Minnesota dairy industry briefing

Minnesota's dairy industry, consisting of over 5,000 farms, contributed several hundred million dollars to the state's economy in 2009. Lately, the industry has been in a tailspin with the wholesale price of milk dropping below $10 a cwt (100 lbs). The low price is especially shocking, after seeing that price top $20 in 2008. More significantly, dairy farmers have seen most of that price drop occur from January to March, allowing for not much time to prepare for such a situation.

To put perspective on this price, on the retail side, a gallon of milk in the store weighs 8.6 lbs and sells for around $3. Those 100 lbs of milk computes to a retail income around $36 for the grocery store. This retail income does not account for profit from other butterfat products, such as ice cream and butter that were removed from the milk during bottling.

According to the 2008 Farm Business Management Analysis, a dairy family spends $12.50 to produce 100 pounds of milk. Furthermore, to pay loans, account for building and machine expenses the break even cost rises to $15.75. If the farmer wants to feed and clothe his/her family the break even price rises to $18.15. With milk currently around $11.50 at the mailbox (wholesale price to producer), it creates a need for even more intensive management than ever. Minnesota's Farm Business Management instructors are actively participating in that process to assist producers in alleviating the cash flow problems that the dairies are experiencing. When a dairy producer knows the above numbers for his/her operation, they can better plan to "weather the storm" of low prices.

If you would like more information, contact a Farm Business Management Instructor in your area or call 1-800-959-6282.