Milking The Cash Out Of Cows

November 17, 1991|By Kerry O'Rourke | Kerry O'Rourke,Staff writer

Westminster dairy farmer Ralph L. Robertson Jr. is milking more cattle this fall. He hopes they'll turn into cash cows.

He's milking about 10 more cows than usual "to try to get a little more cash flow to generate income to buy feed," he said.

County dairy farmers have suffered this year because the price they received for milk was about 13 percent below last year, said Jim Fraher, economist with the Atlantic Dairy Cooperative in Southampton, Pa.

The summer drought also cut into many farmers' income because they had to spend more for feed after their crops were ravaged.

Carroll farmers say they hope the higher milk prices they have received this fall will continue, but say it will take time and better weather to recoup their losses.

"If we have another drought, a lot of us will be in trouble," said Robertson, who received a "Master Farmer" award this year from Pennsylvania Farmer magazine. He milks 88 cows.

"It's going to take a good year to get over this drought," he said. "It takes a long time for prices to rise, but no time for them to fall."

Based on his experience and reading of trade literature, Robertson said he thinks prices will continue to rise in the next few months.

Gary Dell, who operates a dairy farm in Westminster with his father, Greg, and uncle, Roger, said the recent price increase will help the bottom line a little.

"You can't have prices down for 10 months and up for two months and expect to catch up," he said.

The Dells milk 112 cows and have tightened management practices to make ends meet, he said.

"We've had to become more efficient. We had to sell a lot of cows that were not paying for themselves," Dell said.

In 1990, the average price for milk was $14.76 per hundred pounds;this year, it's estimated at $12.91, Fraher said.

Farmers measure milk in 100-pound increments, equaling 11.6 gallons.

Robertson said he noticed an increase in his monthly milk check in September. Since then, the price, based on a federal base price augmented by his cooperative, has risen about $1 per hundred pounds.

Prices generally are up in the fall and down in the spring because they follow supply and demand, said Harry Stanley of the Southeast United Dairy Industry Association Inc. in Atlanta.

Production increases in the spring because grass is greener and cows eat more, he said. Cows eat less when it's hot, so production drops in the summer. In the fall, less high-quality feed is available, so production drops more, he said.

Cows aren't factories where output can be adjusted easily, Stanley said.

Prices rise in the fall, too, because demand goes up when school opens, Fraher said.

Prices last spring were the lowest paid to area farmers since 1979, said Boyd Cook, manager of Dairymen Inc., a cooperative in Sykesville.

If production stays down, prices this spring will be 70 cents to $1 per hundred pounds higher than last spring, he predicted.

The recession has hurt dairy farmers because sales of manufactured dairy products -- cheese, ice cream, cottage cheese, for example -- fell off when unemployment rose, Fraher said. Sales of fluid milk held steady, and now sales of manufactured products are starting to increase, he said.

John W. Wysong, an economist with the University of Maryland Cooperative Extension Service in College Park, said the cheese market is good, which has helped milk prices.

"People still are buying pizzas, instead of buying beef or chicken orother high-protein things," he said.

The price farmers in Carroll and throughout the Mid-Atlantic region receive for their milk is based on a price set in Minnesota and Wisconsin, one of the country's largest dairy regions.

The Mid-Atlantic region -- and much of the country -- must keep its price in line with the Minnesota-Wisconsin price because producers there could easily undercut producers here, saidRalph Strock, chief executive officer of the Middle Atlantic Milk Marketing Association, an advertising agency based in Towson.

Cooperatives in this region use the Minnesota-Wisconsin price as a base, then add $3.03 per hundred pounds to account for what it would cost to transport milk from the Midwest here, he said.

Between the cooperative and the consumer are wholesalers and retailers who add to the cost of milk. Farmers receive about 40 percent of the retail price of agallon of milk, Wysong said.

Retail prices of dairy products haveaveraged 9.4 percent higher this year than last, according to SUDIA in Atlanta. The 1990 price was the highest since 1980, the group said.

But the price of a half-gallon of milk in October was 9 cents less than it was a year ago, said Mark Weimar, an agriculture economistwith the U.S. Department of Agriculture. This year, it cost $1.36; last year, $1.45.

SUDIA predicts retail prices of milk and dairy products will stabilize this year and average 1 percent below 1990 levels.

The difference in the price paid to the farmer and the increase in the retail price has been growing wider, Weimar said.

When the cost to retailers drops, they generally don't lower their prices the same amount because they know their cost eventually will increase again, he said.

In 1987, farmers received 53 percent of the price of a half-gallon of milk; in 1990, they received 48 percent, Weimar said.

In 1987, a half-gallon of milk cost $1.14; 60 cents went to the farmer and 54 cents to the middle men, he said.

In 1990, a half-gallon cost $1.45; 69 cents went to the farmer and 76 cents to the middlemen, he said.

The average American drinks 21 gallons of milk a year, SUDIA said.

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