Global Milk Price - is it affecting you?

[Localmotion]

US milk prices at the farm level have been decreasing in recent months.

For November 2014, the estimated total cost of production was $23.32/cwt. ($14.66/cwt. operating and $8.66/cwt. overhead). Larger operations have lower costs/cwt., so some may be covering all their costs at $20/cwt.

The crop insurance portion of the 2014 Farm Bill has a provision that allows dairymen to insure their margins, with premiums subsidized by taxpayers.

Steve

Thanks Steve - that's interesting to know and clearly a similar situation to the UK.

According to Dairyco (a UK government organisation which is paid for by a levy paid by milk producers), the UK average milk price paid to farmers for November 2014 was 28.91 ppl (pence per litre). It is difficult to pin-point official figures for cost of production, however it is estimated to be around 34ppl on average when taking into account all variable costs including electricity, water, feed, dairy supplies and wages. Many UK dairy farms are family run businesses and do not properly account for wages - so the actual cost of production maybe even higher.

Unfortunately the UK does not have any provision for protection of margins in agriculture via insurance policies. It is even very difficult / costly now to get insurance policies to cover dairy animals.

The picture below is out of date (it was produced by the BBC in 2012) but the prices and margins shown are similar. Obviously this is for fresh liquid milk - which should be more resistant to pressure from the global markets as logistically it cannot be stored or distributed over long distances. However in the UK (which is one of the largest consumers of fresh milk in the world) we see large retailers try and mirror the global market (uht, powder, cheese, butter etc) on our fresh trade which creates an unnecessary downward pressure...

 

[smstonypoint]

Ian,

UK dairymen do a little better than their US counterparts in terms of their shares of the retail price of milk. It looks like the share in the UK is 48% and the share is 45% in the US (Farmer's Share). I think that can be explained by the fact that milk has to be transported over greater distances in the US.

The USDA cost of production data account for both hired labor and the opportunity cost of family labor in estimating overhead. The values were $1.57/cwt. for hired labor and $2.36/cwt for family labor for November of 2014.

Does the UK have any mega dairy farms?

Steve

 

[mjarrels]

Just ask George Bush senior?

mark

 

[dave1949]

The State Of Maine Milk Commission sets monthly minimum wholesale and retail prices. You can see Jan/2015 price minimums here:
http://www.maine.gov/dacf/milkcommission/documents/01-15_000.pdf

The past two years and plans for 2015 are here: Prices: Maine Milk Commission: Boards & Commissions: Maine Department of Agriculture, Conservation and Forestry

That doesn't show what the area producers are paid, but maybe gives an idea.

 

[OldMcDonald]

Steve, The picture prices milk at 25p/litre. I keep in touch with UK agriculture through the English Farmers' Weekly, and a report last week indicated that farmers will receive less than 20p/litre in the near future from one of the major buyers. There have been continuing stories for a long time on downward moves in pricing.

For those of you complaining about the high cost of milk, how much do you think you should be paying?

 

[smstonypoint]

Steve, The picture prices milk at 25p/litre. I keep in touch with UK agriculture through the English Farmers' Weekly, and a report last week indicated that farmers will receive less than 20p/litre in the near future from one of the major buyers. There have been continuing stories for a long time on downward moves in pricing.

For those of you complaining about the high cost of milk, how much do you think you should be paying?

The milk marketing system in the US is Byzantine, what with various Federal milk marketing orders, state milk commissions, etc.

As noted by Dave, minimum prices are set in some states.

The State Of Maine Milk Commission sets monthly minimum wholesale and retail prices. You can see Jan/2015 price minimums here:
http://www.maine.gov/dacf/milkcommission/documents/01-15_000.pdf

The past two years and plans for 2015 are here: Prices: Maine Milk Commission: Boards & Commissions: Maine Department of Agriculture, Conservation and Forestry

That doesn't show what the area producers are paid, but maybe gives an idea.

I don't recall the specifics, but some regulations resulted in large dairies being established (or relocated) in states that you wouldn't think of as dairy country (e.g., New Mexico and Idaho).

Steve

 

[Localmotion]

Ian,

UK dairymen do a little better than their US counterparts in terms of their shares of the retail price of milk. It looks like the share in the UK is 48% and the share is 45% in the US (Farmer's Share). I think that can be explained by the fact that milk has to be transported over greater distances in the US.

The USDA cost of production data account for both hired labor and the opportunity cost of family labor in estimating overhead. The values were $1.57/cwt. for hired labor and $2.36/cwt for family labor for November of 2014.

Does the UK have any mega dairy farms?

Steve

There have been attempts - but to date all plans for super dairies in the UK have been blocked at planning level. The most notable was a plan for a 8,000 cow unit in Lincolnshire (see Nocton Dairies controversy - Wikipedia, the free encyclopedia)

There have also been plans for 1,000 cow unit's blocked. The UK average herdsize is 125 cows (2013 figures excluding followers), although there is a wide variations with many small farms still below 90 head, and also lots of larger 300+ head units. Economies of scale are meaning that it is getting harder for the smaller producers to stay in business - last month the number of milk producers in the UK fell below 10,000 for the first time since records began.

The milk buyer paying 20ppl which OldMcDonald refers to is actually the UK's largest FCB / farmer owned co-op called First Milk. Both myself and the farmer in the newspaper attachment in my OP used to supply First Milk - I was also lucky enough to also work for them as an area manager for a few years before moving to Spain. While their milk price seems lower than many other UK buyers, it does not take into account that it's farmers own the co-op and therefore also get a share of any profits from the final products (mainly cheese and smp). What has been of concern recently is that there has been a cash-flow problem caused by the global market, which means First Milk has had to delay it's payment to farmers - at a time when they are already struggling.

One more question I have - does the US consumer support it's farmers, or is it like the UK where many do not even think about where their food comes from?

 

[smstonypoint]

The UK average herdsize is 125 cows (2013 figures excluding followers), although there is a wide variations with many small farms still below 90 head, and also lots of larger 300+ head units. Economies of scale are meaning that it is getting harder for the smaller producers to stay in business - last month the number of milk producers in the UK fell below 10,000 for the first time since records began.

One more question I have - does the US consumer support it's farmers, or is it like the UK where many do not even think about where their food comes from?

There are about 51K dairy farms in the US, with an average herd size of 115 cows. However, most of our milk production comes from larger herds. Our largest herd (in Indiana) has 30K cows.

The graphic below is dated, but it does show the regional disparities in the size distribution of US dairy herds.

IMO, the US is like the UK in that most folks don't think about their food sources.

I don't know about the political clout of farmers in the UK; but IMO, US farmers have more political clout than their numbers would suggest.

Steve

 

[MossRoad]

... Our largest herd (in Indiana) has 30K cows....

You ever been over there? We went last summer. Quite amazing. 80 calves per day born there. 40 semi tankers of milk leaving each day. If you have never seen industrial dairy, that's the place to go.

Local milk prices here are frequently less than $3.00.

 

[smstonypoint]

You ever been over there? We went last summer. Quite amazing. 80 calves per day born there. 40 semi tankers of milk leaving each day. If you have never seen industrial dairy, that's the place to go.

David is talking about Fair Oaks Farm: Fair Oaks Farms • Farming is both a commitment and a calling to our people..

Steve