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Root of the Dairy Problem

T

Traditional Farmer

Well-known Member
Location
Virginia
Saw on a news last night that average milk consumption I believe it was in the last 20 years has gone from 26 gallons a person per year down to 17 gals.Pretty much explains why fewer dairy farmers and less milk is needed.
 
The population has continued to grow, though, so overall consumption is UP. Each person is drinking less, but there are more people to drink it.

The real problem is PRODUCTION was exceeding demand back then, and it's only gotten worse as farmers breed cows for higher production, push them harder with feed and supplements, and continue to grow their herds in a misguided attempt to make up shortfalls on volume.
 
Fluid milk demand per person is down but demand for byproducts such as ice cream and cheese are up considerably. The big problem for farmers is over production. 15,000 lb RHA was considered excellent 40 plus years ago but today nearly all farms could not survive on that level of production. Anymore it is does the farmer run 22-25K without a lot of supplements or try to push for above 30,000 lbs? Raising production years ago dealt with the immediate problem of raising income but raised supply as well. In addition vertical integration by corporations such as Walmart has eliminated a fair number of smaller farms in some areas. Used to be a small dairy could make it if very low debt, efficient, and highly productive in terms of land and cows but now you have to darn near be working off of a sizable inheritance just to play hobby dairyman.
 
OK guys do the math.

The average American in 1975 consumed 24 gallons of milk a year. That's 215,970,000 people X 24 = 5,183,280,000 gallons of milk. Today 329,920,000 consume 17 gallons. So 329,920,000 X 17=5,608,640,000 gallons. 5,608,640,000 - 5,183,280,000=425,360,000. That's 425,360,000 more gallons needed per year today. Now add in increased demand for other dairy products like butter, yogurt, cheese and ice cream. So just how did this cause Dean's to fail? It didn't. Somewhere in there you are going to find it was more mismanagement than anything else.

I read something last month from the USDA that said demand for dairy products in the US has risen every year sense the mid 70's.

Rick
 
My wife just read where a huge dairy in Texas just filed for bankruptcy, so it's not just the little guys! Dean Foods.

Wisconsin is leading the nation in dairy farm bankruptcies, almost 10% per year! Are we winning yet!
 
(quoted from post at 06:43:54 11/13/19) OK guys do the math.

The average American in 1975 consumed 24 gallons of milk a year. That's 215,970,000 people X 24 = 5,183,280,000 gallons of milk. Today 329,920,000 consume 17 gallons. So 329,920,000 X 17=5,608,640,000 gallons. 5,608,640,000 - 5,183,280,000=425,360,000. That's 425,360,000 more gallons needed per year today. Now add in increased demand for other dairy products like butter, yogurt, cheese and ice cream. So just how did this cause Dean's to fail? It didn't. Somewhere in there you are going to find it was more mismanagement than anything else.

I read something last month from the USDA that said demand for dairy products in the US has risen every year sense the mid 70's.

Rick
Click to expand...

Except their customers, the grocery guys, are fewer in numbers, and larger. Walmart being the biggest. Walmart, and other large groceries, are going vertical, producing their own milk, and other products. Smaller bakeries are going the same way, the big guys are making their own bread and pastries.

Costco has their own hot dog plant, and maybe more.

How do you compete when your largest customer becomes your competitor?
 
When I grew up here in east Texas. We had a dairy just about every where you looked. Now we have very few left. None around D/FW not sure how many if any. Are left out east.
 
Dairy has been struggling since the 60s, the industry is changing and squeezing out the little guys.

I did a lot of automation in this field, the specialty providers had money, the straight dairy had none.
 
Regional grocer Wegman's gave up baking their own products a couple years ago and I dislike the replacements. Used to be you could dunk a piece of toasted
Wegman's bread into some milk and have a strong pleasant wheat taste but no more.
 
Around here I would say that would be the mid-1970's dairies really started to struggle. During the 1960's most dairies on our road were supporting two households and could upgrade equipment on a regular basis. By the mid-1970's these same dairies had a lot of family tensions and the equipment such as manure spreaders and hay balers were getting a lot of wear on them making them less reliable with no replacement in the works. By 1990 all had either changed hands or no longer were shipping milk. All were at a disadvantage in terms of hay and corn silage tonnage per acre against farms with better soils.
 
My father in law retired from dairy farming 10 years ago and made a good living out of it. He put 3 kids thru collage, owns 400 acres and built a new house all debt free. Now they travel about 3 months out of the year. Its all about managing the money.
 
It is a well documented fact that fluid milk consumption has been in decline ever since the end of the Second World War. Even though the overall market has increased by average of 2% per year. As a long time dairy farmer, my opinion is that all of the focus by feed companies, seed companies, breed associations and Universities, has always been about higher production. Not directly about increased profitability. The mind set has always been the more you can produce, the cheaper you will be able to produce. Economy of scale. And that would in fact work, provided the wholesale or farm gate price was able to go up at the same pace as inflation. As it stands, all input cost continue to increase with inflation, while farm gate price are still stuck in the 20th century. And in some cases , stuck were they were 40 years ago. Simply producing more of any product beyond what the market can consume is going to depress the value of said products. All of the marvellous advancements made in genetic development in both plants and animals have only helped farmers to produce more , while taking the same price. But we have all been told that the secret to success is to become more efficient. Truth is the real secret is to become more profitable. Traditional Farmer talks about this regularly, but few notice. If growing corn isn?t making any profit, then stop growing corn. If milking cows isn?t showing a profit using all the excepted methods, and you still want to milk cows, perhaps you need to consider a different way to feed the cows that will allow a profit, or sell into a different market. If you continue to do the same as everyone else , and everyone else is going broke , don?t be shocked when you do too. Hard to believe, but sometimes less will turn out to be more. Too many non farm business are capturing too much of the value of farm products.
 
