Idaho dairy industry remains competitive
By CAROL RYAN DUMAS
While Idaho dairymen have suffered high feed costs and some of the lowest milk prices in the country, they have remained competitive relative to other regions over the past few years.
That's according to a recent study by Scott Brown, an agricultural economist with the University of Missouri.
The research project was funded by Idaho Dairymen's Association to gauge the health of Idaho's producer industry following the 2009 devastation and in light of current economic hardships.
"It is imperative to Idaho dairy producers' survival to make sure the economic playing field is relative to the rest of the country if they wish to remain in business long term," Brown said.
While economic recovery in Idaho's dairy industry since 2009 has lagged that of many other parts of the country due to Idaho's lower milk prices, the gap in that recovery has narrowed substantially, Brown reported.
Idaho's all milk price from 2009 through 2011 trailed both the U.S. price and the price of Texas, which provides a more consistent comparison with Idaho's processing industry and cost of production.
Idaho's price was $1.50 per hundredweight lower than the Texas price in December of 2009, growing to a gap of $2.80 per hundredweight by December 2010. Idaho's milk prices moved higher in 2010 and 2011, but the gap widened further -- by as much as $3.30 from the Texas price.
That gap, however, began narrowing noticeably in 2012, going from about a $2 deficit of the Texas price in January to being nearly on par with both the Texas and U.S. price by mid year.
"It appears that changes in milk pricing in Idaho has had some effects on the relative all-milk prices reported by USDA," Brown said.
The staff at Idaho Dairymen's Association attributes that pricing improvement to Chobani's December announcement that it would build a Greek yogurt plant in Twin Falls.
The response from other processors was nearly immediate, with the two largest handlers of milk -- Glanbia Foods and Jerome Cheese -- both changing how they pay producers, IDA noted in its September newsletter.
While economic recovery in Idaho's dairy producer segment has been slower than other parts of the county, recent information on milk prices shows the industry is cost competitive, Brown said.
The overall competitive position of the dairy industry remains an issue that must be monitored, however. Adequate competition for the milk produced in Idaho will remain important to prices, he said.
Brown recommended steps the industry could take to maintain long-term viability, including possible changes to milk pricing, the establishment of milk marketing cooperatives, better balancing milk supply and demand, and expanding processing capacity.
Whatever path the industry takes, it remains important to understand that all segments of the industry must work together to grow the overall industry, Brown said.
Producer prices must be high enough to produce the needed milk supply but not high enough to put processing at a disadvantage, he said.