March 11, 2010

WEST LAFAYETTE, Ind. – The recovery the dairy industry hoped for in 2010 hasn't looked as good as producers hoped, but interest in the dairy industry and initiatives to change it could spur some momentum, according to a Purdue University Extension dairy specialist.

Mike Schutz said the industry's current state does not look as positive as it did two months ago.

"2009 was a miserable year for milk prices," he said. "They have been this low before, but not for this long in recent years, and feed prices are twice as high as they have been in other downturns. It has just been a really depressing time for dairy farmers."

The industry was hopeful that milk prices would increase as 2010 began, and prices did improve. However, they have fallen in the last two weeks due to growing cheese inventories and an unexpectedly strong supply of replacement heifers. 

"Until the time that the demand for products increases and starts to account for production or, sadly, we lose dairy farms or milk cows, there's not going to be a very prolonged strengthening of milk prices," he said. "That's going to be needed for the dairy producers who survive because it will take time to replace the equity on dairy farms that was lost in 2009."

Milk Income Loss Contract payments, which support farmers when milk prices are low and feed prices are high, may again be paid from April to July.

Schutz said that while there isn't a single answer to help the situation, dairy producers should continue with good management and financial practices.

"It's just a long haul," he said. "It's doing everything that producers have been hearing about for years, such as taking a closer look at feed additives, paying close attention to forage quality and cutting costs whenever possible."

Despite a discouraging start to 2010, interest in milk pricing could help brighten the outlook, Schutz said.

"There's a lot of momentum to somehow change the pricing system to stabilize prices and at least make them more predictable," he said. "This could be done by asking the USDA to reform how prices are established or by creating a supply management program. In a large industry like the dairy industry, there is considerable difference of opinion on how that should happen, but the good news is there's a lot of interest and discussion right now."

Writer: Elise Brown, 765-496-7481, brown222@purdue.edu

Source: Mike Schutz, 765-494-9478, mschutz@purdue.edu

Related Web site
Purdue Dairy: http://www.extension.purdue.edu/dairy

Ag Communications: (765) 494-8415;
Steve Leer, sleer@purdue.edu
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