"If you are a dairy farmer, now is a
good time to get ready to pay off some of your debts," said Mike
Hutjens. "Several reasons are behind the increase in milk price at
the farm. One contributing factor is a reduction in both dairy cows
and dairy farms in the United States after 18 months of
devastatingly low milk prices.
"Another factor was the closure of the
Canadian border to live cattle imports due to the outbreak of mad
cow disease. That resulted in over 100,000 Canadian dairy heifers
that would normally be imported and produce milk in the United
States being kept out. There was also a 50 percent reduction in the
availability of bovine somatotropin (BST), a hormone that increases
milk production by eight to 12 pounds per cow."
About 12 gallons of milk are contained
in 100 pounds of milk purchased at the farm. The farm gate price of
$19 per hundredweight results in a $1.60 per gallon price on
store-bought milk for dairy producers in return for their investment
and labor, Hutjens said.
"While this appears as a bargain for
consumers paying $2.50 to $3 per gallon in the store, six months ago
dairy producers received less than $1 per gallon," Hutjens said.
"That's right -- about 40 percent of the consumer dollar was paid to
the dairy farmer, while processors, transportation and point of
sales consumed 60 percent of the consumer's dollar."
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Hutjens noted that dairy farmers are
also not getting all of the higher prices as profits because
soybean, corn and alfalfa hay -- all used to feed dairy cattle --
are at sky-high price levels. Energy costs are also high, and
fertilizer, equipment and other input costs continue to increase for
"Consumers can anticipate higher milk,
butter, cheese, ice cream and other dairy prices in the near
future," he said. "However, milk prices are predicted to decline in
the previously noted ones, other factors may come into play in the
dairy price scenario to lower or increase prices. These include
possible higher milk production and less culling of cows by dairy
producers in response to high prices, reduction in dairy product
consumption by consumers, heat stress on dairy cows, and 2004
growing season influence on feed costs.
of Illinois news release]