# Dairy dilemma....



## somedevildawg

Was just curious, we don't have a lot of dairies around this neck but I hear you guys and I know the dairies seem to be struggling.....in a nutshell, what seems to be the root cause of the issue. Despite having an empty nest, I still buy a fair share of milk products, what's the problem as you guys see it?


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## Vol

Sounds like it is a vast over-supply.

Regards, Mike


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## hillside hay

Just too darn good at it. I picked up a cull cow a couple weeks ago. 60 lbs per day. That used to be one of your better cows. Now she's happy meal. Unless I by her to feed calves


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## Palmettokat

It is a shame there are so many children and older adults especially who even in the US don't get the food they need and to have an over abundance as we do. Or is there really no over abundance just food not getting to all who need?

I wonder why that is? Realize there are many reasons, think much has to do with the condition of so many families. Too many take no responsibility. Think that is the reason when such as Hurricane Harvey hit it made so many proud to see those who reached out to help neighbors, strangers with no obligation or hope of gain, just because of their concern for others. Renews our faith in man.


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## PaMike

-Less people buying dairy products. Why buy milk when you can buy soda or beer..and more people have allergies such as lactose intolerant.

-Corruption. Dean Foods was found guilty of price fixing in the North East. Mainly up in the New England area. They have a $140 million settlement with the dairy farmers. Sure there is a settlement, but that doesn't really help all the guys that went out of business during that time.

-Overproduction. See the two above reasons which cause thin margins. Farmers are increasing their numbers in order to make the same net profit. This continues to drive price down. In PA the farm numbers are dropping like a rock, but total cow numbers are holding steady. A big dairy can put an addition on and add 200 cows and it replaces 5 Amish herds that sell out...


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## somedevildawg

Ok, I'll go for that....

On the first one...would that be the fault of the Milk association (showing my ignorance) in their marketing strategies? Has their been any additional marketing since the "got milk" campaign? Personally, I've been buying "ultra-filtered" milk, it's pricier but I like the taste a bit better, kinda like Michelob vs Miller I suppose, (for the record it's the aforementioned) these are "newer" products....I also see some type of energy (protein) drink, (gulp, maybe) that's a booming market for the millenniums, I'm not sure why they need the additional energy, most aren't doing much of anything, but alas...it's a big market.

Corruption, never thunk about that one....money and power breeds corruption, hopefully our potus will address some of the things that allows the corruption to run amuck. Sounds like some regulatory agency dropped the ball.....certainly not unusual

Overproduction, without a doubt farmers of any kind can and will be their own worst enemy. As technology advances the industry must advance. With every increase in efficiency, and unintended problem will always be overproduction unless additional markets are created. That leads us back to the original problem.....perhaps marketing is a key component missing today. Idk

I sometimes grab a big gulp of milk, making sure to have a good milk mustache , and turn to my kids or wife and say "hey, do we have milk?" I love milk and milk products....wish more could be done, without a doubt they are some of the hardest working folks on the planet.


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## mlappin

Local big dairy just expanded again, can't remember how many more robotic milkers they added, but thought I heard enough for another 500 cows.

Sad part is an elderly gentlemen I rent land from paid for his farm and raised a couple of kids milking 20-30 cows, now unless its 2000 or 3000 cows your losing money.


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## Thorim

Back in the day you could sell grade B milk it was used to make ice cream and such know everything has to be grade A or it can't be sold at all....


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## slowzuki

These problems are why milk producers started the supply management system here. It’s not perfect by any measure but it gives the smaller farmers a bit more power to push back against the processors.


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## somedevildawg

slowzuki said:


> These problems are why milk producers started the supply management system here. It's not perfect by any measure but it gives the smaller farmers a bit more power to push back against the processors.


Can you expound, in layman terms, the premise behind the supply management system?


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## mlappin

somedevildawg said:


> Can you expound, in layman terms, the premise behind the supply management system?


Fancy term for quotas I imagine.


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## Uphayman

Having been a dairyman for my first 52 years, I will offer my opine......originally in my area there was a homestead on every "40". Land was cleared of timber, pastured with a few (5-10 cows), I'm talking 80 years back. The Cloverland cheese factory just down the road had 94 patrons. All cans. Fast forward to 2017.......Zero farms in my township. Yet cow numbers in the county are more than ever. Just 2 local dairies have more cows than the entire county had just 20 years back. Not crying about change...just making an observation. We are watching more than 25 semi loads a day come up from lower Michigan, over the Mackinaw bridge, heading down to Wisconsin to drop at plants there as capacity is maxed out downstate.

