Freedom New Mexico: Argen Duncan Alan Anderson, owner of Anderson Dairy near Portales, said rising milk prices are helping dairies, but it will take some time to financially recover from about a year of prices that didn’t pay for production costs.
By Argen Duncan: PNT senior writer
Milk prices are rebounding but dairy owners expect it will take years for them to recover from almost a year of prices so low that they couldn’t break even.
Last month, Roosevelt County dairy owner Alan Anderson said, net prices were a little more than $12 per 100 pounds of milk.
Projections indicate milk will bring in just more than $14 per 100 pounds for November and more than $15 by March.
“It certainly helps,” Anderson said.
Milk prices tend to rise in the fall, he said, but they have gone up more slowly this year.
Prices began dropping last October, Walter Bradley of Dairy Farmers of America in Clovis said, reaching a low point of less than $9 per 100 pounds — much less than production costs. On top of that, many dairies were locked into high-priced feed contracts.
Anderson said dairies were getting loans to pay bills.
Ten dairies in Roosevelt and Curry counties have gone out of business, Bradley said. Anderson expects more will shut down because they owe the bank so much.
However, Bradley said he believes the forecast indicates prices stabilizing, and dairy producers will need to move forward and make up losses.
Portales dairy owner Alva Carter Jr. said milk exports are slowly increasing, and close to 200,000 cows nationwide were taken out of production through the Cooperatives Working Together program. Dairy owners also removed more cattle from their herds than normal.
“Demand is starting to be more than supply,” Carter said.
Dairies are coming closer to being “in the black,” he said, although it’s hard to tell how close the whole industry is because everyone has a different structure of debt and equity.
Dairies’ debt loads affect their break-even points and economic recovery time.
Also, feed prices dropped in July, but are increasing now due to moisture in the Midwest keeping farmers from harvesting their crops, Carter said. He said much of whether dairies can make a profit next year depends on feed prices.
Anderson said many dairy producers are waiting for lower prices to sign new feed contracts.
Anderson expects it will take many dairies two years or more to recover, while Carter believes it will take longer. They don’t expect growth in the dairy industry any time soon.
For the next four or five years, Anderson predicted, dairy farmers will work with the herds they have and try to build their equity again.
“I think it’s put enough of a scare in dairies this year to limit them from expanding,” he said.
Also, Carter said the credit crunch would limit herd size.
“I believe that banks will be somewhat reluctant to extend increased credit for growth for a while, until some equity is recovered,” he said.
Carter expects no growth for a couple of years locally and nationally.
“I also believe the dairy industry will be a little more self-regulatory and cautious in the growth also to protect their prices somewhat,” he continued.