Georgians usually don’t think much about milk beyond whether
they need it or if part of a
gallon is still in the ‘fridge.
But they may soon think more about it, especially the price.
“We expect to see grocery prices go up by 15 cents to
20 cents a gallon by June,” said Bill Thomas, an economist with
the University of Georgia
Extension Service.
“Consumers will eventually have to help pay for the
spiraling cost to produce milk,” he said.
Farmers’ costs are almost more than they get for their milk.
A recent survey found that
farmers earn about 3 cents per hundredweight of milk. At just
over 11 gallons per hundred
pounds, that’s only two-tenths of a cent per gallon.
That has to cover non-cash costs like equipment depreciation,
Thomas said. After that’s
accounted for, any money left is profit.
Such low profits forced 53 Georgia dairy farms to close in
1995. Thomas expects more to
close this year as feed costs keep rising — by 15 percent to 19
percent through the end
of the year.
“Prices farmers get for milk hasn’t kept up with their rapidly
rising costs,”
Thomas said. “You
can’t expect farmers to keep losing money and stay in
business.”
Georgia isn’t
alone. Dairy farmers across the Southeast lose ground daily
while trying to meet
ever-rising consumer demand.
Fluid milk wholesalers have kept milk prices artificially low
for the past few years.
They ask a retail price that remains the same even when the milk
supply and processing
costs change.
In turn, while farmers’ costs and production levels vary, the
price they get for their
milk stays the same.
“Dairy farmers today are getting about the same price
for their milk that they were in the early ’80s,” Thomas said.
“At the same time, their costs have gone up
significantly.”
In 1995, hot, dry weather created a shortage of quality feed
grains, he said, that
drove prices up to nearly double what they were in early ’95.
Some farmers choose to give
their cows lower-quality hay and feed, but then the cows give
less milk.
As production drops, the Southeast milk shortage becomes more
dire. Dairy cooperatives
can truck milk to the Southeast from other areas, but that
raises their costs even more.
Local dairy farmers have to pay to truck milk in to meet their
contracts.
“It costs up to 34 cents more per gallon to truck milk
in than it does to produce it locally,” Thomas said. “Farmers
have to absorb that cost, too.”
This problem keeps making itself worse, he said. Low prices
and high costs decrease
production. Low production forces dairy cooperatives to bring
milk into the region to meet
demand, but that adds to their costs. As costs rise, farmers
close their dairies, and
production drops more.
Eventually, retail prices must go up.
Dairy farmers can’t buy modern equipment they need on such
low profits, either.
“Some farmers choose to retire rather than lay out
$200,000 for those changes when they are fairly certain they
probably cannot earn profits,” Thomas said.
The high cost of starting a dairy, with little chance of
profits, keeps new farmers
out, too.
The Extension Service helps dairy farmers learn how to
produce milk more efficiently
and manage their farms better, Thomas said. But even the
tightest management can’t help if
prices won’t support the farm.
“Without increased prices, there won’t be enough milk
in the stores,”
Thomas said. “Then
we know prices will go up much more than the 15- to 20-cent
increase we’re facing this
summer.”
