The state of the dairy business-Is there a solution for local farmers?

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March 21, 2013

The state of the dairy business-Is there a solution for local farmers?

Joyce Marie Taylor Suwannee Democrat The Suwannee Democrat Thu Mar 21, 2013, 08:05 AM EDT

Mayo — Several Lafayette County residents recently got together to discuss the future of dairy farming and the outlook didn’t look promising.

“I hate to keep talking gloom and doom and dark clouds, but the seriousness of our area, most all of the places of business that I’m familiar with are struggling,” said John Hewett.

With higher costs on so many things, Hewett said, even in his gas business they’re trying to make cutbacks wherever possible. The dairy industry, he said, has been in a depression.

“When you’re paying $340 a ton for feed there’s no way to make a dollar,” said Hewett. “We’ve had a number of dairies that’s already gone out of business.”

A lot of the dairy farmers, he said, were in a position where they could sell out and retire.

“A lot of people don’t have that option because they have such a debt,” he said.

Local dairy farmer Eddie Fredriksson said that between 2004-07 his feed costs averaged about 45 to 49 percent of gross.

“In ’09 my feed costs were 73 percent of gross,” said Fredriksson. “I guarantee you, I didn’t have that kind of margin to play with. We had good years in ’05, ’06 and ’07 and then our country’s lag on the energy policies drove ethanol production and took corn and invariably everything else, because everything on the commodity market follows corn. So it took that out of our reach.”

Fredriksson said he’s the one who owns the cows and he has to feed them, as well as take care of them. The business model he used, that goes back long before he ever started his dairy business, he said, was based on feed being between 42-48 percent of gross.

“I can deal with those numbers,” he said.

Feed costs over the last four years, he added, has varied between 64-73 percent of gross.

“Feed is my biggest single item of expense and I’ve got no control over it,” he said.

Fredriksson said he doesn’t understand the rationale of using corn as a fuel.

“All they’ve done, the richest country in the world, is taken food out of people’s mouths,” he said. “This is the most irresponsible thing that a super power has ever done in the history of the world, as far as I’m concerned. You’ve got people in this country and others that are starving to death and they’re running corn to your gas.”

Animal agriculture, he said, is going to morph into something that nobody really wants before it’s over with.

“I’m not smart enough to out-manage that,” Fredriksson said. “I can’t do it.”

Rich Wisdahl interjected that it was interesting retrospect, considering all the American public was told at the time that the use of corn was an attempt to get away from the dependence on oil. Fredriksson said it hasn’t helped at all.

“It was nothing, but that a handful of people got filthy rich,” Hewett said. “With corn at $7 a bushel, a farmer can’t feed his animals. Not at that price.”

Fredriksson said he is in a unique situation where he has to pay freight both ways on everything he buys and sells.

“Go back to ’04 and ’05 when a gallon of diesel fuel was $1.60-$1.65,” said Fredriksson. “Then in 2012 a gallon of diesel is $4.03. I’m paying freight on everything I buy or sell and I get it passed through to me on every tangible supply that I use. So, not only did my feed line go up to an astronomical percentage of my gross, but I’m getting dinged on fuel every time I take a breath. The energy situation in this country is what put me in hock on the feed line and it’s doing it to me on the other side on the freight line.”

Wisdahl asked Fredriksson what he thought the solution was to the dilemma.

“Drill, baby, drill,” Fredriksson said.

Hewett said natural gas was the answer.

The feed crisis, everyone agreed, was also affecting the price of beef, which is at an all time high right now. Hewett said over a million cattle were slaughtered last year because the farmers couldn’t afford to feed them.

“They had to get rid of them, so we’ve got a shortage right now,” said Hewett.

Fredriksson said it’s going to take a while for beef prices to come back down because of the time it takes for mature cows to start having calves. There’s no way to speed it up, he added.

“You start depressing that herd and it takes time and generations to get that back,” Fredriksson said.

“What goes on is we live by the golden rule,” said Hewett. “Whoever has the gold does the ruling. So they pay the lobbyists to speak for them, whether it’s a corporation or an individual. You take a farmer out there and that’s a drop in the bucket.”

Hewett went on to say that there aren’t enough farmers with enough votes or enough money to turn things around, especially when they’re up against the rich oil companies who can turn $1 billion into $10 billion.

“If you try to turn a dollar into two dollars, you’re lucky,” said Hewett.

Fredriksson said the culture of America has changed, especially in Washington, D.C.

“Big money is what sets policy,” Fredriksson said. “Once you change a culture it’s almost like a permanent thing.”

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