Dairy Farmers Reel As Raw Milk Prices Plunge

After years of record sales and profits, demand in the dairy industry is way down — and so are the prices farmers can get for their raw milk. That's forcing many to leave the business. Some are being forced to sell their herds.

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The recession has hit the dairy industry hard, and wholesale milk prices are in free fall. Most dairy farmers are now producing at a loss. As NPR's John Burnett reports, some are being forced to sell off their herds.

JOHN BURNETT: The sign in front of the Stephenville Cattle Company in Central Texas has two messages: Thank God for Jesus and Dispersal Heifer Sale. Today is one dairyman's worst dream.

(Soundbite of shouting)

BURNETT: Don Beckendorff stands on the catwalk over the cattle pins with his big sad eyes watching his Jerseys and Holsteins being herded into the auction arena mostly to be sold for hamburger.

Do you recognize them?

Mr. DON BECKENDORFF (Stephenville Cattle Company): Yes, sir. I've seen them twice today.

BURNETT: His wife DeAnne(ph) is next to him, bundled against the chill.

Ms. DEANNE BECKENDORFF: You're up close and personal twice a day, everyday. But you see them more times than some people see their kids.

BURNETT: The twice-a-day milkings are over for good. Don Beckendorff is cashing out, the last of three generations of dairymen. He faced a cascade of problems - drought killed his rye crop that he planned to use for cattle feed. An E. coli outbreak killed 60 of his cows last year. Then the credit crisis hit and bank called in his note on some new cows he bought when times were good. And milk prices tumbled. Dairymen are paid for raw milk per hundred pounds of liquid. Beckendorff got $24 for hundred weight last summer. Last month, it dropped under $17, and this month it fell below $15 per hundred weight.

Mr. BECKENDORFF: Next month, they say we're going to get from 9.90 to 10.60 for our milk. And the break even is somewhere between 16, $17 (unintelligible).

BURNETT: A stout man in a faded plaid shirt, Beckendorff pulls back his cap and scratches his grey hair.

Mr. BECKENDORFF: When milk drops to 9.90, there's going to be - I'm afraid there's going to be a blood bath. I really am.

BURNETT: His 20-year-old son Daniel has had to drop out of diesel mechanic classes to find work. DeAnne plans to go into town to look for a secretarial job. Don isn't sure what he's going to do.

Mr. BECKENDORFF: When the Lord closes one door, he opens another one. And as far as our family, we just have to see what he has in store for us. Now is the time to trust.

BURNETT: Milk prices were strong from 2004 to 2008, and milking cow herds across the nation grew. But since then, world dairy prices have dropped 28 percent. Demand is down for dairy products, from milk to cheese pizza. Exports are way down, too. For instance, the melamine milk poisoning crisis in China reduced demand in that huge market. Steve Larson, managing editor of Hoards' Dairyman Magazine, says this is the worst downturn he's seen in nearly 40 years covering the dairy industry.

Mr. STEVE LARSON (Managing Editor, Hoard's Dairyman): We're somewhere in the range of 58 or 59,000 dairy farms, and we expect a good many of them to go out of business.

BURNETT: Back at the Auction Barn, sitting in the cafe, dairyman Bill Barton says between bites of a cheeseburger, there's just too much milk out there.

Mr. BILL BARTON (Dairyman): The East Coast is full of milk, West Coast is full of milk. We're just drowning in it. Same thing wrong with GM Motors. Too many cars. Don't take a rocket scientist to see you're all broke if you can't sell your product.

BURNETT: One would hope that falling prices for raw milk would translate it to cheaper milk at the supermarket, but they haven't. Retail milk prices tracked by the USDA have slid only slightly in recent months. Other players in the dairy supply change, from milk processors to grocers, are not hurting as acutely as the dairymen.

Unidentified Man: (unintelligible)

BURNETT: Like Don and DeAnne Beckendorff, look for more American dairy farmers to watch their life's work end up at the auction barn.

Unidentified Man: (unintelligible), 50 here, (unintelligible)…

BURNETT: John Burnett, NPR News, Austin.

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