fedgazette

Falling prices depress dairy market

Wisconsin State Roundup

Published April 1, 1991  |  April 1991 issue

The Dairyland state is reeling from the effects of a continuing slump in milk and cheese prices.

In early March, the base price per hundredweight of milk was $10.04, the lowest it's been since 1978 and nearly $5 less than the record peak in December 1989. If the trend continues, it could spell economic disaster for the nation's largest producer of milk and cheese, officials say.

Government dairy price supports don't help much either, says Ed Jesse, chair of Agricultural Economics at the University of Wisconsin-Madison. "While the support price provides a floor or mattress, it's not guaranteed." The current support price per hundredweight is $9.90, but farmers could realize less than that for their milk, Jesse adds.

Every $1 per hundredweight in price equals about $240 million annually to the state's 34,000 dairy farmers, and ultimately to the state's overall economy. And predictions are that if these low prices continue, 4 percent of the state's dairy farmers could be forced out of business this year.

How the dairy industry got into this situation dates back to a 1989 worldwide milk shortage. That shortage fueled overproduction that later led to price declines.

This comes at a time when Wisconsin is losing market share to other regions of the country, notably the Southeast and California. Nonetheless the situation is most critical in the Upper Midwest, Jesse says. While milk production was up in Wisconsin, there were larger than average gains in the West and South, Jesse says, hence less milk has been shipped from Wisconsin.

But Jesse sees some relief in sight for farmers. Sen. Patrick Leahy, D-Vt., has introduced a bill in Congress that asks for a rise in milk prices that would represent an increase of about $1.25 per hundredweight to milk producers. "There's a 50-50 chance it will pass," Jesse predicts.

Kathy Cobb

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