Dairy Farmers Miss Boom as Feed-Cost Surge Compounds Milk Glut

Nov. 29 (Bloomberg) -- This year’s agriculture boom is a bust for U.S. dairy farmers as surging costs for cattle feed compound a glut of milk products.

While the 27 percent jump in wheat prices and 48 percent gain in cotton may send farm income to a record, dairies will lose money in 2011 for the second time in three years, said Mike Brown, an economist at Glanbia Foods Inc., which processes milk in Idaho and New Mexico. Corn, a feed ingredient, jumped 33 percent in the two months ended Oct. 31, almost three times the gain in wholesale-milk prices. Futures slumped 11 percent.

Dairy farmers expanded herds following the 70 percent jump in prices to a record in 2007, just before the U.S. began its longest recession since before World War II and unemployment rose to the highest level in a quarter century. Weaker demand was compounded by this year’s drought, floods or freezing weather from Canada to Kazakhstan that ruined crops and boosted competition for U.S. grain that dairies require.

“The crop farmers around here have been driving around with new equipment all the time,” said Linnea Kooistra, who owns a 250-cow herd in Woodstock, Illinois, with her husband, Joel. “They’ve been making so much money the last couple of years because of high commodity prices, but for livestock farmers, it’s really been a hard time.”

Farmers lost $2.50 to $4 on average for every 100 pounds (45.4 kilograms) of milk last year, and the deficit may be $1 to $3 in the first half of 2011, said Brown. Glanbia’s three plants in Idaho and a joint venture in New Mexico process a combined 22 million pounds a day and make cheese and whey.

‘Rough Times’