UF report: Florida dairy farmers made more on milk, spent more on feed in 2007

Published: July 30 2008

Category:Agriculture, Business, Florida, Research

GAINESVILLE, Fla. — Wholesale prices for Florida milk hit an all-time high in 2007, but dairy farmers’ potential profits were reduced by skyrocketing feed costs, according to a University of Florida report issued this month.

“Times are changing,” said Albert De Vries, an associate professor with UF’s Institute of Food and Agricultural Sciences and an author of the report. “The farmer’s putting an extra dollar in his pocket but spending it down the road.”

On average, surveyed farmers received $20.49 for every 100 pounds of milk sold, up from $17.09 in 2006. The figures appeared in the annual Florida Dairy Farm Situation and Outlook, which compiles data from surveys and the U.S. Department of Agriculture.

That’s an increase of about 20 percent, much more than the 8 percent increase dairy economists had predicted.

Wholesale milk prices were up not only in Florida but also nationally and internationally, driven by a weakened U.S. dollar and increased global demand for dairy products.

“More and more we’re part of the global marketplace for milk,” De Vries said. “Pricewise it was a very good year.”

Profitwise, De Vries said, it was better than usual, with farmers making an estimated $3 per 100 pounds of milk sold. That’s up from an average of 73 cents profit per 100 pounds in 2000-2005.

The profit margin would have been substantially higher but feed costs were up 160 to 200 percent from 2006 levels, he said. They were driven mainly by rising prices for corn, a major component of dairy cattle feed and a commodity in demand for ethanol production.

In 2007, those increases added as much as $3 to the cost of producing 100 pounds of milk, the report said. Feed prices are also expected to be up this year, partly because Midwest flooding will reduce domestic corn supplies, and partly due to rising energy costs.

Florida wholesale milk prices are expected to remain high in 2008, possibly averaging $21.25 per 100 pounds, according to an estimate quoted in the report. Nonetheless, profits may decline from 2007 levels, due to rising feed and fuel costs.

“It’ll be a challenging year again for producers,” De Vries said.

Market forces have affected Florida’s dairy industry in other ways. In 2007, the state had 142 dairy farms, down from 150 in 2006, and had 124,000 dairy cows, down from 130,000. The state’s total milk production declined from 2.27 billion pounds in 2006 to 2.11 billion pounds.

Nationally, milk production has increased every year since 2004. In Florida, the lack of growth is blamed on slim profit margins, escalating land values and the cost of environmental regulations, the report said.

For consumers, higher milk prices may be here to stay, De Vries said. Strong increases in energy costs and the global demand for food have sharply increased food prices in the United States.

“This is a wake-up call that we can’t take food production for granted and improved efficiency is still on the agenda,” he said.

The report was written by De Vries, UF dairy extension agent Russ Giesy and his son Jay Giesy, a dairy specialist with Cargill Animal Nutrition. Read the report at http://edis.ifas.ufl.edu/AN200.

Credits

Writer
Tom Nordlie, tnordlie@ufl.edu, 352-392-0400
Source
Albert De Vries, devries@ufl.edu, 352-392-5594

Category:Agriculture, Business, Florida, Research