Dairy: Family Farmers in Crisis

Crisis has hit dairy farms and hit them hard. While small dairies are most vulnerable to fluctuations in the market, the dairy crisis is being felt across the nation, in every region and on every farm.

Please click here for a timeline of Farm Aid's activities in response to the dairy crisis.

Take action and demand action from USDA Secretary Tom Vilsack to help dairy farmers.

What's led to the dairy crisis?

The dairy crisis is not the result of overproduction or because of a sudden decline in demand spurred on by the global recession. Dairy farmers have been hit with a catastrophic combination of factors beyond their control. They are struggling to pay bills from record high feed and fuel costs; adequate credit is increasingly impossible to come by; and most damaging of all, the price of milk paid to farmers by processors collapsed a record 30% in January 2009 alone, and 50% since July 2008.

Just how bad is it?

Nationwide, it is estimated that dairy farmers are losing $200 per cow, per month. Dairy farmers are being paid as low as $9 for a hundred weight (cwt) of fluid milk, about 11.8 gallons, but just to break even a dairy farmer needs to make at least $17-27 (depending on the cost of production in their region). With little relief in sight, the price of milk is projected to continue its decline throughout 2009 before making even a slight recovery. If current trends continue, we may immediately lose up to 20,000 of our nation's 60,000 dairy farms and billions of dollars from our rural economies, which are already hurting during these tough economic times.

Why aren't prices dropping in the supermarket?

Between 1998 and 2007, dairy farmers' share of the price spent on milk dropped 25% while the retail price increased by 40%. As this demonstrates, the price of milk paid to a farmer is unrelated to the price paid by a consumer at the grocery store, and it is not based on the cost of production or the amount of milk on the market. Instead, the price of milk is dictated by the Chicago Mercantile Exchange, which has a reputation for being manipulated into charging consumers more and paying farmers less. Price gouging and anti-trust violations by the nation's biggest dairy cooperatives, processors and food companies have resulted in artificially low prices for farmers without any transferred savings to consumers.

What's happening on dairy farms as a result of this crisis?

Many small and medium-sized dairy farmers have already shut down operations, while others continue to head to the slaughterhouse to thin their herds. In January 2009 alone, 72,000 cows were culled, and estimates suggest another 250,000-300,000 of the nation's 9.3 million milking cows need to be immediately culled in order to begin to stabilize prices. While this may seem like a logical short-term fix to stem the impact of the industry's collapse, herd reduction tactics place stress on other industries, beginning with beef. In fact, dairy farmers are finding it increasingly difficult to find anyone willing to buy their culled cattle at a reasonable price.

How will the dairy crisis affect rural America?

As dairy farmers are forced into bankruptcy, the impacts on farm service and input industries will ripple through rural America and beyond, further taxing our country's already fragile economic and unemployment situation.

Furthermore, we could face a shortage of local dairy farmers, forcing us to rely on milk imports and substitutes that may compromise the health and safety of our children and ourselves.

What must be done to address the crisis?

For the immediate survival of our dairy farmers, the price of milk paid to farmers must be altered to reflect their cost of production. Under Section 608c (18) of the Agricultural Marketing Agreement Act of 1937, the Secretary of Agriculture is required to adjust farm milk price to "reflect the price of feeds, the available supplies of feeds, and other economic conditions which affect market supply and demand for milk and its products." If ever there was a time for the Secretary of Agriculture to use this power, it is now.

Ultimately, what our dairy farmers need is a complete overhaul of the milk pricing system: one that incorporates their cost of production, a fair living wage, and an inventory management mechanism designed to address overproduction as needed.

Furthermore, the Department of Justice must tackle unchecked anti-trust violations and excessive control in the industry to ensure a pricing system that is fair and transparent for dairy farmers, processors and consumers alike.