With the arrival of 2009, dairy managers will be facing significant economic challenges. Milk prices at the farm gate will decline over 30% or $5 to $6 per one hundred pounds (Nov, 2008 was $19/cwt; Feb, 2009 may be $13/cwt). Reasons for this decline include the recession in U.S. and world dairy economies, stronger U.S. dollar, decline in eating out, and less export of dairy products.
Strategies to consider include:
- Lower feed costs may replace $1.50 per cwt
- Explore the use of by-product feeds to reduce feed costs (target 9 cents per pound)
- Maintain milk yield and milk components
- Increase quality premiums
- Sign up for the MILC (milk income loss contract) can provide $1.20 to $1.50 per cwt
Consumers may see a drop of 50 cents per gallon as dairy farmers receive 5 to 6 cents less per pound of milk (8.6 lb of milk in a gallon of milk). Cheese prices could also drop 50 cent a pound, butter could decline $1.00 per pound.
With today's current milk prices and imput costs, Illinois dairy managers could lose $100 a month per cow. The average Illinois herd size is 102 cows representing over $10,000 loss per month. It may be summer, 2009, before milk prices increase return to break even prices.
