Florida's dairy farmers are losing an average of more than $700,000 a year. It's a $99-million problem statewide.
|Florida’s Dairy Industry
» Has 140 dairy farms statewide, down from 288 in 1992
» Ranks 19th in the U.S. for total milk production
» Produces 2.1 billion pounds of milk annually
» Employs 2,000 directly
“It has just been such a roller-coaster ride,” says Joe Wright, a farmer in Avon Park who serves as president of the milk marketing cooperative Southeast Milk. Three years ago, Wright recalls, dairy farmers were paying record prices for grain to feed their cows, but they were also earning record prices for milk thanks to strong demand. “When the recession hit, demand went away and milk prices went down, but we’re still stuck with high input costs.”
While all farmers are susceptible to dips in the economy, dairy farmers face a particularly tough predicament because unlike grain farmers, who can store the grain in a silo and wait for better prices, dairy farmers have a product that spoils rapidly. Moreover, dairy cows can’t be turned off with a switch. They continue producing milk whether the farmer can sell it at a profit or not.
Most Florida dairy farms sell their milk for an average of about $1.41 a gallon but face production costs of $1.74 a gallon, according to the Senate report. Just two years ago, when production costs were $1.84 a gallon and the price of milk was $1.88 per gallon, the typical Florida Dairy farm was making a profit of about $529,000.
The tight credit market is also putting a squeeze on the industry as farmers burn through cash to maintain herds that can’t be downsized quickly. Wright says he’s aware of some farmers who have been unable to get bank credit, but says feed suppliers have been working with some farms, giving them 60 or 90 days to pay instead of the usual 30.
With economists predicting only a gradual recovery for milk producers, lawmakers are stepping in to try to help the foundering industry.
Congress recently approved a $350-million emergency aid package for dairy farmers. While $290 million will go directly to dairy farmers, the federal government will use $60 million to buy surplus cheese and dairy products —?but the legislation does not say specifically how the $290 million will be allocated. That is being left up to the Department of Agriculture.
Bailouts aside, there are several steps state lawmakers could also take to help Florida’s dairy farms.
For instance, the Legislature could require government institutions in the state to purchase a certain percentage of milk from Florida dairy farmers. The state could also create tax incentives to help farmers who are expanding or updating their facilities or building new farms.
As lawmakers mull their options, the dairy industry is trying to drive up demand for milk through various marketing and partnership initiatives.
Dairy Farmers Inc., Florida’s milk promotion organization, recently teamed up with Dairy Management Inc., its national counterpart, to create partnerships with companies such as McDonald’s and Domino’s Pizza in order to sell more dairy products. The dairy groups supported McDonald’s launch of a new line of McCafe coffee drinks, which are close to 80% milk, and they were a driving force behind Domino’s development of a new “American Legends” line of pizza, which contains 40% more cheese than a traditional Domino’s pizza.
The DFI has also been working with Florida processors and retailers to develop new locations in stores where milk is sold. “You will start seeing milk in places such as the deli counter and coolers in the front of stores,” Matt Lussier, an Alachua County dairy farmer and president of DFI, wrote in the a recent issue of DFInsider, the group’s official newsletter.
Some farmers have come up with their own ways to deal with the crisis.
The Dairy Farmers marketing organization has been stepping up partnerships to create more demand.
Karen Dakin says the cash flow from these new products and activities hasn’t canceled out the $200,000 to $300,000 revenue drop caused by lower milk prices but says every little bit helps. “Before you know it, you start to generate an income that is noteworthy — that does counterbalance some of these down times.”