Milk price drop sees American dairy farmers turn to beef market

Posted by Isobel Drake on 18th February 2009

America’s dairy cows are now being redirected to the slaughterhouse in the thousands as milk prices plummet to levels that make production unviable for many farmers.

Some dairy farmers have reported that they have had to sell a portion of their herds for slaughter because feed prices are still high and demand is falling around the world, placing pressure on the price of the staple. In some cases in the US the price of milk farmers receive is now around half of the production costs, and if the price continues to flounder then potentially 15% of the nation’s dairy cows could be slaughtered for beef this year.

“This could destroy our dairy infrastructure,” Mike Marsh, CEO of the United Western Dairymen trade association, told the Associated Press. “We need to get supply and demand into alignment as quickly as possible so this economic trainwreck isn’t strung out.” The price has fallen away dramatically around the world to such an extent that mature dairy cows would have sold for about US$2.500 in November yet now, the lack of buyers means selling them to the beef market at under half that is now the more lucrative option.

The recent Australian Agriculture in Focus report by Rabobank pinpointed the difficulties facing dairy farmers around the world, although noted that the fall in the Australian dollar had at least managed offer some advantage to Australian farmers.
“As the economic crisis hit in 2008 the lack of credit availability created difficulties for all borrowers including farmers, processors, distributors and retailers,” General Manager of Rabobank Food & Agribusiness Research, Bill Cordingley, advised. “The exodus from futures markets, a shortage of credit for companies trading in agricultural commodities and the damage to consumer wealth have all added to the downward pressure on commodity prices.”

Mr Cordingley added that, while all agricultural commodities would be affected, the commodities most likely to be impacted are those that are seen as discretionary spending such as natural fibres, wine and even dairy. “Particularly in developing nations dairy is still considered a discretionary purchase so prices are likely to drop along with the reduced consumption of milk, cheese and yoghurts,” he said.