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1608 PD: Millionaires are made in recessions

Published on 06 November 2008

This month I got a call from a “bitching” dairy producer (that’s how he identified himself) telling me that Idaho milk producers ought to be given an award for shooting themselves and everyone else in the foot by continually expanding cow numbers and herd size averages. His complaint was that such business practices drive down milk prices both for those expanding and for everyone else.

His concerns about low milk prices aren’t new; they are dairy producers’ age-old gripe. Our economic downturn on the heels of high-feed prices will likely increase the frequency and volume of those comments. I guess a collapse in the financial markets, cascading through Wall Street and trickling down to consumers will bring out the low-milk price demonstrators.

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Yet he may be right that Idaho will get an award before the end of the year. A mere 118 million pounds of production separated Idaho and New York at the end of the third quarter in the race to become the nation’s No. 3 milk-producing state. I’ve analyzed the scenarios (see http://www.progressivedairy.com/pd/features/2008/1608/1608_cooley_idaho.html). Idaho has never outperformed New York in total milk production in the fourth quarter, but if New York production per cow or cow populations falter, Idaho just might pass the Empire State.

New York producers still control their own destiny, minus weather conditions, of course. Those producers, like many around the country are asking, “How many cows can I afford to keep and feed?” Comparing the two states’ scenarios has reaffirmed in my mind there’s much to be made from increasing per-cow production, especially when margins are slim.

Recently it seems when the news is bad more follows. This issue contains a disconcerting perspective on the outcome of a producer-led court case to challenge new changes in processor make-allowances. I agree with the author that dairy producers would exist even without processors – rather than the other way around.

We didn’t plan for the timing of this finances/business-planning themed issue, yet how applicable today. The tone of most of the articles is realistic, yet hopeful. It’s the same tone that believes what I heard in a radio ad the other day, “Millionaires are made in recessions.” In many ways, this economic downturn is full of opportunities to make a profit; they are just less obvious than the $20-per-hundredweight days of just a year ago. PD

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