By MICHELE F. MIHALJEVICH

Indiana Correspondent

INDIANAPOLIS, Ind. — Indiana has lost more than two dozen Grade A dairy herds since the first of the year and several hundred over the past 20 years.

As of May 1, the state had 970 Grade A herds, down from 997 on Jan. 1, according to the Indiana State Board of Animal Health (BOAH). During that time, 33 herds were lost and six were added. In 1997, Indiana had 1,875 herds, and in 2007, only 1,381, BOAH stated.

The number of Grade B, or manufacturing, herds has also declined. As of May 1, there were 41, unchanged since Jan. 1, but down from 759 in 1998 and 399 in 2005. Manufacturing grade refers to milk used for cultured products such as cheese and yogurt.

“I don’t think these trends are unusual,” noted John Wilson, senior vice president and chief fluid marketing officer for Dairy Farmers of America. “We’ve gone through numerous cycles over the past 30 years. The long-term trend is toward fewer dairy farmers and the ones that remain typically get bigger.

“Dairy farmers are very resilient; they can hang in there with the best of them. In the last four years, things haven’t been great for the industry.”

The price dairy farmers get for their milk is a key reason for fewer herds, said Michael M. Schutz, a professor of animal sciences at Purdue University. Producers who receive $16-$17 per cwt. aren’t making any money, he said.

“With low prices, some farmers are looking at losing equity in their operations,” Schutz explained. “Co-ops and manufacturers are seeing lower milk prices because of the difficulty in marketing milk. There’s more supply than demand right now. For the immediate-term, they’re producing too much milk.”

Low milk prices have been caused by several factors, including fewer exports and a large supply of milk around the world, he said. Fluid milk consumption per capita is down in the United States. “There have been changes in consumer preferences,” Schutz noted. “People don’t eat breakfast cereal as much as they used to. Milk was a companion to that.”

The oversupply of milk tends to make buyers and co-ops more selective in who they buy their milk from, he said. That may put pressure on smaller farms that haven’t kept up with standards set by buyers.

Fewer herds don’t necessarily mean fewer dairy cows. Last year, Indiana had 185,000 milk cows, according to the UDSA’s National Agricultural Statistics Service. Five years before, there were 175,000.

“While we’ve lost a lot of operations, cow numbers have gone up,” Schutz said. “We’re losing smaller farms. Larger farms have been able to respond to changing cow numbers.”

When a herd sells, about 25 percent of the cows go to slaughter and about 75 percent go to another producer’s herd, Wilson said. “In the next three to five years, we’re seeing a long enough trend (in reduction of dairy herds) that it’s probably not likely to turn around. We’ll see fewer dairy farms.

“In cow numbers, we expect a slight reduction, as several farms are selling out. It’s unfortunate we have people leaving the business, but we’re not seeing cows leaving the business,” he noted.

Milk prices were last good in 2014 and have been mediocre since, he said. A change in the amount of milk produced in the European Union (EU) has added to the problem.

The EU, collectively the biggest supplier of milk in the world, had a quota limiting production from the early 1980s until 2015, he said. European dairy farmers immediately increased milk supplies once the quota was removed. Also, Russia imposed an embargo on several European products, including cheese.

“The increased milk produced in Europe was put into milk powder,” Wilson explained. “There are 800 million pounds of milk powder in storage in Europe. That’s created a cloud on the entire industry.”

In other parts of the world, milk sources come from reconstituted powder. Milk powder is also used as an ingredient in a variety of foods. The milk powder stored in Europe is getting old enough that it may have to be converted to animal feed, Wilson said.

Dairy supplies in the United States have grown but, “it’s not out of control,” he pointed out. “Our national supply and demand is not that far out of whack. I see the problem starting in Europe, more than too much milk in the United States.”

R.D. Schrader, president of Columbia City, Ind.-based Schrader Real Estate & Auction Co., has seen some dairy farmers sell off their herds and others, their entire operations.

“It’s a difficult situation they’re facing,” he explained. “For a lot of them, it’s how they’ve made a living for their entire careers. They get to the point where they can’t continue through the tough times. There’s a higher level of trouble in the dairy sector now than in a lot of years.”

All sizes of dairies can be impacted by lower prices, Schrader said. He hasn’t seen much dairy equipment come onto the market, but there has been some interest in land and buildings from beef cattle producers and smaller hobby farmers.