Trade wars and high global supplies decimated prices for Washington dairies over the past two years, but demand remains high and prices recently have begun to surge along with hopes for the state’s third most valuable farm product.
While farmers have struggled against the ever-changing market forces, consumers have benefited through lower prices and the introduction of new dairy-based products tailored for families who want more choices.
While milk consumption numbers decline, Americans are buying more dairy-based products per capita than they have since 1962, said Kimmi Devaney, spokeswoman for Dairy Farmers of Washington.
“Our industry is definitely evolving,” Devaney said. Consumers “are eating more on the go and more in restaurants and not as much at home with a gallon jug at the kitchen table. Dairy companies are taking that into consideration with more single-serve milk, cheese and yogurt products to appeal to what works best for consumers.”
The negative market pressures continue to force out small dairies in the state, as milk prices had fallen below the cost of production, she said. Unlike wheat and corn that is sold by the bushel, milk is sold by the 100-pound unit.
The price for 100 pounds of milk had fallen to about $14 between 2016 and 2018 largely because of increased global supplies, said Ken Bailey, the leader of economic planning and analysis for Seattle-based Darigold Inc.
“Canada and the (European Union) had (dairy production) growth rates well ahead of ours,” Bailey said. “That supply put downward pressure on prices. It’s been tough for farmers.”
As a result of the low prices, many small farmers pulled the plug, Devaney said. In 2014, Washington had about 600 dairies. Now, only about 350 continue to operate.
“Like any business owner, when you are consistently losing money for that long, it’s really hard to stay in business,” she said.
The average age of farmers in the state is almost retirement age for other careers, Devaney said.
“Several farmers don’t have the next generation that is interested in coming back,” she said, or the farmers “don’t have anybody to leave them to.”
While the number of dairies has continued to decline, the number of milk cows has increased at the larger operations. In 2008, Washington had about 244,000 milk cows. As of 2018, it had about 277,000.
“So that number has grown as the number of farmers has fallen,” Devaney said.
Case VanderMeulen, 54, owner of Coulee Flats Dairy in Mesa, said his 7,000-cow operation has struggled with the low milk prices. But, at the same time, he benefited because he paid lower prices for the 100 pounds of feed he gives each cow daily.
The lower commodity prices “lessens the blow a little bit,” VanderMeulen said. “But higher prices usually works better because your margin is better. It’s just a lot better when the dairy economy is booming.
“We have to go through the ups and downs,” he continued. “The downs suck, and the ups are never long enough.”
Prices for milk started to rebound in the last few months of 2019, he said. “And the 2020 outlook is pretty decent,” he said.
Bailey, the Darigold executive, said new trade deals with Canada, Mexico and China can only help the dairy markets.
“Of course, we are thrilled about this,” Bailey said. “It lays out a very clear foundation for how trade is going to take place. China is likely going to be buying a whole lot more agricultural products from the U.S. and buying less from the EU and Australia.”
Changing consumer preferences have had a profound effect on national markets. For example, the amount of liquid milk consumed per capita in the U.S. has tumbled more than 40% since 1975. Americans drank about 24 gallons a year in 1996, according to government data. That dropped to 17 gallons in 2018.
In November, Dean Foods, the nation’s largest milk producer filed for bankruptcy and it was quickly followed by Borden Dairy Co. The dairies companies, both based in Dallas, controlled about 13.5% of U.S. sales last year.
But Bailey said sales for Darigold, which has a processing plant in Spokane, remain strong. He credited the cooperative’s access to export markets and new products like the drink Fit milk. Producers use filters to increase the protein level and reduce the natural lactose-based sugars. The new product also has the added benefit of a longer shelf life than liquid milk.
“Fit milk is an example of what consumers want and how we are adjusting to fit those needs,” he said. “So, the demand is there.”
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