$99 million loss projected for Florida’s dairy industry

By Carrie A. Mizell

Florida dairy farmers are struggling to hang on to their livelihoods, according to a just released assessment of Florida’s dairy industry, in which the University of Florida’s Institute of Food and Agricultural Sciences forecasts a total expected loss for the industry of $99 million this year.
Charlie Smith of Alliance Dairies estimates that the dairy is losing $500,000 per month on its herd of 4,000 milking cows. In order to stay afloat, Smith said the dairy has opted not to make improvements on existing facilities and will not be purchasing any new equipment this year.
“We won’t be making upgrades,” Smith said. “We can’t cut our staff, or our feed, but we can choose to not make the improvements we do in good times.”
Smith said the 70 employees of Alliance Dairies have job security despite the difficult economic conditions, which stem from a drop in milk prices, more supply than demand, and increased feed costs.
According to the IFAS assessment, the price dairy farmers receive for their milk has dropped nearly 50 percent since last summer because of a wide range of factors. Milk supply is now exceeding demand due to the general economic situation in the U.S. and around the world, reduced U.S. exports, increased production overseas, and the continued impact of last year’s high feed prices.
Wholesale milk prices hit an all-time high in 2007 and then climbed again in early 2008 to their second highest level. Since December, the price dairy farmers receive for their milk has been in steep decline, forcing many farmers to reduce production by selling cows, renegotiating loans or selling land.
In January, Smith said Alliance Dairies got $18.91 per hundredweight of milk whereas in March the price had dropped to $14.06 per hundredweight of milk.
“I think our break even is around $19 per hundredweight of milk,” Smith said.
Farmers do not set the price of milk, rather wholesale and retail prices are determined by market forces of supply and demand. On average, farmers receive only about 30 cents of every dollar that consumers spend on dairy products. The other 70 cents is split among others in the supply chain.
Milk prices determine approximately 90 percent of revenues on Florida dairy farms.
The projected average price Florida farmers will receive for their milk in 2009 is $17.08 per hundredweight, or per hundred pounds, which is about 11.6 gallons. With feed prices still high, milk costs more to produce than farmers receive. The cost to produce milk in Florida is estimated at $23 per hundredweight for 2009, which is slightly less than the all time high cost of $24 in 2008.
According to the IFAS assessment, the difference between revenues and costs leads to an expected loss of $4.92 per hundredweight of milk produced. In 2009, revenues are expected to be less than 80 percent of the total cost. Each of Florida’s 140 dairy farms is expected to lose approximately $709,000 this year.
Prices are expected to rebound later this year, but the turn around won’t start until the end of summer or early fall.
For some, that may be too late.