By Arden Tewksbury, Manager
Progressive Agriculture Organization

Many dairy farmers have stated they feel 2015 is a more troublesome year than 2009. It’s very easy to point to figures and agree with the above dairy farmers. In 2009 the average price paid to dairy farmers in Federal Order No. 1 was $13.01 per cwt. This was $5.61 per cwt. less than the average price for 2008.

The average price for the first months of 2015 in Order 1 was $16.86. The first 8 months of 2014 was $24.70. This is a difference of $7.84 per cwt. This clearly shows that comparing the present year with the preceding year, 2015 is a more difficult year for dairy farmers than 2009 by $2.23 per cwt. And this is six years later.

Anyone can play around with figures all you want, but the cold hard facts are: the average dairy farm in Order No. 1 will have approximately $160,000 less to use as compared to last year (2014). These figures cannot be denied. In some parts of the country, these figures will double.

The Economic Research Service said the national average cost of production for 2009 was $22.28 per cwt. Using the ERS figures for the first six months of 2015 and estimating the final six months of 2015, the cost of production for 2015 will probably be around $24 per cwt.

So, the difference in the cost of pro-duction between 2009 and 2015 will be approximately $1.72 per cwt. The $1.72 plus the $2.23 difference in price would seem to mean the total difference is $3.95 per cwt., which means about $160,000 to the average U.S. dairy farmer. The loss is for one year. However, one cannot forget that in 2014 the average price in Order No. 1 was $24.28 per cwt. which is $7.42 per cwt. more than 2015.

I believe that most dairy farmers would say that 2014 was a good year, but the ERS said the national average cost of production was $27.66 per cwt. Why has the cost of production dropped $3.66 per cwt. in one year’s time?

1. The feed cost has gone down some.

2. Some dairy farmers might have pre-paid some 2015 expenses in 2014.

3. However, in our opinion, it’s simple.

When milk prices reach a higher level, then many dairy farmers are apt to spend money, but when prices take a downward swing, then dairy farmers are having a tough time and they will not buy anything extra, and they will have a tough time keeping their heads above water.

The Federal Milk Marketing Improve-ment Act said the national cost of production would become the value of manufactured milk. Let’s use Order No. 1 for an example. Manufacturing price $24, plus $3.25 differential, equals $27.25 for the fluid price (bottled milk).

A Class one price of $27.25 would not require any premiums attached to it using a 35 percent class one utilization and a 65 percent manufactured utilization, the price paid to the average dairy farmer in Order No. 1 would be approximately $24.93. In 2014 the average price was $24.28. Not bad. Do we have any takers?