When I became editor of Dairy Herd Management in 1992, the all-milk price was $13.50 per hundredweight and the corn price fluctuated between $2 and $2.50 per bushel. Eighteen years later, the all-milk price has improved, but still drops below $13.50 on occasion. It was below $13.50 for most of 2009. Meanwhile, the corn price has doubled or even tripled.
That, in a nutshell, describes the plight of many dairy farmers today.
It was a fundamental message delivered on Dec. 9 at a Professional Dairy Producers of Wisconsin seminar by Dan Basse, president of the AgResource Company, a domestic and international agricultural research firm.
The world has certainly changed since 1992. Back then, U.S. agriculture wasn’t buffeted as much by world events as it is today. And, ethanol was but a glimmer in the eyes of corn growers and corn promotion boards.
Ethanol, China and Russia are now among the main drivers of rising corn prices in the United States. Ethanol production consumes about 34 percent of the U.S. corn crop, which puts price pressure on the portion used for feeding livestock. China and Russia are rapidly expanding their livestock production, which means they will need to start buying grain from other countries, including the United States.
Basse says next year’s corn crop will need to be around 14 billion bushels to satisfy increased demand. That is an ambitious goal, considering this year’s crop came in at 12.5 billion bushels.
Demand for corn is insatiable, and the corn price may reach a new plateau after being at $2 to $2.50 all those years. Indeed, $6 to $7 corn may become the “new normal.”
Dairy farmers in grain-deficit areas like California are the hardest hit. According to Basse, California dairy farmers have been unprofitable since 2008.
I found it interesting to learn one of the reasons why ethanol has flourished so much, and gained government subsidies, is because the ethanol industry has such a strong lobbying presence in Washington, D.C. Indeed, “ethanol has the strongest lobby in agriculture,” Basse said.
That lobbying presence made itself felt once again in December, when the U.S. Congress passed (and President Obama signed) the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which extended the ethanol subsidy for another year.
It would be interesting to see if ethanol subsidies could pass on their own merit without being part of a bigger bill. My guess is they wouldn’t. Many people would see them as “pork-barrel” spending — and, thankfully, Congress is finally getting serious about putting an end to that kind of waste.
If ethanol is such a good idea, why can’t the industry stand on its own rather than being subsidized?
Six-dollar corn is hurting too many dairy farmers.
It takes me back, again, to 1992 when I started this job. I remember meeting with a group of 50 or so dairy farmers near the town of Nelson, Wis., one morning and they kept reminding me that the milk price had not increased in years, while all of their other expenses had increased by a significant amount. Yet, $2 corn was taken for granted at the time and was the least of their concerns.
How times have changed.