Global Milk Price - is it affecting you?

[Localmotion]

Although now living in Spain, I originate from the UK where I had a dairy farm milking 400 NZ Jersey x British Friesian cows. During my time milking there were some very tough times where the price we received did not cover the cost of production for long periods - and while this was not my main reason for leaving the industry, it was a consideration.

Currently in the UK the milk price is averaging around 24p per litre ($1.36 / gallon) - which is well below the cost of production for many farmers. Some are receiving much less - as low as 20ppl ($1.13 / gallon) which is clearly not sustainable and is a real risk to the future of our industry.

There is quite a lot of publicity about the problem in the UK at the moment - with many citing the cause as global milk price, with an excess of milk products on the global market due to good production around the world last year and also in part because of reduced demand from Russia and China.

Given that TBN is a global site - and especially has a lot of users from the USA and Canada, I'd be interested to know what effect the global milk price is having where you are?

Are you also currently forced to sell your milk at below the cost of production, and is it causing many farmers to pack up?

Also how well do the general public understand your business?

In the UK there is a definite "gap" between the farmer and the consumer, with many shoppers still believing that farmers are all rich...! The supermarkets in the UK often sell milk at a discount as a loss leader, but this gives a false impression to the consumer that milk is a cheap product.

There is an interesting article here Dairy farmers from todays Guardian newspaper which gives a bit of background... the farmer interviewed is an acquaintance of mine and a very good businessman.

 

[Gary Fowler]

I have no idea how much the dairy farmer gets for his milk, but here a gallon of milk is $4.50 at Wallyworld.

 

[tjcarguy]

In Canada we have milk marketing boards and layers of subsidies . Milk and cheese in half price across the border in the US ---Trevor

Canadians don't know the price of milk - The Globe and Mail

 

[2LaneCruzer]

I have no idea how much the dairy farmer gets for his milk, but here a gallon of milk is $4.50 at Wallyworld.

A couple of years ago, we spent a week in St. Thomas, USVI. Milk, if I recall correctly, was about $6.00 or $7.00 per gallon. I'm reasonably sure that price reflected the cost of importing their milk, and if processed there, the processing costs. Electricity and water are extremely high, as is gasoline. The only thing cheap in the islands is liquor. We warned when we went there, to watch how much we drink...because the cost of the mixer in the drink is more that the liquor...so they make them STRONG!

Milk here in Oklahoma is in the $4.00 - $4.50 range.

 

[dmccarty]

Yeah, the HIGH cost of milk is affecting us. My kids will drink a gallon of milk a day, two days max. That is a minimum of 15 gallons at close to $5 per gallon which is at least $75 but most likely well over $100 for milk per month. That ain't chump change. I would say that aint chicken feed but chicken feed is expensive too yet the government says we have low inflation....

There was an article in the Wall Street Journal a few days ago talking about the falling price of milk but we have not seen it yet. The article did say that some dairy farmers in the big dairy producing states were pouring milk down the drain. I can remember this happening over the years when there was an oversupply of milk. The article implied this was the usual problem in farm commodities, prices go up so farmers produce more but they product too much which causes the prices to fall dramatically. Even my kids can only drink so much milk and then no more. :laughing:

Later,
Dan

 

[kcflhrc]

We can still get it here in Kansas for just under $4 a gallon. Still ridiculous.

 

[dmccarty]

A couple of years ago, we spent a week in St. Thomas, USVI. Milk, if I recall correctly, was about $6.00 or $7.00 per gallon. I'm reasonably sure that price reflected the cost of importing their milk, and if processed there, the processing costs. Electricity and water are extremely high, as is gasoline. The only thing cheap in the islands is liquor. We warned when we went there, to watch how much we drink...because the cost of the mixer in the drink is more that the liquor...so they make them STRONG!

Milk here in Oklahoma is in the $4.00 - $4.50 range.

When we were in China late last year, all milk products were expensive. We spent a good hour looking at items and comparing prices in a grocery store our first morning in Hong Kong. :laughing::laughing::laughing: Exciting I know! We arrived very early in the morning and we had time to kill waiting for our hotel room to be available. I think the milk was around $10-12 a gallon but it was UHT milk, I don't think it was fresh milk. I would guess the milk was from Australia or maybe New Zealand. I was in four more grocery stores during our trip, including Walmart! :shocked:, but I don't remember seeing milk in mainland China. It might have been there but I did not see it.