There is a dairy farm in north central IN populated with 15-18 thousand animals.That operation probably eliminated the need for 75-100 small farm dairy's in that area over last 15 yrs. There is only so much supply the milk market can absorb.
 
Also AMPI is closing their cheese production facility in Rochester, MN (and MAYBE one in Iowa too). I only heard part of the news blip about it.
 
There is a lot more to the story than what is being discussed. I would suspect that a lot of the production is in areas where the demand is static or declining such as the Northern US. A lot of the population growth is in the Southern US so potentially there is room to grow if you are located in an area where the population is rising in terms of milk drinkers. You make a fair criticism of what I call the university system which has long discussed increasing production as a means to increase income. But there is also a long standing problem in that farmers flat out don't work together to manage production but rather look at their fellow farmers as competitors. I question that profitability in terms of efficiency is not being pushed as a key measure for the university or lender is labor dollars per cow or per output of milk. I think that farmers do a decent job at looking at what does not work and adapting. I have greatly reduced my corn production as cost of production has run ahead of of income on many of my fields for many years now. That was not always the case.
 
What you said is what I feel is part of the conundrum in terms of short listing the problems with dairy farming. I would guess that part of your FIL's success is having a comparatively high land production base versus many other farmers. In other words it takes less area to feed one cow or more cows that can be supported by a given acreage. Probably over the decades this meant less feed purchased and perhaps more crops sold out of the barn or bin. As I hinted at earlier my neighborhood was not at the ultra high end in terms of hay or corn tonnage produced per acre. So fixed costs on that land such as taxes and insurance were comparatively higher on a per cow basis. When margins were not tight the less productive farms could offset with purchased feed and still make a living. As margins tightened during the 1970's purchased feed cut substantially into profitability.
 

there is also a long standing problem in that farmers flat out don't work together to manage production but rather look at their fellow farmers as competitors
Click to expand...

That is so true... So many farms around me didn't need a price increase or drop to add more cows... All they needed was a rumor that the guy down the road was milking more cows than they were!
 
(quoted from post at 13:37:35 11/13/19) There is a lot more to the story than what is being discussed. I would suspect that a lot of the production is in areas where the demand is static or declining such as the Northern US. A lot of the population growth is in the Southern US so potentially there is room to grow if you are located in an area where the population is rising in terms of milk drinkers. You make a fair criticism of what I call the university system which has long discussed increasing production as a means to increase income.[b:2a1bc78a55] But there is also a long standing problem in that farmers flat out don't work together to manage production but rather look at their fellow farmers as competitors[/b:2a1bc78a55]. I question that profitability in terms of efficiency is not being pushed as a key measure for the university or lender is labor dollars per cow or per output of milk. I think that farmers do a decent job at looking at what does not work and adapting. I have greatly reduced my corn production as cost of production has run ahead of of income on many of my fields for many years now. That was not always the case.
Click to expand...

That line in bold is the biggest problem. I have never seen a group of people less willing to work together, more willing to under cut (or stab in the back) those also in the dairy biz or less willing to even say anything nice about a neighboring dairyman, much less to assist him, than our local dairy farmers. I get the rugged individualist thing, but it's like some sort of a war as far as I can see. Until dairymen learn that they need to control their output to bring up prices, and that they ALL need to work together to do that, nothing will change.
 
I don't milk anymore but still love milk, I drink half a gallon of whole milk a day, that comes to 183 gallons a year. Someone else must not be keeping up there end of the deal!
 
According to the data here

https://www.ers.usda.gov/data-products/dairy-data/

per capital fluid milk consumption has dropped considerably, ice cream has held steady, cheese and yogurt are up significantly, and so on.

Total per capital consumption by their formula to merge all types of dairy consumption is up somewhat over time.

Total production is way up. So the other replies who focus on production issues and efficiencies are probably largely right.

But that all said, I suspect there is a valid point in noting the per capita decrease in fluid milk consumption. It can't be helpful.

I also wonder if the shift to more heavily processed dairy products has an impact on dairy farmers that hasn't been mentioned yet in the replies I read. It seems like it has to have had some impact, though positive vs negative may be regional. I wonder...
 
What were the reasons that Walmart and Food Lion dropped Dean Foods as a supplier in 2017(?): price, quality or delivery?
 
I just heard on the radio today that in the USA, people have been drinking 6% less milk yearly for a while now. That sure will affect the market...
 
Naturally you do realize it is even more complicated than what you said. Most fluid milk is sold at 2% butter fat. And whole milk shipped of the farm averages nearly 4% butter fat. So the processing plants skim off about half of the butter fat, and use it in other products like 10% coffee cream, or 35% whipping cream. While selling the white water , they call 2% as milk. So if the processing plant pays $14.00 per hundred for the milk, to be sure it is sold for more than $48.00 per hundred.
 
Bruce, That is the best reply I have ever read on YT in the 12 years I have on Here. You are a smart man. Bill
 
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