After four years of massive blows to the New Mexico Dairy industry that closed nearly 40 dairies, experts are saying the passing of the U.S. Farm Bill could provide hope for recovery.
“The state of the industry, in few words, would be ‘a double whammy,’” said New Mexico State University Extension Dairy Specialist Robert Hagevoort.
With most of New Mexico’s dairies being primarily in Curry, Chaves and Roosevelt counties, eastern New Mexico has been the region most affected by the drought and high feed prices.
Hagevoort said the industry’s troubles began in 2009, when local dairy producers experienced an 18-month stretch of “unbelievable losses” caused by extremely high feed prices.
Challenges continued into 2011 and 2012 with a hard-hitting drought.
“The prices dairymen paid for forage was insane,” Hagevoort said, adding that dairymen had to get hay transported from Canada. “The rest of country could recuperate but in New Mexico, we couldn’t. It’s been three to four years now in a row where we’ve basically been upside down.”
Hagevoort said dairymen had to take all the equity out of their operation to pay the banks financing their farms.
“What these families had built up in generations, all that equity was gone in two to three years,” Hagevoort said.
He said the industry is now hoping for a new farm bill to do away with old price support systems.
“The new farm bill proposes what is called a margin insurance program, very similar to what other commodities already have,” Hagevoort said. “It’s a producer-paid insurance program that the government would regulate. It makes sure that if margins are upside down, insurance will pay out.”
Beverly Idsinga, executive director of the Dairy Producers of New Mexico, said her organization supports the farm bill.
“It needs to be passed because it will help out producers,” Idsinga said. “We are in a crisis.”
Idsinga said the gap between the cost of milk and production can be as large as $4.
“They’re losing money every day,” Idsinga said. “The dairy title inside the bill provides a safety net to protect producers. It doesn’t treat producers inequitably based on size of region as other insurance programs have.”
Hagevoort added that banks would be less hesitant to work with dairy producers with the provisions in the farm bill.
“If these banks know there’s a bottom on the downside because insurance will kick in, they’re much more likely to extend credit,” Hagevoort said.
Although several dairies have closed, the amount of production hasn’t dropped as much as expected.
Hagevoort said when dairymen aren’t able to pay their bills; they are forced to sell cows.
“A lot of cows have been sold and a lot of those instead of being dairy cows, they become beef cows,” Hagevoort said. “But a percentage of the good young productive cows will be sold to other dairies and continue to produce milk under ownership. That’s one of the reasons why production numbers are holding on.”
Hagevoort said another reason production numbers haven’t fallen as expected is because cows are becoming more productive.
“Every time we turn around, these cows are producing better and better,” Hagevoort said.
Walter Bradley with Dairy Farmers of America agrees with Hagevoort.
“What has happened is when those dairies close and shut down, the cows that were not producing well are sold to slaughter,” Bradley said. “We’re keeping really good milk cows, which keeps the production up.”
Bradley says feed prices are still high and eastern New Mexico has yet to see the full impact of the drought.
“We lost a 6,000-cow dairy near Muleshoe nearly two weeks ago,” Bradley said. “That impact will make a significance difference. We’re struggling to meet our order demands already.”
But Bradley says he’s optimistic as 2013 approaches.
“We don’t anticipate growth in dairies, in fact we may lose, but what we do see is an increase in our pricing that offsets that high feed cost we have to pay,” he said. “It’s reason to be optimistic. We hope the worst is over. We believe that will stabilize our industry with our producers.”