Nuts were very expensive which surprised me. Even peanuts. :confused3:

Later,
Dan

 

[oldnslo]

Last time I checked on milk prices to the dairy farmers was $18 / 100 lbs or approx $1.54 to the farmer. yes this is below production costs when corn is going for $5 a bushel or higher.

For reference: Dad's last milk check in April of 72 he received $11.83 per 100 lbs for grade B. When I retired from dairy in 86 we were getting $13. 21 per 100 for grade A. At that time $16 per 100 was considered the break even point.

mega dairies with there own bottling plant are replacing the small family farms.

 

[smstonypoint]

US milk prices at the farm level have been decreasing in recent months.

Raw milk over here is priced by the cwt. The December price of about $20/cwt. would work out to be about $1.72/US gallon.

The USDA provides monthly estimates of milk production costs -- USDA ERS - Milk Cost of Production Estimates.

For November 2014, the estimated total cost of production was $23.32/cwt. ($14.66/cwt. operating and $8.66/cwt. overhead). Larger operations have lower costs/cwt., so some may be covering all their costs at $20/cwt.

The crop insurance portion of the 2014 Farm Bill has a provision that allows dairymen to insure their margins, with premiums subsidized by taxpayers.

Steve

 

[MacLawn]

Well, I'm for milk boys. We only buy so called organic (that's just milk the way it was 150 years ago. Almost), and pay about $4.50 a HALF gallon I think it is. Since I'm now a geezer, don't drink as much as I used to when neighbor had a registered jersey that gave about 5 gallons a day if I remember right. Now, that was organic milk!

We have friends who were (past tense) dairy farmers in Oregon, supplied milk to Tillamook cheese place. They finally retired, sold cyows, farm, did opposite of wha' we here want to do - moved to the city!

Anyway, Local, if people were like me, y'all milk producing boys would do great. I believe in the land flowing with ----- Yep, milk and honey. Canno' beat it.

 

[Localmotion]

US milk prices at the farm level have been decreasing in recent months.

For November 2014, the estimated total cost of production was $23.32/cwt. ($14.66/cwt. operating and $8.66/cwt. overhead). Larger operations have lower costs/cwt., so some may be covering all their costs at $20/cwt.

The crop insurance portion of the 2014 Farm Bill has a provision that allows dairymen to insure their margins, with premiums subsidized by taxpayers.

Steve

Thanks Steve - that's interesting to know and clearly a similar situation to the UK.

According to Dairyco (a UK government organisation which is paid for by a levy paid by milk producers), the UK average milk price paid to farmers for November 2014 was 28.91 ppl (pence per litre). It is difficult to pin-point official figures for cost of production, however it is estimated to be around 34ppl on average when taking into account all variable costs including electricity, water, feed, dairy supplies and wages. Many UK dairy farms are family run businesses and do not properly account for wages - so the actual cost of production maybe even higher.

Unfortunately the UK does not have any provision for protection of margins in agriculture via insurance policies. It is even very difficult / costly now to get insurance policies to cover dairy animals.

The picture below is out of date (it was produced by the BBC in 2012) but the prices and margins shown are similar. Obviously this is for fresh liquid milk - which should be more resistant to pressure from the global markets as logistically it cannot be stored or distributed over long distances. However in the UK (which is one of the largest consumers of fresh milk in the world) we see large retailers try and mirror the global market (uht, powder, cheese, butter etc) on our fresh trade which creates an unnecessary downward pressure...

 

[smstonypoint]

Ian,

UK dairymen do a little better than their US counterparts in terms of their shares of the retail price of milk. It looks like the share in the UK is 48% and the share is 45% in the US (Farmer's Share). I think that can be explained by the fact that milk has to be transported over greater distances in the US.

The USDA cost of production data account for both hired labor and the opportunity cost of family labor in estimating overhead. The values were $1.57/cwt. for hired labor and $2.36/cwt for family labor for November of 2014.

Does the UK have any mega dairy farms?

Steve

 

[mjarrels]

Just ask George Bush senior?

mark

 

[dave1949]

The State Of Maine Milk Commission sets monthly minimum wholesale and retail prices. You can see Jan/2015 price minimums here:
http://www.maine.gov/dacf/milkcommission/documents/01-15_000.pdf

The past two years and plans for 2015 are here: Prices: Maine Milk Commission: Boards & Commissions: Maine Department of Agriculture, Conservation and Forestry

That doesn't show what the area producers are paid, but maybe gives an idea.

 

[OldMcDonald]

Steve, The picture prices milk at 25p/litre. I keep in touch with UK agriculture through the English Farmers' Weekly, and a report last week indicated that farmers will receive less than 20p/litre in the near future from one of the major buyers. There have been continuing stories for a long time on downward moves in pricing.

