Producers pare back costs for feed, labor to survive downturn

By CAROL RYAN DUMAS
Capital Press

The downturn in global and domestic milk markets has driven dairymen from profit to peril.

"This is the most devastating year we've ever had; it's affected everyone's equity positions," said Adrian Boer, who operates one dairy in Jerome County, Idaho, and two in Gooding County.

Boer grew up in the dairy business in California and has been an Idaho dairyman for 30 years.

"Dairymen are just kind of holding on and just hoping milk prices will rebound enough to stay in business," he said. "I know numerous families who are struggling."

A brief upturn in December and January pushed milk prices to about $15 per hundredweight. It is now retreating, hovering around $13 per hundredweight for Class III milk.

"It's not a pretty time," he said. "We're seeing another downturn. I just hope it doesn't go as deep as the last time. I don't think it will ... it's always possible."

National cow numbers have fallen by 250,000, but they still need to come down another 50,000 to 100,000 to bring supply in line with demand, he said.

Boer, in partnership with sons Ken and Kevin, has weathered the storm so far.

"The challenges are paying our bills. We keep eating into equity and at some point that comes to an end," Boer said. "The futures were looking like we could get through this, but they're down again ... around the $13 level. And that doesn't get it done."

Boer and his sons watch their input costs to maximize their income. That meant changing feed ingredients at times while trying to stay as close to normal practices as possible.

"We've probably never watched our costs as much as we have in this time period," he said.

The Boers weren't able to save any labor costs. But they're not buying anything they don't need, like replacement equipment, which illustrates the trickle-down effect on allied industry.

They have also strengthened their relationship with their lenders.

"We talk with our bankers more than we ever have," Boer said. "When it comes to meeting with bankers, we all are involved."

In the profitable years of 2007 and 2008, the Boers were able to pay down a lot of their debt.

"We were in decent financial condition when this thing started," he said. "That's probably the reason we've been able to survive this downturn."

Boer, who is on the board of directors for the National Milk Producers Federation, said it's going to take time to build back export markets lost in the global downturn. He said if replacement heifers, which are at record numbers, are used for anything beyond replacing deeper culling, it will hurt the industry.

"I think we're going to see an upturn in milk pricing, maybe not as soon as we'd like," Boer said.

"If you're in farming, you need to be an optimist," he said. "I didn't see this recent downturn coming, but I think the last half of the year we'll see more stronger pricing. That's all I'm willing to venture."