Was 2012 worse than 2009?

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They were both terrible years — 2009 and 2012. Is there any way to say one was worse than the other?

It depends on who you talk to. For Jim Ahlem, dairy producer from Hilmar, Calif., 2012 was worse. It’s difficult to compare, he says, because 2009 brought low milk prices and 2012 brought high feed costs. “They both were horrible years,” he acknowledges, but 2012 was “probably a little worse because of the financial weakness people are in.” Certainly, a lot of producers who used up equity in 2009 didn’t have enough time to recover when 2012 came around. “The feed cost is so much higher than it was in 2009,” he adds.

For Ahlem, that is huge. He is able to grow two-thirds of his own corn silage, but everything else (concentrates and hay) must be purchased.

Weather played a role

The success one had in growing feed — influenced by the weather — made a critical difference.

Ken Nobis, who runs a 1,050-cow operation in St. Johns, Mich., was one of the fortunate ones.

“We had very few dairy producers in my organization (Michigan Milk Producers Association) who suffered severely in the drought,” Nobis says. “Most of our producers raise their feed.”

And, timely rains in late July and early August allowed those producers to get the crops they needed. Between July 26 and Aug. 10, many dairy regions in Michigan got 5 to 6 inches of rain, he says. Basically, the areas north of Lansing got enough rain to get adequate, good or even excellent crops.

“I didn’t hear many complaints from our producers that they didn’t produce” the feed they needed, Nobis adds.

Therefore, 2009 was much worse, Nobis says. “The squeeze was a lot tighter.”

It could have gone either way

For Joe Wright, dairy producer from Avon Park, Fla., the squeeze could have been tighter this year than in 2009 if he had not switched from a confinement free-stall operation to a 1,200-cow low-input modified grazing operation.

“If I had continued the way it was before, I don’t know if we’d still be in business,” he said somewhat jokingly, but perhaps with an element of truth to it.

2012 was so much easier than 2009, he adds, because he didn’t have the same feed-cost exposure.

But for other farmers in Florida, 2012 may have proven worse. Many must purchase their concentrates and, as Wright points out, “when you are dealing with soybeans and corn, you probably can’t find a more expensive place.” For one reason, there are many competing uses for the land in Florida, favoring alternatives such as winter vegetables and citrus over corn.

“We definitely have high-priced feed,” says Wright, who serves as president of the Southeast Milk dairy cooperative.

Still some optimism

For Ahlem, the producer from California who believes this year was worse than 2009, there is still an element of optimism.

“For the future, I still feel pretty positive,” he says. He bases that optimism on the progress the dairy industry has made in exporting more of its product overseas, as well as industry recognition of animal-welfare issues and its proactive stance on some of those issues, such as tail-docking. (For more information on exports, see the sidebar above.)

 

In a bad year, there was one bright spot

Dairy exports are on a record-setting pace.

During the first nine months of this year, dairy exports accounted for 13.6 percent of U.S. milk production (on a milk-solids basis). And the final year-end tally should be close to that figure, says Alan Levitt, vice president of communications at the U.S. Dairy Export Council.

The previous record was 13.3 percent in 2011.

This year’s growth was spurred, in part, by healthy increases in the export of whey protein concentrate and cheese.

Levitt says he is hopeful that the growth will be maintained in 2013. Certainly, the companies that export U.S. dairy products abroad have seen the value of positive growth and have become more sophisticated in meeting the needs of foreign buyers.


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Joe Dairyman    
USA  |  December, 03, 2012 at 06:25 PM

They were both bad! And 2012 ain't over yet. I would say 2009 was worse. 2012 was not as bad until the feed went costs went up half way through the year. Our good years are Breakeven now!

Lopes    
California  |  December, 04, 2012 at 09:09 AM

2008-2009 and 2012 were both bad 2011 gave some relief but not enough for recovery and 2012 was another killer year. 2012 was a farming feed and beef sales year and maintaing cattle numbers. The calves are coming back from the calf ranches to the farms do to the increased costs. The milk pricing system is unmanagable for the producer and is not sustainable. When the dairy economists get their heads out what they think is job security and change the formulas from end product to Cost of Production pricing the trend will not change. The milk price has to represent the cost of doing business for the producer not only the processor. This won't change until the last drop of milk is produced.

skicker    
CNY  |  December, 04, 2012 at 10:39 AM

Here, 2012 definitely better than 2009. especially if you were able to grow some of your own concentrate. Most dairies here grow forage and some concentrate and crops were adequate, quality good. Despite high input costs, growing vs buying feeds definitely an advantage this year, in the past this has not always been so. Virtually no dairy dispersals listed so far although a few small farms have sold cows while keeping the farms.

Bob Milligan    
St. Paul MN  |  December, 04, 2012 at 01:35 PM

Interesting article and comments! Both were unprofitable years for the dairy enterprise. Because high feed costs are the challenge this year, many dairy crop farms will do well unless they were hit hard by the drought. The crop enterprise will cover the losses in the dairy enterprise. For these farms, the opposite occurred in most years in the $2.00 corn era (mid 80s – mid 2000s) when profits in the dairy enterprise often covered losses in the crop enterprises. It is important to not look at 2009 and 2012 and miss the forest for the trees. 2009 and 2012 hit the dairy enterprise very hard; however, the real issue is that in the last 4-5 we have entered a new era in the dairy industry. We no longer have or will have $2.00 corn. Just as only the crop farms with truly outstanding leadership and management thrived on $2.00 corn, only specialized diaries with truly outstanding leadership and management (and reasonable balance sheets) will thrive, even survive, in this new era.

Joe Dairyman    
USA  |  December, 04, 2012 at 03:35 PM

I agree with lopes the pricing system is broken. USDA comes out with reports that it cost more to produce milk than what we get. The milk price is higher in the east than the west. If you are growing corn for milk production instead of selling it you are leaving money on the table. We all know we are not going back to $2.00 corn. Some one needs to tell the processors we can't produce milk for less than $ 20.00 today either.

Bill Pratt    
Chesapeake, OH  |  December, 04, 2012 at 05:38 PM

I'd have to say that 2009 was worse. But 2012 is the year I will exit the dairy business. After cows being milked on this farm for 93 consecutive years, the barn will be empty on December 15th. I've loved dairying very much over the last 25 years but have come to the conclusion that it really never loved me back. We have used the same double 6 herringbone parlor for 55 years, the same mixer wagon for 16 years, the same skid steer for 11 but our capital cannot be replaced because of suffering through the 18 months of 2009 and the first half of 2010. Fortunately, I've developed a new career in time. Unfortunately, I will always want to be a dairy farmer. I wish the best for all of you that continue to fight to keep your dream alive.

Julio    
ill  |  December, 04, 2012 at 07:07 PM

2012 has been a tougher year because of grain prices. When corn was two bucks a bushel crop farmers didn't make it in the cash market but were helped with subsidies. Dairyman didn't use cost of corn production into the cost to produce a cwt. of milk because you didn't have to and dairymen knew they couldn't grow corn for two bucks. Here in the southern corn belt drought took its toll. Crop insurance covered losses but depending on your insurance coverage some crop producers won't be made whole. If your grow corn as a dairyman do you feed it for cost of production or sell it for market value and what is being subsidize now. Land with $2.00 corn was 2500 to 3500 an acre. Today that land is 7500 to 10000. Agriculture is the next growth industry as told by treasury secretary Timothy Geitner. We'll have to see how much stays on the farm.


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