Tuesday, July 3, 2007

High milk prices don't equal big farm profits

Even if you aren't the one who does the grocery shopping for your family, you're probably aware of the record milk price at the stores. You may have also heard that we dairy farmers are getting paid really well right now too. We are getting paid a really good price for our milk, but what shows up on the "gross" doesn't stick around for the "net".

The cost of corn, soybean, and cotton feed ingredients have all gone up...significantly for some products. This drought has forced many farmers who typically grow all their own forages such as silage and hay to purchase them from outside the southeast. The high price of diesel fuel has increased the freight cost of getting these products to the farm. By the time you add everything up, it's costs more per day to feed a cow her 60-70 pounds a day than it ever has!

And when you add in the cost of feeding heifers some of the same ingredients (while getting no immediate return on investment), the cost of labor, the cost of electricity, and all the other costs that go into a dairy farm, there's not a whole lot of the milk check left after you've paid all your bills. It's even worse if you're in the middle of making facility improvements like we are.

Thanks to the high price, many dairies have already begun milking more cows, and at some point there will be a higher supply than the market calls for. Then, the price will drop in the stores (and probably drop like a rock on the farm).

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