The economic crisis that hit dairy farmers earlier this year is growing - but some relief is on the way.
"What we keep saying is that it can't get any worse, but it has gotten worse," said Tom Wakefield, who owns J.T.J. Wakefield Farms Inc. in Bedford and is a board member of the National Milk Producers Federation. "Where's the bottom? We're in unchartered territory, and we don't know we're going."
Wakefield spoke about the crisis July 14 to the U.S. House of Representatives Subcommitee on Livestock and Dairy in Washing-ton, D.C. He said milk prices vary by region of the country, with the lowest prices on the West Coast at $7 to $9 per hundredweight. In the mid-Atlantic region, he said, prices are $10 to $11 per hundredweight.
Mirror file photo by Patrick Waksmunski
Area dairy farmers receive $10 to $11 per hundredweight of milk, but it costs $5 or $6 more than that to produce it, said Tom Wakefield, a Bedford dairy farmer and National Milk Producers Federation board member.
"Everybody is in really bad shape," Wakefield said Friday. "It's really difficult to pay bills on $10 or $11 milk when feed costs are $5 or $6 above that."
Dairy exports hit a record of 11 percent of exports in 2008, but the global demand for milk plummeted late last year when the economy declined, which created a supply and demand imbalance.
"The revenue dried up, and it isn't anything the American dairy farmer did wrong, and it wasn't that the system was broken," Wakefield said. "If you're producing at a certain level for the market, and the market dries up today, you can't just stop producing milk. You can't turn them off, turn the lights off and go home for two weeks. That's not how agriculture works."
In the region
A county-by-county look at the dairy industry:
Annual milk production
In thousand-pound units
Source:?Pennsylvania Center for Dairy Excellence
In a decision announced Friday by Agriculture Secretary Tom Vilsack, the United States Department of Agriculture said it will temporarily increase purchase prices for cheese and nonfat dry milk. The prices will rise from $1.13 per pound for block cheese to $1.31; barrel cheese, from $1.10 per pound to $1.28; nonfat dry milk powder, from 80 cents per pound to 92 cents.
The new levels, which were imposed Saturday and set to expire after Oct. 31, are higher than those requested by NMPF on June 26.
NMPF had asked that the USDA raise purchase prices for block and barrel cheese by six cents a pound and for nonfat dry milk by four cents a pound. Higher product prices will translate into higher farm-level prices, according to NMPF. The USDA estimates this will raise farmer income by $243 million.
"It's definitely going to be a big help, but it isn't going to be the silver bullet," Wakefield said. "Just moving the blocks from $1.13 per pound to $1.31 is a substantial change - that will really help. Twelve cents more on powder doesn't sound like much, but at the end of the day, it all adds up. (Prices aren't) where (they) were a year ago, but this definitely helps."
The government also provided some relief by purchasing 200 million pounds of surplus milk powder, Wakefield said, which takes it out of the system and will help with the supply-and-demand imbalance.
"That's 200 million pounds that will now go into export and won't get back into the system," Wake-field said. "It's helping supply and demand by keeping that ratio even. When supply is high and demand is low, the price is going to be lower - that's basic economics."
The dairy industry had been working to lower supply by removing more than 100,000 cows from the national dairy herd, with another herd retirement initiative under way, and pouring more money into dairy promotions and advertising, Wakefield said.
Several dairy interest groups have united in a taskforce to examine the situation, Wakefield said, and will present its ideas to the House Subcommittee on Livestock and Dairy on Aug. 11. He's not sure what they'll come up with - but he said the market could decline even more if something's not done.
"As we go forward over the next six months, it's going to get much worse," Wakefield said. "Because people borrow money to put crops out, expecting the price to increase by fall, and by October or November have to start paying on the crop that they put out, and if the price of milk does not increase, things are going to get a lot more tough."
Still, the new USDA prices should help George and Chris Perrin, who own and operate Russ-Leigh Farm in Snake Spring Valley near Everett.
"What we're making right now, you just can't do it," Chris Perrin said. "It's too hard to keep surviving on what we're making now - it's what my husband's father made back in the 1960s."
The Perrins bought their farm five years ago from George's parents, who operated it for 49 years. Though they're struggling, they haven't considered selling the business or declaring bankruptcy.
"We're not selling any of the herd," Chris Perrin said. "We'll just keep going like you do every day. We all have to do that. ... Nobody has any money to buy it - where would you sell it? You couldn't make any money doing it."
More than a matter of business, though, it's a matter of pride, Perrin said. Like other farmers, they've had to ask suppliers to wait for payment, but they're sticking it out.
"My husband was born and raised on this farm," she said. "Plus we like what we do."