Processors: Work Together
(Continued from Page A 1)
taller, Wal-Mart, had 14 percent
overall market share. Along with
Costco at 5 percent, both retailers
command the time and attention
of processors and bankers.
“Wal-Mart’s philosophy is to
get you in the store and sell you
something 2.3 times per week,”
noted Barr. The philosophy
draws tight margins on a lot of
the products sold, including food
at the some of the large “super
centers” around the country.
Wal-Mart, like other giant re
tailers, seeks low price strategies
from all suppliers, including pro
cessors.
For dairy producers, 15
months of low milk prices is tak
ing its toll, according to Robert
Yonkers, chief economist. Inter
national Dairy Foods Association
in Washington, D.C.
For many, this downturn in
prices to below-support levels is
the longest in memory.
Production is overtaking de
mand, with an increasing milk
Ag loan officers inspect the pastures from the feed
walkway at the John Rodgers Plum Bottom Farm near
Belleville on Tuesday.
supply “and very lackluster de
mand for dairy products,” Yon
kers noted.
Yonkers pointed out that, since
1988, a recurring theme for the
dairy industry is milk price vola
tility, with dramatic highs and
lows. There have been some
“high highs, and low lows” since
1992, noted Yonkers, with 1998,
1999, and 2001 providing the
highest milk prices on record fol
lowed by lows. But normal recov
ery occurred a short time after
not the case this time, however.
Demand is remaining steady,
at 1 percent per year, while the
milk output per cow increases 2
percent. Yet per-capita consump
tion of milk products has gone
downward since 2002.
“We have more milk than we
can find a home for,” noted Yon
kers.
Part of the problem, in assess
ing numbers, is the structure of
USDA reporting. Yonkers noted
that USDA denotes a farm oper
ation as simply a farm with one
About 80 ag loan officers from banks and credit institutions visited the Lynn Neer
farm Tuesday near Belleville. Neer, in center with cap, spoke about his custom heifer
operation. All photos by Andy Andrews, editor
or more milk cows. But many of
those types of farms have nothing
at all do to with actually selling
milk.
Yonkers relies on private sur
veys that indicate more clear
numbers.
The interesting thing, Yonkers
noted, is that about 48 percent of
the farms in the country have less
than 50 cows (about 44,205
farms) with a milk output per
cow of 14,400 pounds. On the
other hand, farms that make up
2,000 or more cows number 380,
about 0.4 percent of all dairies,
and produce 25.5 billion pounds
of milk. They are producing
“twice the amounts of milk as the
smallest dairies,” or 15 percent of
the U.S. total at 21,000 pounds of
milk per cow.
The bigger farms are “doing
more,” according to the econo
mist, and are able to manage
price downturns a lot more stead
ily.
i Waste • Better Feed • Lower Cost
Yonkers noted that in 2001,5.2
percent of U.S. milk production
was imported. Exports made up
5.4 percent of U.S. milk produc
tion.
Contrary to some reports, “im
ports are not ruining our dairy
markets,” said Yonkers. The
milk protein concentrates, or
MFCs, coming from Ireland,
New Zealand, and Australia are
not having an impact especial
ly in light of the fact that the U.S.
exports a lot of whey protein con
centrates to the Pacific Rim.
Right now, an issue that re
mains “front and center,” noted
Barr with the farm cooperatives,
is “lack of export demand. There
is nothing going on in the export
markets.”
Five to six years ago, globaliza
tion of markets was looked at as
a “panacea” for agriculture. But
there is no growth engine outside
the U.S., Barr said.
“The Japanese,” noted the
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economist, “have not solved their
problems with economic growth.”
For ag, the fact there is no big
inventories of globally of grains is
positive news.
For ag products, the U.S. is be
ginning to feel competition from
the former soviet Union, especial
ly on the wheat supply side. And
the U.S. poultry industry exports
20 percent of what it produces
while markets for that poultry
continue to tighten
Dairy remains an industry
with “no discipline whatsoever,”
said Barr, in terms of matching
production with demand. The
only thing driving profitability at
this time is simply controlling
costs.
U.S. economic growth, as a
whole, should remain modest for
2004, in the 3-4 percent range.
There will be “rescaling of expec
tations,” especially at the stock
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