Opinions & Sacred Cows: Looking to recovery

“…the dairy market has reached ‘a clear turning point,’ with economic recovery underway, demand improving and wholesalers seeking to refill pipelines…we pray the apparent recovery trend continues well into 2011, for each of us!”

by Ron Goble

Everyone in the dairy industry is looking to recovery. What a year. As we approach the end of 2009 and the beginning of 2010, we are looking for better economic times in all aspects of the dairy industry.

We don’t have to review the low points of this past year. You’ve all lived it. We’ve been bombarded with the negative news all year long. It time to think “RECOVERY.”

I’m thinking recovery too. Aug.27, 2009 I had a heart attack. Oct. 2 I had triple-bypass heart surgery to fix the problem. Yes, I’m living in recovery mode, one day at a time. However, I’m back at work and didn’t miss a deadline, thanks to some help from friends and colleagues. The future looks bright once again and I’m looking ahead with new perspective and appreciation for life.

If only the dairy producers’ financial woes could be resolved by a good anesthesiologist, a skilled surgeon and dedicated support team. A few weeks of recovery and couple months of rehab and their troubles would be behind them. Dairying would be fun again and a huge burden would have been lifted off their backs.

Sorry to say, the dairy industry’s malady is a predicament much more difficult to cure. As 2010 draws near, dairy markets continue to show signs of improvement, especially as cow numbers and milk production are dropping slowly. However, prices still have a ways to go before reaching breakeven on the dairy farm.

Milk production is expected to be approximately 188.4 billion pounds this year and expected to drop below 187 billion pounds during 2010. While milk prices are expected to hit in the neighborhood of $15/cwt sometime next year, it still doesn’t quite meet breakeven for the majority of dairymen, and won’t even begin to allow them to start building equity lost through 2009. Some long-time dairy producers say they’ve lost equity that it took them a lifetime to build.

Dairy is not alone in its economic downturn and struggle to make a profit, however. As reported in “Feedstuffs” cattle feeders had experienced their greatest losses in history, pork producers had experienced their second greatest losses in history and chicken and turkey producers had experienced some of their greatest losses in history.

With all that historic bad news behind us, and as we focus on “recovery,” I’m still thinking that producers and their cooperatives can still put their heads together and make adjustments that will benefit both parties. Agriculture has long struggled with a lack of ability to set their own prices for the commodities they grow or produce. The law of supply and demand is a tough master, but a generous one when in proper balance.

Heavy culling by individual dairymen and the impact of the last four CWT herd retirement rounds are bringing the industry closer to a real recovery. The last CWT round – significantly smaller that three previous rounds – was expected to cull 26,412 cows, which will account for 517 million lbs. of milk. CWT says the last four rounds removes 5 billion lbs.

According to Rabobank International, the dairy market has reached “a clear turning point,” with economic recovery underway, demand improving and wholesalers seeking to refill pipelines. As we end 2009, and begin 2010, we pray the recovery trend continues well into 2011, for each of us! Have a Blessed Christmas and Prosperous New Year!

FYI

Have an opinion or response? E-mail Ron Goble, Associate publisher/editor, Western DairyBusiness at: rgoble@dairybusiness.com

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