Dairymen cut back as dairy prices drop 44 percent

JEROME, Idaho — These days there fewer black and white heads poking out of the steel fence along the deeply rutted, dirt road through Ralph Anderson's Magic Valley Farm.

A few months ago, Anderson managed a herd of 600 Holstein cows, enough to keep his milking barn humming 24 hours a day. Now, Anderson, 51, devotes just three hours a day to milking the 60 milk producing cows that remain on his farm here in the heart of Idaho dairy country.

Amid falling milk prices that have pinched dairymen all across the state and nation, Anderson agreed in December to reduce his herd as part of a national buyout program paid for by the dairy industry.

Anderson, who started his dairy in 1987 with his father and brother, said he hasn't yet decided whether to leave the dairy industry altogether or slowly rebuild the herd in anticipation of a turnaround in milk prices.

"Right now, the less cows you have the less money you're losing," said Anderson, one of the many struggling dairymen in Idaho, the nation's third-leading milk producing state.

In Idaho, the industry's meteoric rise over the last ten years helped transform an agricultural economy rooted in crops like potatoes and grains to livestock and dairy production, and with it made the Magic Valley the epicenter of the state's new farm economy, according to the University of Idaho Extension service.

In the last two years, state profits reached record highs and dairy farms expanded. Now, with the waning national and international economy dairy prices have dropped 44 percent. At the same time, high feed prices have some farmers opting to thin herds and cut losses.

"We recognized in November and December that we were facing some tough times," Idaho Dairymen's Association President Bob Naerebout said. "We are very dependent on having a strong national economy."

When the economy is doing well, people can afford to purchase meat and milk, Naerebout said.

But the downturn in the last 6 months has fewer people buying milk and dairy products, leaving Idaho's dairy farmers with two options.

"It's between getting rid of more animals or throwing away the product," Naerebout said.

Falling dairy prices also pose a problem for Idaho's economy because in 2008 dairy made up 34 percent of the state's total farm cash receipts, or $2.153 billion.

Roughly $200 million has come out of Idaho's economy through taxes and lost revenue since the beginning of the year because of the drop, Naerebout said.