The universities said "you gotta make more milk". The banker said "you gotta make more milk". The sales man said"you gotta make more milk". It has now become a mentality, because the price is low, "I gotta make more milk". And when the price rebounds, "I'm going to make even more milk".

The old economics of supply and demand were abandoned long ago in the dairy industry. May it rest in peace.............


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## glasswrongsize

Milk at Aldi's ("discount"-type of grocery store around here...I like 'em) last week had milk for $.48 a gallon and eggs for $.24 a dozen.

By the time the store made their profit, the trucking was done and the distribution facility made their profit, etc...there can't be any meat left on the bone for the producer.

I smell a rat somewhere; there's no way in heck that price is a reflection of an unmolested free market.

Mark


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## Teslan

mlappin said:


> Local big dairy just expanded again, can't remember how many more robotic milkers they added, but thought I heard enough for another 500 cows.
> 
> Sad part is an elderly gentlemen I rent land from paid for his farm and raised a couple of kids milking 20-30 cows, now unless its 2000 or 3000 cows your losing money.


All the dairies big and small around here seem to be expanding or upgrading. So either money is cheap/easy to borrow or someone is making at least a little bit of money. A neighbor sold out his smaller dairy (milk around 150 cows I think) earlier this year to a dairy man from California who sold his dairy in CA. Bought the dairy here for $2.5 million. Including 80 acres of land, 2 houses, water rights, Then the CA guy probably has spent quite a bit more upgrading the barn, pens, lagoon and such. I don't know to much about running a dairy, but the guy from CA seems to run it better then the old owner. At least by the cleanliness of his pens anyways that I can see.


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## Teslan

glasswrongsize said:


> Milk at Aldi's ("discount"-type of grocery store around here...I like 'em) last week had milk for $.48 a gallon and eggs for $.24 a dozen.
> 
> By the time the store made their profit, the trucking was done and the distribution facility made their profit, etc...there can't be any meat left on the bone for the producer.
> 
> I smell a rat somewhere; there's no way in heck that price is a reflection of an unmolested free market.
> 
> Mark


Hard to believe the trucking alone could be done for that. Maybe Aldi is using those things as a loss leader? Taking a loss on those to get people in the store to sell more profitable items.


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## slowzuki

Supply management / quota system - basic idea is you bid/compete on rights to produce a certain amount of milk. The price you get paid for your milk is set to allow for cost+limited profit. If you are a small dairy or inefficiently run you will still struggle, but you can predict the prices and therefore access loans to improve efficiency. You are not protected from rapid changes in your costs, the mechanisms to change the price you get paid are slow.

It raises the prices of milk but there is no government subsidies or bailouts of the dairy industry here, that cost is built into the price of milk and dairy products.


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## somedevildawg

glasswrongsize said:


> Milk at Aldi's ("discount"-type of grocery store around here...I like 'em) last week had milk for $.48 a gallon and eggs for $.24 a dozen.
> By the time the store made their profit, the trucking was done and the distribution facility made their profit, etc...there can't be any meat left on the bone for the producer.
> 
> I smell a rat somewhere; there's no way in heck that price is a reflection of an unmolested free market.
> 
> Mark


Wow.....milk here is 3.29 a gallon the 1/2 gallon of "ultra filtered" is 3.19, eggs 1.19 dz

What is the "normal" price of milk?


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## haybaler101

somedevildawg said:


> Wow.....milk here is 3.29 a gallon the 1/2 gallon of "ultra filtered" is 3.19, eggs 1.19 dz
> What is the "normal" price of milk?


Definite loss leader at aldi's. Dollar General does it here at about $1.40 gallon. Local farm gate price is $17-18/cwt or $1.50 gallon that the producer is getting paid. All milk in this part of Indiana goes thru Prairie Farms and they have went to a quota system. Any production over and above base set last year gets dinged a couple bucks per cwt. with already low prices, this put the hammer on anyone's expansion plans.


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## glasswrongsize

somedevildawg said:


> Wow.....milk here is 3.29 a gallon the 1/2 gallon of "ultra filtered" is 3.19, eggs 1.19 dz
> 
> What is the "normal" price of milk?


The wife tells me it's $3; can't tell you about eggs' "normal: price as ours are super-expensive (we have a mess of chickens around for eggs and to keep the '***** fat ; could dang sure buy em cheaper). The loss leader thing makes heap-big-sense to me and is probably good business...I heard about it and I don't do the shopping; so, it gets the word out for THEIR store.

