Watching Milk Prices

Watching Milk Prices. I’m Greg Martin with today’s Line On Agriculture.

A recent trip to the grocery store has shown that even though the price of gasoline has come down from record high prices last fall, the price we are paying for food is little changed and that includes dairy prices. According to Chris Galen with the National Milk Producers Federation, that grocery store price does not reflect the price the farmer is getting.

GALEN: Milk prices aren’t going up if you are talking about happening at the farm level. We’re looking at about a .43 cent drop per gallon that farmers are going to get from January to February so those February milk checks will really reflect the decline that’s been happening in the underlying commodities here over the winter.

According to Galen those declines have continued from this time last year.

GALEN: This winter it’s about a 50% drop from what they were the winter of 2008 and for a lot of farmers whether you are there in the northwest or any where else in the U.S. those are red ink prices. Meaning that people are going to be operating in the red until we see a significant rebound.

Bottom line for the dairy industry is input costs.

GALEN: The absolute price that farmers are getting is not lower than what it was in early 2002 and early 2003. These will be the lowest price we’ve seen in 6 years but they were lower back in 2003 but the real kicker here is that the input costs farmers are paying are much higher than they were back 6 years ago. Feed especially. Corn is back up around $4 a bushel, soybeans are $9 or $10, hay is expensive and energy prices even though they’re dropped are still elevated so it’s the fact that you are paying more for feed, for fuel, even for labor costs and milk prices aren’t anywhere close to making that difference.

Like everyone else Galen says they are keeping a close eye on the new Administration to see what help may be waiting in the wings.

GALEN: Well were hopeful that the Obama administration is going to be able to take some steps to make things better. Obviously they’re got the whole U.S. economy and really the global economy that they have to work on and so dairy is just one small, little cork bobbing in a much larger ocean here. We have sent a letter to the incoming Secretary Tom Vilsack, Secretary of Agriculture and asked him to do a handful of things that USDA can do to help improve the situation. Basically we are talking about improving the function of the dairy price support program, purchasing more dairy products for the use in feeding programs and the also reactivating the dormant dairy export incentive program which will help us export more products.

That’s today’s Line On Agriculture. I’m Greg Martin on the Northwest Ag Information Network.