ESCANABA - The dairy business is struggling in the wake of a world-wide milk glut. Both the price of milk and the demand for it have plummeted, leaving dairy farmers with holes in their pockets.
According to the National Milk Producers Federation, prices dairy farmers get for 100 pounds of milk fell from $20.58 last November to $13.29 in August. The price paid by processors to farmers is set by the U.S. Department of Agriculture based on commodity markets, which rise and fall with global demand.
"There is no doubt farmers are being adversely affected by low milk prices, partially brought on by the over supply of milk," said MSU Extension Educator Warren Schauer, Escanaba.
Allen Porath, Porath Dairy Farm, said he gets less than $12 per 100 pounds of milk - a huge drop compared to last year when he made as much as $20 for that amount. The price drop has nearly cut his income in half.
"The input costs are too high for what you're getting," he said. "Fertilizer has been high...you can't operate without that. I would say this is one of the worst years."
Part of the problem is the dried-up export market. Just two years ago, around 10 percent of the state's milk went to Asian and other markets, but none of it is exported now, said Ira Krupp, a dairy expert with Michigan State University Extension.
"The whole process is messed up because of the global economy right now," said Dairy Farmer Robert Getzloff, Getz-Milk Dairy, LLC. "With exports being down, there's nowhere for the milk to go."
At the heart of the problem is the nature of milk. Unlike farmers who can hold out for better prices by storing crops in a silo, dairy farmers must sell their milk or else it spoils. Also, cows keep producing regardless of economic conditions, which means dairy farmers will continue to pay the same operational costs even though the price of milk is down.
Getzloff said he pays $15-$16 in operational costs to make 100 pounds of milk, yet he only makes $11.50. He said he's losing thousands of dollars a day.
"Right now I'd estimate we're losing about $3 per cow, per day - we're milking around 400 to 425 cows," he said. "There's not enough income to cover supplies and costs. It makes it difficult to pay the bills."
The milk glut has financially burdened some dairy farmers to the point that they're entering herd retirement programs, and giving up on the dairy business altogether.
Through the Cooperatives Working Together (CWT) Herd Retirement Program, dairy farmers wishing to get out of the dairy business can bid to have their cows permanently removed from milk production. The purpose of the Herd Retirement Program is to stabilize milk prices by reducing the number of cows in the national dairy herd, thus reducing milk production.
"We've had one or two dairy producers in the U.P. who have participated in the program, and offered to sell all their cattle and get out of the dairy business," said Schauer. "This is a high time of financial stress.
Those who are sticking with it are forced to borrow money from the government. In Michigan, dairy farmers have received $31.2 million in subsidies since February, according to Andy Stille, an FSA official in Grand Haven.
The milk glut hurts more than just dairy farmers, but also feed mill businesses, farm equipment dealers, and implement dealers, noted Getzloff.
"It hurts all those guys and in turn, it hurts the community," he said. "All those places employ people."
Prices are projected to be $14.18 this month, but others expect the prices to stay down for several more months.
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The Associated Press contributed to this report.
