Utah's dairy producers face another lean year

For the first time in the state's recorded history, Utah's roster of dairy farmers has dropped below 300. Prices for fluid milk are declining, while the costs for fuel, feed and fertilizer have been on the upswing.

June is Dairy Month in Utah, and the occasion finds local producers looking at another lean year. In a June 7 statement, the Dairy Farmers of Utah reported that the average price for a gallon of milk was $2.50, which was comparable to May 2003 prices. This week, grocery advertisements were a dollar below that in some markets.

"It's tough," said Mark Gibbons, a Lewiston, Cache County, dairy farmer and president of the Utah Dairymen's Association. "I consider ourselves to be good managers, running a good operation. But things are really tight.

"We won't be buying any new equipment for the foreseeable future. We've got to make do with what we've got and hope that things don't break down. We feel the pinch when the price goes (down) like that. But then, I don't know of any dairy farmer that doesn't."

Karen Koncar, chief executive officer of the Utah Dairy Commission, said the drop in prices at the grocery store "reflects the situation dairy farmers have faced all year." The situation is one of simple economics, she said — the law of supply and demand.

"From 2002 through 2004, the supply was fairly constant," Koncar said. "In 2005, the milk supply increased 3.5 percent compared to the year before. It really jumped, so we have an oversupply."

Which isn't necessarily uncommon, or unnatural, or unexpected, according to Mike Brown, spokesman for the Dairy Farmers of Utah. What is problematic this time around is the concomitant increase in costs.

"For better or worse, many dairy farmers are used to this — the dairy industry has high peaks and then valleys, a lot of fluctuations," Brown said. "The biggest effect this year is that their prices are up. Gas prices are up.

Fertilizer prices are up. Prices are up for feed."

Unlike other business owners, farmers don't determine the price of their product. Nor do they have much control over the costs they incur — cows need to be fed, for example, no matter the cost of feed. Products need to be transported, no matter the cost of fuel. And there is no mechanism for passing those price increases on to consumers.

"If you were making clothing, and you weren't getting the price you wanted, you might hold onto that product until you can get a better price," Brown said. "Dairy farmers are unique, in that since milk is perishable, they either sell it for the price people are willing to pay or they throw it down the drain."