Store Dairy Prices Do Not Equal Farm Profitability


8/16/2012 9:16 AM

This week, I checked out the milk price in the dairy aisle of my local grocery store. The good news: Prices are on the rise. I picked up a gallon for $3.83. However, the price in the store has very little connection to what is happening on the dairy farm.

Farm profitability is more closely tied to what it costs to produce that gallon of milk, minus the mailbox milk price for that gallon, than what it sells for to consumers.

Unfortunately, with rising feed costs, farmers are not making the headway they were hoping for.

Several dairy producers said their last milk check was basically consumed by their feed price. One farmer said 85 percent of the check went to pay the feed bill. That does not leave much wiggle room for paychecks, vet bills and the other costs incurred on the dairy farm.

Moving forward, milk prices are projected to keep rising as milk supplies continue to tighten and school lunch programs begin for the 2012-13 school year.

Fall prices are projected to be more than $20 per hundredweight for the region. However, right behind that rising price is continued increases in the cost of corn, soybeans and forages. It is these high prices that will keep the MILC (Milk Income Loss Contract) program going strong through the rest of 2012.

Fortunately, the Mid-Atlantic is setting up for a pretty good crop season. According to the crop progress report issued by the Pennsylvania office of the USDA National Agricultural Statistics Service, about half of the corn crop is in good or excellent condition. More than half of the hay and soybean crop are also in great condition. While this will not be a record-breaking year by any means, the Mid-Atlantic has a better outlook than our Midwestern counterparts.

As we head into the fall, industry specialists are sharpening their pencils to work with farmers to find out where to make adjustments to balance milk production with costs. In this week’s Eastern Dairy Reporter, columnists focused their efforts on tips regarding farm profitability and the hidden costs of some management choices.

-- Charlene M. Shupp Espenshade, special sections editor


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