Feed prices push dairy farmers to the brink | Economy


Eric Vanstrom stuck by his dairy cows through a recession, trade war and global pandemic that forced him to dump milk in manure pits. This year, however, he’s finally had enough. What puts him on the brink: exorbitant grain prices.

One weekend in early June, the Kennedy, NY farmer and his wife loaded 46 dairy cows into cattle trailers and sent them to an auction house. Some went to other dairies. Others ended up in slaughterhouses, to be processed into ground beef. They were so expensive to feed and so unprofitable that it wasn’t even sad to see them go.

Vanstrom’s situation is becoming more and more common. Corn and soybeans consumed by dairy cows are experiencing a historic recovery, fueled by drought in major producing countries and China’s massive grain purchases to feed a rapidly expanding herd of pigs. From the United States to Ethiopia, farmers say soaring costs are putting their businesses at risk, so much so that they are considering opting out altogether.

“For many cows, they will only have one career change from a happy cow to a happy meal,” said Mary Ledman, Global Dairy Strategist at Rabobank. Expensive feed is giving a renewed force to the transformation of the industry, fueling the growing dominance of mega-dairies, which milk tens of thousands of cows and are better positioned to cope with the volatility of an increasingly global market. While consolidation can improve efficiency and control consumer prices, it is also forcing small and medium-sized businesses around the world to close their doors. President Joe Biden’s executive order to promote competition in U.S. industries is unlikely to have a major impact on dairy companies, according to broker StoneX Group Inc., with many agriculture-related guidelines targeting dairy industries. meat and poultry.

“If you see feed prices going up the way they are now, maybe this is the thing that prompts you to say, ‘It’s probably not a good idea to keep going,’ said James MacDonald, agricultural economist and visiting professor at the University of Maryland.

The Small Dairy is an iconic symbol of American rural life and values ​​like honesty and hard work. Traders ardently linked the wholesomeness of such a life to the milk itself, with idyllic scenes of pastures and cows on the wrappers. With consumers increasingly willing to pay more for dairy products with organic and sustainable credentials, milk from mega-farms faces competition on grocery store shelves. However, there is no doubt that small operations are becoming rarer.

Low milk prices have long plagued dairy farmers, and thousands of people have left the industry over the past five years. The pandemic, however, has proven to be a lifeline for many. As COVID-19 forced schools and restaurants to close, resulting in canceled orders, governments around the world responded with emergency aid and bought dairy products. Prices rebounded and the farms that survived came out of the crisis better than expected.

Today, while some long-standing aid programs are still in place, others have ended. With soaring feed prices, more and more dairy farmers are calling again for a stop. Wisconsin, an indicator for the industry and the state known for having thousands of small farms, has already lost 177 dairy herds this year and is at a record high of data dating back to late 2003. Although the executive order President Biden aims to help small farmers whose profits have shrunk as multinational companies increasingly dominate, there is little in the directive that would specifically help the dairy industry, according to Nate Donnay, director of market intelligence slag at StoneX Group.

The high price of animal feed is not the only cost that is becoming increasingly heavy for dairy farmers. Just about everything that goes into running a farm has become more expensive, from labor to fertilizer, and the wild weather bringing everything from drought to flooding doesn’t help.

Cody Nicholson Stratton and her husband operate a fifth generation family farm in Humboldt County, California. Because the region’s usually lush green fields have been parched this year, the couple know they will run out of food. They sold about 20 of their 120 cows and halved their sheep herd. More cuts could be on the horizon.

“It’s a beautiful mess to have a drought on top of all the struggles that have accompanied COVID,” Nicholson Stratton said.

Meanwhile, large farms are also getting bigger and more productive. So even if small farms shy away from the industry, consumers can see a benefit in the form of lower prices for dairy products. The U.S. Department of Agriculture expects milk production to reach 228.2 billion pounds this year – up 2.2 percent from 2020 – as more cows work in the large farms.

Consolidation is also underway in Asia. Inventories of dairy cows in China fell to less than 6 million from 14 million in 2013 as smaller farms were replaced by larger farms, many of which are managed by large companies like Yili Group and China Mengniu Dairy Co.

In places like Australia, other industries are just proving to be more attractive. Despite a more favorable production outlook for the country’s agricultural industry as a whole, record beef prices have prompted some producers to move away from the dairy industry for the meat industry, while strong land values ​​have encouraged others to sell their holdings completely, said the national service agency Australia said in its latest outlook.

Meanwhile, in Ethiopia all the farmers are struggling. Fekensa Degefa, a computer science graduate with a small dairy farm outside the capital Addis Ababa, wants to expand his herd from 13 animals to hundreds, but high input costs – mainly feed prices – are a constant concern .

“We barely cover our costs,” said Fekensa.

In the United States, the number of licensed dairy herds had already more than halved between 2002 and 2019, according to MacDonald’s analysis of USDA figures, with smallholder decline being concentrated in Minnesota, New York, Pennsylvania and Wisconsin. He expects the country to lose dairy farms at a rate of 5 to 6 percent this year, faster than the historic trend of around 4 percent. Back in upstate New York, Vanstrom moves on, even though he grew up milking cows and for years all roads have brought him back to them.

He and his wife sell the meat from their beef cattle directly to consumers at farmers’ markets, making $ 30,000 in 2020 and planning more for this year. Although he has turned the page, he keeps an eye on the neighbors who are still struggling to make ends meet.

“I don’t see a future for small dairy farmers. Work this hard, seven days a week, 365 days a week, never take time off and have nothing to show for it, “Vanstrom said,” it’s horrible.


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