Posted: Wednesday, September 12, 2012 11:16 AM
By CAROL RYAN DUMAS
The impact of the drought on Midwestern grain production is challenging dairy producers in the Northwest who face increased feed and fuel prices, lower margins, and tighter credit availability.
Cash-flow has become a serious issue for many Northwest dairies, according to the Washington Dairy Products Commission.
Producers have been in the negative a good six months, said Robert Smit, a Lynden, Wash., producer and chairman of the Commission. Recovery is another year or two down the road,
"It's not a pretty picture," he said.
The drought has doubled grain prices. Smit's mixed grain has gone from under $200 a ton to more than $400 a ton, and he's expecting hay prices, around $210 a ton now, to go to more than $300 a ton this fall.
Not being able to pay feed suppliers, who have become friends, is really disturbing, he said.
Dairymen aren't even going to come close to break even until the end of the year, and then they'll still have a hole to fill, he said.
With milk prices at $15 to $16 per hundredweight and the cost of production at $18 to $19, Washington dairymen are losing $3 a hundredweight.
Typical losses on a 500 cow dairy are running $25,000 to $30,000 a month, and larger dairies are faring even worse, he said.
"I can hardly imagine how much money they're having to borrow just for the privilege of calling themselves a dairyman," he said.
He tells dairymen to hold on and ask their creditors for time. Milk prices are going to come up, he said.
It's no better in Oregon, even on organic dairies that receive a higher price for their milk.
While the organic milk price is higher than for conventional milk, it has less potential for increase because of greater consumer price sensitivity, Jerome Rosa, owner of JER-OSA Dairy, an organic operation near Gervais, said.
Input costs have escalated, with corn prices doubling in the last year, he said Organic corn has gone from $350 a ton to $700 a ton.
Staying in business in these tough times hinges on the amount of feed an operation grows for itself, he said.
Most Oregon dairymen grow a large portion of their forage, and it's been a good year for forage crops. But the price of land has increased so much, that buying or renting land makes it hard to expand crop production, and all have cut their grain use significantly, he said.
Feeding less grain and more forage reduces production and components, and the income on that production is not enough to offset the savings in grain costs, he said.
It's hard to put a number on losses, but it all relates to debt load and how much of their own feed an operation raises, he said. Those with a lot of debt, growing little to none of their own feed are losing large amounts of money.
Banks are putting more pressure on conventional dairies, and it's a dire situation for producers who don't produce their own grain, he said.
The drought is likewise having a big impact in Idaho, said Harry Hoogland, a Castleford dairyman who raises two-thirds of his own feed.
Even for producers who grow a lot of their own feed, the price of corn drives all other feed inputs. The biggest impact for Hoogland is the price of proteins, driven by the price of soybeans, which has gone from $10 a bushel in January to more than $17 a bushel now.
He doesn't feed soybean meal, but its affects on other proteins has raised his corn meal and distillers grain prices $100 a ton, he said.
In Washington, Smit said some of his good friends, proficient dairymen with good cows, are asking him if there's anything to be hopeful about, any reason to hang on.
"It's disheartening," he said. "They're not sure they're going to stay in the business. It's just really sad."