So I take no pleasure in writing about the long stretch of poor milk prices that has forced far too many dairy operations out of business. From 2017 to 2018 alone, 6.5 percent of U.S. dairy farms shut down, according to a U.S. Department of Agriculture report.
So what’s the problem?
The best, most succinct explanation I’ve heard comes from an economist who said simply, “There’s too much milk.” Put differently, supply exceeds demand — and any first-year student of economics knows that’s going to hold down prices.
The supply-demand imbalance reflects, in part, the management skill of U.S. dairy farmers. Thanks to better genetics and improved feed rations, among other things, U.S. dairy cows produced an average of 22,775 pounds in 2018, up from an average 17,763 pounds per cow in 1999.
Dairy farmers are getting even better at what they do — but that’s not altogether a good thing, at least not for their bottom line.
On the demand side, place some of the blame on President Donald Trump’s trade policies. Retaliatory tariffs put on U.S. dairy exports have cut sharply into the amount of U.S. milk sold to foreign consumers, and that works against U.S. milk prices. (Oh, wait, I almost forgot: “Trade wars are good and easy to win.” Sure. And Bigfoot is real and Elvis is alive and well.)
Declining domestic demand affects milk prices, too. Americans drink an average of about 18 gallons of milk annually, down from about 30 gallons of milk annually in the 1970s. That’s partly because of increased options. Americans are still drinking the same amount in beverages as they did in the ’70s, but alternatives — such as energy drinks — are taking away some of milk’s market share.
The nuanced stance on milk among some nutritionists is a factor, too. Consider this statement from the Harvard Medical School website: “Dairy is one of the most controversial food groups. Is it healthy — or a health risk? It really depends on what you need.” That’s certainly not an anti-dairy message, but it’s hardly a glowing endorsement, either
Solutions?
There’s not enough space in this column — maybe not in this entire issue of Agweek — to try to explain America’s milk pricing system. It’s notoriously complex and complicated.
I’ve written many stories about dairy farms and the dairy industry. One of the story packages took first place in the news category of the annual North American Agricultural Journalists’ writing competition. So I’d like to think I know a little about the dairy industry and dairy policy. But fully understanding the latter — no, that’s beyond me. It’s beyond most Americans.
Can something so Byzantine really be in the best interests of consumers and dairy producers? Would simplifying our milk pricing system be useful? I don’t know the answer; I’d appreciate hearing your take.
One thing I am sure of: Rational trade policies would boost dairy exports and help our milk producers. (Unless, of course, you believe that trade wars are good and easy to win. If so, say hello to Bigfoot and Elvis next time you seem them.)
Boosting domestic consumption would help, too. Easier said than done, of course. A lot of smart, talented people are working hard, with limited success, to do so.
If you have thoughts, insights or potential solutions, drop me a line and share them.
In the meantime, there’s too much milk. And until that changes, too many of our nice and skilled dairy farmers will be going out of business.