Does it become bottled milk? Class 1 priceYogurt? Class 2 priceCheddar? Price of class 3Butter or powdered milk? Class 4Traditionally, class 1 receives the highest price.
Do you know where your milk comes from?Photograph: Sue Ogrocki/AP Photo
There are 11 FMMOs that divide the country. FMMOs in Florida, the Southeast and Appalachia focus primarily on Class 1, or bottled, milk. The other FMMOs, such as those in the Upper Midwest and Pacific Northwest, have more manufactured products, such as cheese and butter.
Over the past several decades, farmers have generally received the minimum price. Improvements in milk quality, production, transportation, refrigeration, and processing have resulted in larger quantities of milk, longer shelf life, and greater accessibility to products throughout the United States. Increased supply has reduced competition among processing plants and lowered overall prices.
Along with these improvements in production came rising production costssuch as livestock feed, farm labor, veterinary care, fuel, and equipment costs.
University of Tennessee researchers in 2022 compared the price Received by milk in all regions against the primary costs of production:feed and labor. The results show why farms are struggling.
From 2005 to 2020, milk sales revenue per 100 pounds of milk produced ranged from $11.54 to $29.80, with an average price of $18.57. During that same period, total costs to produce 100 pounds of milk ranged from $11.27 to $43.88, with an average cost of $25.80.
On average, that meant a single cow producing 24,000 pounds of milk generated about $4,457, but that milk cost $6,192 to produce, which meant a loss for the dairy farmer.
The most efficient farms can reduce their production costs by improving cow health, reproductive performance and feed to milk conversion ratiosLarger farms or groups of farmers (cooperatives such as Dairy Farmers of America) can also take advantage of forward grain contracting and future milk prices. Investments in precision technologies, such as robotic milking systems, rotary parlors, and portable reproductive and health technologies, can help reduce labor costs on farms.
Regardless of size, surviving in the dairy industry requires passion, dedication and careful business management.
Some regions have suffered greater losses than others, largely due to the way farmers are paid, i.e. milk grades and rising production costs in their area. Some insurance programs and coverage that can help farmers offset high production costs or unexpected price drops. If farmers take advantage of them, data shows that they can It works as a safety netbut they do not address the underlying problem that costs exceed revenues.
Passing the torch to future farmers
Why do some dairy farmers continue to persist, despite low milk prices and high production costs?
For many producers, the answer is that it is a family business and part of their heritage. Ninety-seven percent of dairy farms in the United States are family-owned and operated.