WASHINGTON – Prices for Maryland milk have fallen more than 25 percent over the last year, strapping state dairy farmers who were already struggling to recover from two years of drought.
State agriculture officials said prices fell from $17.90 per hundred pounds in January 1999 to $13 last month, with the sharpest drop — a 21.8 percent decrease — coming since October.
The problem, farmers and officials agree, is that dairy farmers are producing so much milk that the surplus is driving prices down.
“If we would all make a little less milk, we’d all make a lot more money,” said Craig Leggett, a dairy farmer near Hagerstown.
It’s basic supply and demand, said Kevin McNew, an agricultural economist at the University of Maryland.
“We’ve had several years in a row of real high prices. When prices are high, people start to expand their production. They start adding more cows,” and giving them higher-grade feed to make them produce more milk, he said.
The drop in prices is galvanizing some in Maryland to renew the push to join the Northeast Dairy Compact, an effort that was blocked last year by Congress.
The compact establishes a price for fluid milk for New England producers above the federally set minimum price. The compact price takes into account the higher cost of production in the region.
McNew said part of the problem for East Coast farmers is that large dairies with thousands of cows are springing up in the West, particularly in California, which has gained about 4,000 cows a month for the last two years. Most Maryland dairy farms have between 50 and 99 cows, according to the Maryland Department of Agriculture.
Because production costs are cheaper in the West, those farmers “are probably getting by OK,” McNew said, while farmers in the Northeast, including Maryland, “are getting creamed.”
Consumer groups have questioned the expansion of the compact, saying it artificially inflates milk prices and hurts low-income families who can afford it least.
But supporters say the compact is not license to unreasonably jack up the price of milk. The compact’s value is that it keeps the milk supply down while keeping farmers in business, said Myron Wilhide, president of the Maryland Dairy Industry.
“Consumers, processors and producers sit down and say we need this price. If it’s too high, someone’s going to increase production,” which will drive prices back down, Wilhide said.
But while it is relatively easy to increase production when prices are high, it is not so easy to cut back when the market goes sour, said Chuck Fry, a fourth-generation farmer in Tuscarora with 120 milk-producing cows.
“The only way we can slow production is to cut back on cow numbers,” said Fry, who has five employees to work a dairy herd, raise turkeys and grow corn, soybeans, wheat, barley, alfalfa and orchard grass.
“We’d have to lay off an employee, our buying power would go down, less money would go through the banking system,” he said.
But Leggett said that cutting back production is as simple as feeding cows less, saving farmers the cost of feed in the deal.
Leggett, who works on the side as a dairy nutrition consultant, is convinced that the best thing for farmers and for cows is to cut back on feed. If each cow was fed five pounds less grain per day, “that’s at least five pounds less milk.
“In two days’ time we’d have $25” prices, he said, and cows would have longer productive lives.
In October, Maryland farmers were getting $16.60 per hundred pounds of milk, according to figures from the U.S. Department of Agriculture. That was down to $13 last month, and McNew said it may be months before an upturn.
“I think we need to rethink farm policy,” he said. “If the motive is to save the family farm, [we need] some sort of income support directly targeted at small family-type farms.”