A sharp drop in milk prices has the nation’s dairy producers sustaining huge losses and many are culling cows, a move that should mean less milk in 2009, said industry sources attending a convention here.
Currently, the U. S. Agriculture Department estimates slightly more milk production in 2009 versus 2008, but USDA may revise down that estimate later this year, sources said.
“Since the first of the year I have been surprised at the number of dairy cows coming to market,” Gregg Doud, National Cattlemens Beef Association economist, told Reuters on the sidelines of the NCBA’s annual convention.
“I am sure those numbers do not reflect that,” he said of USDA’s latest milk production figure.
In January, USDA forecast 2009 U. S. milk production at 190.5 billion pounds, up slightly from 2008’s 189.6 billion.
An abundance of dairy products worldwide and a slowdown in sales here and abroad caused a sharp drop in milk prices in the latter half of 2008. Costs are also up because of high costs for feed and fuel.
While the drop in sales was largely blamed on weak global economies, sales to China also slowed as contaminated milk there in 2008 hurt consumption.
“China was an important market, and last summer that just dropped off,” said Jim Docheff, a Longmont, Colorado, dairy producer who spoke at the NCBA convention.
U. S. milk prices are still low, trading at about $10 per one hundred pounds (cwt), compared with more than $20 early last summer.
Docheff said he needs about $18 per cwt to cover production costs.
While it appears an effort has failed to have Washington lead a dairy herd reduction program, dairy producers attending the Phoenix convention said milk cows will still be sold because many producers cannot afford to keep them.
It has been estimated that up to 300,000 extra dairy cows could be sold this year as milk producers trim production. NCBA’s Doud said if those sales are spread through the year, they should not greatly pressure cattle prices.