Steep climb for recovery: Modest milk price rise gives scant relief to dairy industry

By Seth Nidever
snidever@hanfordsentinel.com

Milk prices inched up in March, but that didn’t give much encouragement to local dairy farmers mired in a severe downturn with no end in sight. “We need it to go up by about $8,” said Dino Giacomazzi, who runs a multi-generational dairy on Sixth Avenue near Hanford.

The local dairy industry, by far the largest agricultural business sector in Kings County, has been staggering from high feed costs, low milk prices and weak demand for cheese and other dairy products.

There are signs that the bottom may have been reached.

Milk pool prices per hundred pounds inched up to $9.84 in March, up from $9.58 in February. Some experts, like Bill Van Dam of the Western Milk Producers Alliance, see the market starting to move upward.

But local dairy operators offered a less-than-cheerful perspective.

Giacomazzi said he’s stuck with high feed prices he locked in last year on the expectation that the corn market, driven by demand for ethanol amid historically high petroleum prices, would go even higher.

Then the economy collapsed, the price of oil collapsed and Giacomazzi and other dairy farmers were left with expensive feed not worth the milk produced by the cows that eat it.

One reason Giacomazzi coughed up the big cash for feed: Back then, in September, he was getting $16.84 per hundredweight of milk.

Now, he wonders when he can get back to the break-even point.

“I don’t see it,” he said. “There is no break-even point in our future.”

Riverdale producer Jamie Bledsoe was hardly more sanguine.

He said production costs on his dairy are about $15 for every hundredweight of milk that rolls off in a tanker truck.

“I’m surviving on guts right now,” he said.

The hope expressed by Bledsoe is that a program to cut supply by paying dairy farmers to sell their herds, combined with market forces and lower feed costs, will level things off by August or September.

But like other producers, he just doesn’t know.

“We’re still in a very deep hole,” said Mike Marsh, CEO of Western United Dairymen.

Marsh expects some price relief in June and July, as the herd buy-off program takes cows out of circulation and the summer heat causes a slowdown in milk production.

For Giacomazzi, it’s become a question of how much equity he wants to burn. His family owns the facility and they own the land, so they can borrow against that.

But it could get to the point where, as Giacomazzi put it, “we may end up with no cows, and the bank may want all of our land.”

Bledsoe described a similar situation. He has equity left. He just wonders how long he can hold out.

“With this recession, we’re not quite sure when this things going to turn,” he said.

The reporter can be reached at 583-2432.

(April 28, 2009)

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