People aren't drinking as much milk as they used to, and the price has fallen. Yet, there are more dairy cows than ever, all eating feed -- and the price of that keeps rising. The result is that $10 of milk can cost $17 to produce. As Bloomberg News writes,
In California, the largest milk-producing state, dairies
lost $1.07 per 100 pounds in April, compared with profits of
$11.23 in July 2007, based on feed costs and milk prices, USDA
data show. In January, the state was the most unprofitable in at
least six years of record-keeping.
"We're all in survival mode," said John Gailey, 35, the
general manager and a part owner of the 4,000-cow Milky Way
Dairy near Visalia, California ... "I'm surprised we are not hearing
about more people filing for bankruptcy."
It doesn't take an economics degree to know that something has to give.
That something is the cows. To "shift the pain to consumers," the
National
Milk Producers Federation is paying for at least 100,000 dairy cows to
be slaughtered.
The National Milk Producers are counting on this to
make the price of dairy products soar. Even though consumers are
hurting around the country, hopes are to see a "big spike
up" in dairy-product prices in 2010, with record-high prices for butter and cheddar
cheese, and a doubling in the price of milk futures.
The
reason for the overpopulation is that it takes two years for a heifer
to start producing milk, and in 2007, the milk industry couldn't keep up
with demand. Prices were through the roof, and global exports were
at an all-time high. Since then, in addition to a global economic
meltdown, the third-largest milk drinking country -- China -- had a melamine
milk scare that severely hurt sales.
So what happens to 100,000 dead cows? Most will end up on dinner tables. "More
than three fourths of the cows [milk producer] Giacomazzi sold were purchased by
beef processors including Cargill Inc."
So be on the lookout for good deals on steaks.
(Image via Flickr: Karen)
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Its called business people.We dont work for the government so we must remain profitable.Once supply and demand are in check life will return back to normal...
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