Mark


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## somedevildawg

I thought u wuz razin them eggs for them possums' Mark, course I've had possum and **** in the same broth, we call it Bainbridge Stew...all ya need is two possums a **** and three squirrels, ifn ya got a rabbit, all the better....that's a special little touch for a special cassun

But, We do add cheese and chase it with milk....

It sounds as if there's no easy answer to the problems facing today's dairyman, it reminds me of a couple of ole country boys that were selling melons....buying them from a farmer as culls for $1 and taking them to the local market and selling them for 3 for 2$ and would sell out as soon as they arrived, couldn't get em unloaded.....finally, after much pondering on their delimma, they decided they had to buy a bigger trailer


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## mlappin

Teslan said:


> Hard to believe the trucking alone could be done for that. Maybe Aldi is using those things as a loss leader? Taking a loss on those to get people in the store to sell more profitable items.


I can guarantee its a loss leader, it is for Walmart as well. The company I'm a dealer for on the boilers offered several free marketing classes. One thing that points to a loss leader, its at the back of the store so even a person who really only stopped for a gallon of milk has to walk past the chips, snacks, frozen foods, fresh fruits, etc etc etc to get to the cheap milk.


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## Grateful11

Teslan said:


> Hard to believe the trucking alone could be done for that. Maybe Aldi is using those things as a loss leader? Taking a loss on those to get people in the store to sell more profitable items.


The last time we were in one of our Aldi stores milk was $1.71, don't remember what eggs were. They don't really need to lower prices to get people to come in, they stay busy all the time because they have great prices on mostly basic staples. I think the price drops may have something to do with a new competitor moving into the US, Lidl grocery.


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## endrow

slowzuki said:


> Supply management / quota system - basic idea is you bid/compete on rights to produce a certain amount of milk. The price you get paid for your milk is set to allow for cost+limited profit. If you are a small dairy or inefficiently run you will still struggle, but you can predict the prices and therefore access loans to improve efficiency. You are not protected from rapid changes in your costs, the mechanisms to change the price you get paid are slow.
> 
> It raises the prices of milk but there is no government subsidies or bailouts of the dairy industry here, that cost is built into the price of milk and dairy products.


Our milk Inspector for DFA tells us to expect talk about a quota system to begin in the near future .


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## mlappin

endrow said:


> Our milk Inspector for DFA tells us to expect talk about a quota system to begin in the near future .


Not such a horrible ideal compared to another dairy buyout I suppose.


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## PaMike

Wouldn't quota be a good thing? Maybe you need to up your cow numbers quick so you are locked in at a higher number....


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## swmnhay

PaMike said:


> Wouldn't quota be a good thing? Maybe you need to up your cow numbers quick so you are locked in at a higher number....


A quota would be a good thing if you have one but for someone that wants to start milking they would have to buy the quota.Kinda opens up another can of worms the way I see it.Can't afford to start up because the expense of buying the Quota.

There is a huge dairy here that sold his dairy and Quota in Canada and built here.7000+ cows 10 yrs ago,no idea what they milk now.


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## endrow

I think quota is our only hope .


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## somedevildawg

endrow said:


> I think quota is our only hope .


That's a shame.....but like my grandaddy use to say about gettin older "son it beats the alternative"

It seems bigger is better nowadays in so many respects, perhaps spurred on by the "too big to fail" debacle we witnessed just a few short years ago.....


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## swmnhay

somedevildawg said:


> That's a shame.....but like my grandaddy use to say about gettin older "son it beats the alternative"
> It seems bigger is better nowadays in so many respects, perhaps spurred on by the "too big to fail" debacle we witnessed just a few short years ago.....


I've heard the small guys that don't have semi loads of milk get charged pretty high rates just for the milk hauling.Seems like everything is tilted to the big guys no matter what commodity you are producing.


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## IH 1586

My cousin seems to think I should go back to milking. He is 19 cows from being the largest in the county according to DHIA. Largest is currently 529. He still talks of getting to 1,000. I just helped him chop and haul manure. Thank God I'm independent help and can leave at my choosing. Way to stressful. Cobbles everything together and 2 bosses pulling you in 2 different directions before you get anything accomplished. It's fun from the outside looking in.


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## luke strawwalker

Oh, I have my doubts about quotas helping much of anything...

For years we had the "cotton allotments" (basically, cotton quotas) and it really didn't do much of anything. Just locked you in to your set acreage, couldn't increase or decrease without buying an allotment from someone else, or selling allotment for cash.

Same thing happened with tobacco a few years back. My wife's cousins used to grow several acres of tobacco in southern Indiana, and 'the system' favored the big producers and was putting the squeeze on the little guys (just like everything in ag). The gubmint went to a quota system and within a couple years they just sold out their quota to a big guy looking to expand...

