(Bloomberg) — Eric Vanstrom was hung from his dairy cows during a recession, trade war and global pandemic that forced him to dump milk in compost pits. This year, though, he’s finally had enough. The thing that puts it over the edge: exorbitant grain prices.
One weekend in early June, farmer Kennedy, New York, and his wife loaded 46 dairy cows into cattle trailers and sent them to the auction house. Some went to other dairies. Others ended up in the slaughterhouses, to be made into ground beef. Feeding them was so expensive and unprofitable that he was not sad to see them go.
Fanstrom’s predicament is increasingly common. The corn and soybeans eaten by dairy cows are on a historic high, fueled by drought in major producing countries and China’s massive purchases of grain to feed its fast-growing pig herd. From the US to Ethiopia, farmers say high costs are putting their businesses at risk, so much so that they are considering exiting altogether.
“For a lot of cows, they are going to have a career change, from happy cow to happy meal,” said Marie Lidman, global dairy strategist at Rabobank. Huge counties, which milk tens of thousands of cows and are in a better position to withstand the vagaries of the increasing global market. Although consolidation may boost efficiency and keep consumer prices in check, it also forces small and medium-sized operations around the world out of business. President Joe Biden’s executive order to boost competition across US industries likely won’t have much impact on dairy companies, according to broker StoneX Group Inc. , with several agricultural-related directives targeting the meat and poultry industries.
“If you see feed prices go up as they are now, that might be the thing to say, ‘It probably wouldn’t be a good idea to go on,’” said James MacDonald, an agricultural economist and visiting professor at the university of Maryland.
Small Dairy is an iconic symbol of American rural life and values such as honesty and hard work. Marketers passionately associated the safety of such life with milk itself, with idyllic scenes of pastures and cows on packages. With consumers increasingly willing to pay a premium for dairy products with organic and sustainable qualifications, milk from major farms faces competition on the grocery shelves. However, there is no doubt that small operations are becoming rare.
Dairy farmers have long been plagued by low milk prices, and thousands have left the industry in the past five years. However, the pandemic has turned into a lifeline for many. With Covid-19 forcing the closure of schools and restaurants, causing orders to be canceled, governments around the world have pounced on emergency aid and bought up dairy. Prices rebounded and farms that survived the crisis have fared better than expected.
Now, although some long-term assistance programs remain, others have ended. With feed prices soaring, more dairy farmers are calling to quit smoking again. Wisconsin, an industry leader and a state known for having thousands of small operations, has lost 177 dairy herds this year and is at a record low level of data dating back to late 2003, even though President Biden’s executive order is intended to help small farmers who Profits have dwindled as multinational companies become increasingly dominant, and there isn’t much in the guidance that would specifically help the dairy industry, according to Nate Donnay, director of dairy market insight at StoneX Group.
Expensive feed is not the only cost that is becoming more of a burden to dairy farmers. Pretty much everything that goes into running a farm is getting more and more expensive, from labor to fertilizer, and the wild weather that brings everything from drought to flooding isn’t helping.
Cody Nicholson Stratton and his husband run a fifth generation family farm in Humboldt County, California. Since the area’s lush green fields are usually dry this year, the couple knows they will be in short supply. They sold about 20 of the 120 cows and cut their flocks in half. There may be more cuts on the horizon.
“It’s a beautiful mess that drought is on top of all the struggles that have happened with Covid,” said Nicholson Stratton.
Meanwhile, large farms are also becoming larger and more productive. So even as smaller farms flee the industry, consumers may see a benefit in lower dairy prices. The US Department of Agriculture expects milk production to reach 228.2 billion pounds this year – up 2.2% from 2020 – as more cows toil in larger operations.
Consolidation is also underway in Asia. Stocks of dairy cows in China fell to less than 6 million from 14 million in 2013 as smaller farms were replaced by larger farms, many of which are run by major companies such as Yili Group and China Mengniu Dairy Co.
In places like Australia, other lines of business are proving more attractive. Despite more favorable production prospects for the country’s agricultural industry in general, record-high beef prices have prompted some producers to move away from dairy to the meat industry, while strong land values have encouraged others to sell their farms altogether, says Dairy Australia. He said in his last predictions.
Meanwhile, in Ethiopia, farmers are suffering across the board. Fekensa Degefa, a computer science graduate who has a small dairy farm outside the capital, Addis Ababa, wants to expand his herd of 13 animals into the hundreds, but high input costs – mainly feed prices – are a constant concern.
“We are barely covering our costs,” Vikensa said.
In the United States, the number of dairy herds that are actually licensed by more than halved between 2002 and 2019, according to a McDonald’s analysis of USDA figures, with the decline in small operations concentrated in Minnesota, New York, Pennsylvania and Wisconsin. The country is expected to lose dairy farms at a rate of 5% to 6% this year, faster than the historical trend of about 4%. Years, all roads led him there. In college, while studying abroad, he left classes to work in a dairy.
Now, that’s behind it. He and his wife sell meat from their cows directly to consumers at farmers’ markets, generating $30,000 in 2020 and expecting more for this year. Although he has turned the page, he is keeping an eye on neighbors who are still struggling to make ends meet.
“I don’t see a future for small dairy farmers. To work hard, seven days a week, 365 days, you never get time off and you have nothing to show for it, it’s horrible,” Vanstrom said.
(Updates with background begin in the 20th paragraph.)
More stories like these are available at bloomberg.com
Subscribe now to stay ahead with the most trusted source of business news.
© 2021 Bloomberg LB