Another 87,000 cows to slaughter; will it help?

The recession-battered dairy industry will likely send another 87,000 milk cows to slaughter, but producers are wondering whether it will make much difference.

Cooperatives Working together, a national organization of producers, announced Wednesday that the cows will be removed as part of its third herd retirement program in the last nine months.

Farmers will be notified by Aug. 31 whether their bids were accepted. After that, they have 15 days to get rid of the cows.

The last round, which finished in July, removed 101,000 cows.

That brings the total amount of milk reduced to about 4.8 billion pounds since December 2008.

But with national production close 200 billion pounds, local dairy farmer Joaquin Contente wonders how much impact it will really have.

The rest of Kings County’s dairy industry is wondering the same thing.

Dairy has been the top agricultural industry in Kings County for several years running now, with annual production soaring to nearly $700 million in 2007.

But the industry has since been slammed by the recession, the financial crisis, falling overseas demand and consumers wary of spending money to eat out.

The federal government has recently taken several steps to try to keep dairy farmer afloat. Last week, Agriculture Secretary Tom Vilsack announced that USDA will temporarily raise the support price for cheese and nonfat dry milk.

The support price program is designed to provide a price floor when the bottom falls out of the market. Producers had been complaining that it wasn’t high enough to matter.

Jamie Bledsoe, a Riverdale dairyman, thinks Vilsack’s announcement will help a little, possibly even boosting the price to $10.58 per hundred pounds of milk.

Dairymen are paid by the hundredweight, as it is called, a price that is determined by the Chicago Mercantile Exchange and has little to do with the price consumers pay for a gallon of milk at the grocery store.

Instead, the hundredweight price is tied much more strongly to what happens in the cheese market, where the industry relies on food service and restaurant sales rather than on people buying liquid milk.

Bledsoe predicts that farmers will do no better than a break-even basis for the rest of 2009 and all of 2010, returning to some kind of profitability only in 2011.

Some believe that the bottom has been reached.

“I’m astounded at how many people applied (for herd retirement). It’s a clear indication how desperate things are out on the dairy,” said Bill Van Dam, CEO of the Alliance of Western Milk Producers.

The combination of the latest herd reduction and Vilsack’s price support boost should start turning things around, Van Dam indicated.

After Vilsack made the announcement, the price of cheese shot up 6 cents on the CME, which for dairymen translates into a 60 cent jump in the per hundredweight price, Contente said.

The price has since dropped slightly.

The eventual benefit of the temporary price support increase, which runs through Oct. 31, could be as much as a $1.50 jump in the hundredweight price, according to Van Dam.

The likely effect, however, won’t be felt by local dairies until September at the latest, he said.

But it is still costing farmers more to make the milk than what they receive for it.

The debt dairymen have racked up in the last nine months trying to stay afloat has destroyed equity built up over the last 10 to 15 years, he said.

The industry still hasn’t brought supply in line with demand, Bledsoe said, and he’s not sure that all of Washington’s actions are going to accomplish that.

“If things don’t change long term, our business might not be a bankable business,” he said.

Bledsoe predicted that August would be his worst month yet.

“I don’t know what else Washington can do,” he said.

The reporter can be reached at 583-2432.