Minn. Loses Hundreds of Dairy Cows to Economy

November 6, 2010
By Patrick B. Anderson, Winona Daily News

Steve Schell struggled at first with the idea of dumping his 350-cow dairy herd. The 56-year-old farmer grew up milking. Morning chores and work-filled weekends were a part of his childhood. But his costs rose last year as his income dropped.

Photo: Winona County had the second highest number of dairy cattle in Minnesota in 2009, after Stearns County, according to state data. (File)

When he noticed some of the equipment in his parlor needed replacing, Schell's decision was made.

"The very first week was the hardest," he said. "It must have been something that had been bred into me. I was used to it."

Schell isn't the only area farmer abandoning his dairy cattle. A rocky market has forced sellouts or retirements of at least a dozen 100- to 250-cow dairy herds in the Winona County area in the past six months, said Tom Anderson, a farm business management instructor for Riverland Community College in Plainview, Minn.

More than 100 dairy herds across the state folded between January and October of this year, according to the Minnesota Department of Agriculture. The number of herds in the county fell from 217 to 201 during the same nine-month stretch.

Winona County had the second highest number of dairy cattle in Minnesota in 2009, after Stearns County, according to state data. The exodus of nearly 1,500 cows from one of the state's most important dairy counties has an economic impact of $17.5 million on local communities, Anderson said.

Last year's low milk prices hit farmers hard and the number of herd reductions that followed is abnormal considering the short time span, Anderson said.

"We've seen more in southeast Minnesota in the last six months than we have before," he said. "I can't remember a time when we've seen that many."

Dwindling dairy farms are probably the result of the economic downturn, said Neil Broadwater, a dairy specialist and professor for the University of Minnesota's extension office in Rochester.

International milk sales dropped by nearly 40 percent in 2009 from the year before, and the market became saturated, he said.

Nationally, the average base price of milk dropped 65 percent, which transfers to an estimated loss of more than $30 million in combined annual returns for the county's dairy farmers. Prices sank so low that, for the first time in more than 50 years, the average dairy herd in Minnesota lost money.

"It has put many dairy farmers in a financially

difficult situation," Broadwater said. "The dairy industry has been struggling."

Milk prices have since stabilized, but the rising cost of feed is hurting recovery, said Jack LaValla, another farm business management instructor for Riverland.

Farmers should be able to buy three pounds of feed for the value of one pound of whole milk to make a decent profit, according to a ratio developed by University of Wisconsin-Madison researchers.

But the balance between feed cost and income has lingered below the optimum range for three years. The national ratio averaged 2.24 in September. The same ratio fluctuated between 1.45 and 2.42 in 2009.

Some farmers may have the fiscal strength to tough it out, but many start to question their livelihood when making milk costs more money that it brings in, LaValla said.

"I think everybody in the dairy industry has felt it," he said. "I don't care if you're a big farmer or a small farmer."

Schell never doubted the stability of his dairy operation until last year when the dismal market made it impossible to justify extra costs.

"We can't afford to buy corn and run it through a milk cow," he said. "Even just your plain old diesel fuel adds up."

A farmer can dispose of a herd by selling it off to other farmers -- bit by bit if necessary -- or by selling the entire herd to a group of co-ops that combine funds to pay for mass slaughter. Cooperatives Working Together holds auctions once or twice a year, when it has enough money to fund the buyouts.

Similar auctions held across the country help reduce overall milk production, tipping the supply-and-demand scale back in the dairy farmer's favor, Broadwater said.

Schell was one of four Winona County farmers who retired herds in the most recent co-op auction.

He still has a pretty big workload, but selling his dairy herd helped him pay off some of his extensive debts and will eventually save him a giant chunk of money on his electricity bills, he said.

Schell wants to focus on raising milk-producing cows for sale to other farmers. The move will help him stay close to the milk industry -- an industry he grew up in and still feels connected to.

He even considered waiting out the slump.

"I'm sure I could have," he said. "But my parlor was just plain shot."