Bout the only thing a quota system does is give you a little "travelin' money" when you sell out to a bigger producer itching to expand...

Later! OL J R


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## Grateful11

Something I noticed no long ago at a couple grocery stores, a WalMart and Food Lion. Food Lion used to have an entire one side of aisle completely filled with cereal. Now it's down to half that or less. WalMart has shrank theirs some but not as much as Food Lion. Personally I'm still a morning cereal eater. I think part of the problem is these newer generations have been lead to believe that cereal is bad for you.


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## somedevildawg

That very well could be, the poor SOB's ain't got a mind of their own anymore, they rely on outside influences (think media) to make their decisions for them.....it's really quite pathetic. I enjoy a bowl of fruit and cereal every now and again.....had to beat rice Chex and fresh peaches


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## mlappin

swmnhay said:


> I've heard the small guys that don't have semi loads of milk get charged pretty high rates just for the milk hauling.Seems like everything is tilted to the big guys no matter what commodity you are producing.


 Kinda makes sense though, a local guy had 7 or 8 milk tankers. Wasn't hard to find drivers that went straight to a mega dairy, filled the trailer in one stop then drove straight to the creamery, it was near impossible to find a driver that was willing to make 10-20 stops to get a trailer load before heading to the creamery.


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## Teslan

Grateful11 said:


> Something I noticed no long ago at a couple grocery stores, a WalMart and Food Lion. Food Lion used to have an entire one side of aisle completely filled with cereal. Now it's down to half that or less. WalMart has shrank theirs some but not as much as Food Lion. Personally I'm still a morning cereal eater. I think part of the problem is these newer generations have been lead to believe that cereal is bad for you.


I'm not sure they have been led to believe it's bad for you as much as their parents don't eat much of anything for breakfast so therefore their kids don't either. They serve breakfast at schools don't they now? So sales of cereal have been going down. I don't watch much TV and probably not the right shows when I do for breakfast advertising. But I can't recall the last cereal commercial I have even seen. In college in the 90s I didn't know anyone that ate cereal every morning. I did. Still do. My sons also like cereal. But all my friends that didn't eat cereal I doubt their kids eat cereal.


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## swmnhay

mlappin said:


> Kinda makes sense though, a local guy had 7 or 8 milk tankers. Wasn't hard to find drivers that went straight to a mega dairy, filled the trailer in one stop then drove straight to the creamery, it was near impossible to find a driver that was willing to make 10-20 stops to get a trailer load before heading to the creamery.


yea it's the way it is with everything.IIRC a guy that milked 15-20 cows said they were charging him $2.00 a cwt to pick up his milk.He has retired now.Very few of the 20 cow dairies left.I can only think of one.


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## 68cuda

swmnhay said:


> A quota would be a good thing if you have one but for someone that wants to start milking they would have to buy the quota.Kinda opens up another can of worms the way I see it.Can't afford to start up because the expense of buying the Quota.
> 
> There is a huge dairy here that sold his dairy and Quota in Canada and buiewlt here.7000+ cows 10 yrs ago,no idea what they milk now.


In Ontario there is a new entry program for people that want to get in the business the dairy board will match the Quota the the person buys up to a certain amount


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## carcajou

The Milk quota system works well enough up here, but we do pay double for most dairy products at the store. I can live with that.


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## swmnhay

68cuda said:


> In Ontario there is a new entry program for people that want to get in the business the dairy board will match the Quota the the person buys up to a certain amount


What is the current value of the quota?How do they measure it,by milk produced or number of cows?


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## endrow

carcajou said:


> carcajou said:
> 
> 
> 
> The Milk quota system works well enough up here, but we do pay double for most dairy products at the store. I can live with that.
> 
> 
> 
> Needed that here 10 years ago . Now Quota alone would not fix.
Click to expand...


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## 68cuda

swmnhay said:


> What is the current value of the quota?How do they measure it,by milk produced or number of cows?


Quota is capped at 24000 per kg of butter fat in Ontario. Works out to about 1 kg per cow depending on butter fat content. If you want to milk more cows you bid on quota on the monthly quota exchange.


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## 68cuda

carcajou said:


> The Milk quota system works well enough up here, but we do pay double for most dairy products at the store. I can live with that.


Was in Florida last month and was paying about 3.80 a gallon that was over 5.00 canadian with the exchange it's only 4.25 for 4 liters here


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## carcajou

About $ 3.60 cdn here for 2 litres of 2% milk. Butter is $ 5.25 a pound unless it's on sale. I'll check on skim milk powder and cheese next time i'm in.


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