US dairy farmers face extreme hardship despite agriculture boom

DAIRY farmers in the US are facing extreme difficulty making ends meet, despite a boom in other areas of American farming, according to one Glanbia expert.

US-based Glanbia Foods economist Mike Brown said the boom being experienced by many US farmers contains little cheer for dairy farmers. He cites surging costs for cattle feed and a glut of new milk products forcing down dairy returns.

“We don’t think some dairymen will be able to survive,” Mike Brown said from his office in Evanston, Illinois.

While the 27% jump in wheat prices and a 48% gain in cotton has sent general US farm income to a record, dairies will lose money in 2011 for the second time in three years, said Mr Brown.

US dairy farmers lost €2 to €3 on average for every 45.4kg of milk last year, and the deficit may be €0.80 to €2.30 in the first half of 2011, he added.

Glanbia Foods processes milk in Idaho and New Mexico. Glanbia’s three plants in Idaho and a joint venture in New Mexico process a combined 10 million kilos a day and make cheese and whey.

Meanwhile, Rabobank analyst Hayley Moynihan believes that the American dairy industry is pinning its hopes on rising exports to China, Russia and India.

She says that potential growth in these markets could be aided by slumps in the US dollar.

Relative to currencies in these target markets, the dollar has slumped 8.5% in the third quarter, the most in eight years, notes Moynihan, a New Zealand-based senior analyst with agriculture lender Rabobank International.

Ms Moynihan said: “A weaker dollar makes exporting more attractive from a US perspective. There are attractive global prices for dairy commodities, in comparison to domestic US market returns, due to good demand for dairy products from developing countries.”

US President Barack Obama said he is delighted with the performance of US agriculture in general. The industry has hugely boosted his stated goal of doubling overseas sales of US goods by 2015.

American industry analysts predict that farm exports from the US, the world’s largest grain shipper, may top the 2008 record of $115.3bn in 2011.

There are also positive signs for the US dairy sector. The Virginia-based US Dairy Export Council Dairy estimates exports totalled $2.751bn (€2.12bn) in the first nine months of 2010, which is on pace to break the sector’s record performance in 2008. The domestic US dairy market has become oversupplied with people who were attracted by profits being made a few years back.

The National Milk Producers Federation spent €185m culling 231,000 cows in the past two years. The industry-funded group stopped subsidising herd cuts last month in favour of promoting exports. a