For those of you complaining about the high cost of milk, how much do you think you should be paying?

 

[smstonypoint]

Steve, The picture prices milk at 25p/litre. I keep in touch with UK agriculture through the English Farmers' Weekly, and a report last week indicated that farmers will receive less than 20p/litre in the near future from one of the major buyers. There have been continuing stories for a long time on downward moves in pricing.

For those of you complaining about the high cost of milk, how much do you think you should be paying?

The milk marketing system in the US is Byzantine, what with various Federal milk marketing orders, state milk commissions, etc.

As noted by Dave, minimum prices are set in some states.

The State Of Maine Milk Commission sets monthly minimum wholesale and retail prices. You can see Jan/2015 price minimums here:
http://www.maine.gov/dacf/milkcommission/documents/01-15_000.pdf

The past two years and plans for 2015 are here: Prices: Maine Milk Commission: Boards & Commissions: Maine Department of Agriculture, Conservation and Forestry

That doesn't show what the area producers are paid, but maybe gives an idea.

I don't recall the specifics, but some regulations resulted in large dairies being established (or relocated) in states that you wouldn't think of as dairy country (e.g., New Mexico and Idaho).

Steve

 

[Localmotion]

Ian,

UK dairymen do a little better than their US counterparts in terms of their shares of the retail price of milk. It looks like the share in the UK is 48% and the share is 45% in the US (Farmer's Share). I think that can be explained by the fact that milk has to be transported over greater distances in the US.

The USDA cost of production data account for both hired labor and the opportunity cost of family labor in estimating overhead. The values were $1.57/cwt. for hired labor and $2.36/cwt for family labor for November of 2014.

Does the UK have any mega dairy farms?

Steve

There have been attempts - but to date all plans for super dairies in the UK have been blocked at planning level. The most notable was a plan for a 8,000 cow unit in Lincolnshire (see Nocton Dairies controversy - Wikipedia, the free encyclopedia)

There have also been plans for 1,000 cow unit's blocked. The UK average herdsize is 125 cows (2013 figures excluding followers), although there is a wide variations with many small farms still below 90 head, and also lots of larger 300+ head units. Economies of scale are meaning that it is getting harder for the smaller producers to stay in business - last month the number of milk producers in the UK fell below 10,000 for the first time since records began.

The milk buyer paying 20ppl which OldMcDonald refers to is actually the UK's largest FCB / farmer owned co-op called First Milk. Both myself and the farmer in the newspaper attachment in my OP used to supply First Milk - I was also lucky enough to also work for them as an area manager for a few years before moving to Spain. While their milk price seems lower than many other UK buyers, it does not take into account that it's farmers own the co-op and therefore also get a share of any profits from the final products (mainly cheese and smp). What has been of concern recently is that there has been a cash-flow problem caused by the global market, which means First Milk has had to delay it's payment to farmers - at a time when they are already struggling.

One more question I have - does the US consumer support it's farmers, or is it like the UK where many do not even think about where their food comes from?

 

[smstonypoint]

The UK average herdsize is 125 cows (2013 figures excluding followers), although there is a wide variations with many small farms still below 90 head, and also lots of larger 300+ head units. Economies of scale are meaning that it is getting harder for the smaller producers to stay in business - last month the number of milk producers in the UK fell below 10,000 for the first time since records began.

One more question I have - does the US consumer support it's farmers, or is it like the UK where many do not even think about where their food comes from?

There are about 51K dairy farms in the US, with an average herd size of 115 cows. However, most of our milk production comes from larger herds. Our largest herd (in Indiana) has 30K cows.

The graphic below is dated, but it does show the regional disparities in the size distribution of US dairy herds.

IMO, the US is like the UK in that most folks don't think about their food sources.

I don't know about the political clout of farmers in the UK; but IMO, US farmers have more political clout than their numbers would suggest.

Steve

 

[MossRoad]

... Our largest herd (in Indiana) has 30K cows....

You ever been over there? We went last summer. Quite amazing. 80 calves per day born there. 40 semi tankers of milk leaving each day. If you have never seen industrial dairy, that's the place to go.

Local milk prices here are frequently less than $3.00.

 

[smstonypoint]

You ever been over there? We went last summer. Quite amazing. 80 calves per day born there. 40 semi tankers of milk leaving each day. If you have never seen industrial dairy, that's the place to go.

David is talking about Fair Oaks Farm: Fair Oaks Farms • Farming is both a commitment and a calling to our people..

Steve