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Nuts & Bolts

October 11, 2012

Rising feed cost seen driving milk production down

(Continued)

CHICAGO —

Chinese demand for dairy products and lower production in the U.S. and New Zealand probably will keep prices rising into next year, said Hackett. China is the world's biggest buyer of whole-milk powder and will import four times more this year than a decade ago, USDA data show.

U.S. exports of cheese, whey, lactose and other dairy products reached records last year, valued at $4.82 billion, or 30 percent more than in 2010, according to the Arlington, Va.-based U.S. Dairy Export Council. The total amount of U.S. dairy products shipped will increase 2 percent to 5 percent this year from 2011, the council forecasts.

Riley Walter, an agricultural bankruptcy lawyer in Fresno, Calif., said he's had 58 cases of dairies in some kind of financial difficulty over the past year and half, including bankruptcy filings, out-of-court liquidations and moving operations into receivership.

"Dairies go through cycles, and I've hit every one of them since 1979, but nothing like this," Walter said. "The recent spike in feed prices due to the drought and ethanol policies really put a nail in the coffin of a lot of people."

So far this year, 49 bankruptcy cases have been filed by family farms in California, up from 43 cases filed last year in the same period, according to federal court records. The cases include dairy and other family-run farms that are eligible to use Chapter 12 of the U.S. Bankruptcy Code to try to reorganize their debt.

"We're all hemorrhaging hard financially," said Jim Wilson, 44, whose dairy in Riverdale, Calif., milks about 3,000 cows and is losing about $200,000 a month. "We're all on the brink of going under and just culling herds harder because we can't afford to feed them."

— With assistance from Jeff Wilson in Chicago, Alan Bjerga in Washington and Steven Church in Wilmington, Del.

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