Business World

Missouri’s struggling dairy farmers are asking Gov. Jay Nixon for an infusion of cash to help keep them in business.

The Missouri Dairy Association met with the governor this week to ask for a $16.5 million emergency payment from federal stimulus funds to help the state’s roughly 2,000 dairy producers.

"We think it would be a good investment for the state," said Larry Purdom, chairman of the association and dairy farmer from Purdy, in the southwestern part of the state. "We’re losing money every day."

Dairy farmers are trying to cope with what they describe as the worst crisis to hit the industry in decades. With a rise in feed and fertilizer costs last year, along with slowing demand, dairy farmers are now losing as much as $4 or $5 per hundred pounds of milk. Prices per hundred pounds are roughly $11, while production costs are about $15. Farmers were fetching last year about $20 per hundred pounds, or hundredweight.

"It’s an unprecedented time for them, with the combination of low milk prices and high feed costs," said Scott Brown, a livestock and dairy analyst with the Food and Agricultural Research Policy Institute at the University of Missouri. "It is indeed a crisis."

Dairy farmers in Missouri, Illinois and other dairy-producing states are scrambling to pay their bills.

Credit has shriveled up, and some farmers, particularly those new to the industry, are unable to find cash to keep their operations running. Some are selling or retiring their herds and shuttering their businesses. And in the next couple of months, farmers will have more bills for fertilizing, seeding and harvesting.

"We’ve got a lot of expenses in the fall," Purdom said. "The banks are saying no, and I don’t blame them."

The crisis comes after four years of increased demand for American milk products — usually sold as powdered milk or cheese — from overseas. The global appetite for American milk products shot up, particularly in Asian countries, as drought conditions in dairy powerhouses Australia and New Zealand dried exports to a trickle. Prices for American products soared.

"Dairy farmers have gone from 2007 and 2008, with record prices, to this," said Jim Fraley, manager of the Illinois Milk Producer’s Association. "It’s tough no fax payday loans."

Troubles began last year when grain and feed prices rose, pushed up by high energy costs and demand for ethanol. Then the global economy started slowing and demand shrank. Meanwhile, in recent months, supply from Australia and New Zealand has come back into the export market, while American producers, who started producing more milk to meet global demand find themselves with an oversupply.

"We haven’t been in the world market for several months now," Brown said.

Domestic demand has slackened, too. Food manufacturers, anxious to lower costs, have turned to milk substitutes or have reformulated products, according to Brown, while fewer people are hitting their local cheese-heavy pizza joints.

For Midwest dairies, the slowing demand creates an added logistical problem. "Milk isn’t something you can store under the couch," said Fraley, "and all the powder plants are in California. We have to make it into cheese or ice cream."

To help, several states, including Arkansas, Connecticut, Louisiana, Maine and Vermont, have funneled cash to their dairy farmers. In Illinois, farm advocates have asked the state Department of Agriculture to buy some of the surplus, though the department has not taken action, Fraley said.

In late July, the U.S. Department of Agriculture announced that it would increase the amounts paid for dairy products through its Dairy Product Price Support Program, providing some relief.

But farmers say they need more help — fast.

Jon Hagler, director of the state’s Department of Agriculture, said Thursday that he’s sympathetic to the struggles of the state’s dairy farmers but wants to see what impact the federal action will have first. The governor’s office did not respond to a request for comment Thursday.

The funds requested would translate into about $2 per hundredweight of fluid milk, which could keep farmers in business long enough for prices to recover, analysts say.

"Two dollars won’t cure the crisis," Brown said. "But if that gets them another 60 or 90 days down the road, where we can see some rebound in milk prices, that’s what we’re hoping for."

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