Pinched dairy farmers are running scared

While consumers are loving the low price of milk and ice cream, Utah dairy farmers are scared.

Midway dairy farmer Grant Kohler calls it "the perfect storm": They are being paid less for raw milk, while feed and transportation costs are unusually high. And the lines of credit that help them weather rough patches are uncertain at best as financial institutions wrestle their own economy-related demons.

"I've never seen anything close to this," Kohler said. "People who had had generations of farming are losing their farms … eating equity that took years to build."

As in other places, said Karen Koncar, executive director of the Utah Dairy Council, the number of dairy farmers is shrinking. Utah now has fewer than 250. Those who remain are able with about half the number of cows to sate a growing population. And she wonders if Americans recognize how much they benefit from "their safe food supply."

In the past, dairy farmers weathered low prices because feed prices were low, too. Not this time. Rising gas prices have put grain and diesel fuel "out of sight. We have to truck feed in and product out, so we pay both ways," said Mark Gibbons of Lewiston, like Kohler a third-generation dairy farmer.

Increasing regulation related to clean air and water have added costs. The cost of keeping the animals healthy has risen. And affordable help isn't easy to come by either, he said.

It costs about $18 to produce 100 pounds of milk and farmers get only $11 for it right now, so they lose money, Koncar said. Adds Kohler, "it's not like I can just cut back. The cow has to be milked and fed and everything has to keep going. We're used to periods of eating equity, but I've never seen anything like this."

The most optimistic predictions say the situation may ease in early 2010. The farmers predict some of them will not be around then. And they're being especially hard hit because they were shipping about 11 percent of their product overseas as powdered milk. Poorer countries that desperately need that milk product can't afford it in this global recession, so the exports now use only 6.5 percent of the supply. That puts the excess milk back on the U.S. market, further increasing the supply and driving down prices. Other consumers, like restaurants, use less to save money. Think less cheese on that pizza.

Credit concerns are the other huge issue. Kohler typically borrows to pay for hay, then pays it back as he sells the milk over the year. This year, payback has been hard and he's not sure what that will mean when it's time to buy more hay.