DairyBusiness

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Dairy Financial Times

by Bruce Miles

We have completed our year-end cost study for what will go down in history as possibly the worst for the dairy industry. It has been well published by now the record numbers of dairy either in default, facing foreclosure or worst yet completely out of business. While cooperatives and manufacturers have been recording double-digit profits, dairymen have lost anywhere from $2.00 per cow per day up to $5.00 per cow per day.

The cost study includes more than 14 billion pounds of milk produced from many of our western dairy clients. With the gross milk price received of $12.40 per cwt, dairymen could not keep up with the total cost of producing milk at $16.10 per cwt. The only positives to come out of 2009 were the fact that feed costs were down from an average cost of $9.22 to $8.26 per cwt and total expenses down from $17.41 to $16.10. With this being said, the milk price was down over $5.00 per cwt from 2008. Thus dairymen found themselves eating though equity and getting their operations pushed to the brink of disaster.

Regionally, dairymen found similar results:

So it’s perfectly clear now, high prices in 2008 did not produce high incomes due to record high feed and production costs. So when milk prices fell in 2009 and feed costs came back down, dairymen felt the pinch. Not shown in any of these numbers is the $1.50 per cwt needed for principal repayment and living expenses. So how did this happen? Why has it been allowed to go on for so long? Who is going to survive? Plenty of questions, but shouldn’t our leaders have better answers than the ones they are giving you?

FYI

Bruce Miles, CPA in Costa Mesa, Calif., with Genske, Mulder & Co., LLP, a certified public accounting firm representing clients who produce 12% of the nation’s milk in 29 states. Bruce can be reached at 949-650-9580 or e-mail him at bruce@genskemulder.com