"I would suspect we're going to see a continual shrinkage of dairies in Western Washington," said Bill Brookreson, deputy director for the state Department of Agriculture.
Gordon said the latest price plunge started immediately after the Sept. 11, 2001, terrorist attacks, as people cut back on going out to eat. This reduced the demand for cheese and butter, which in turn trimmed milk consumption to just over 1 percent growth, instead of the nearly 3 percent that had been expected.
Since dairies' herds of cows keep producing milk, this small shift in demand drove prices downward. Inexpensive imported milk from Europe and New Zealand pushed down prices even further, though the imports only account for 2 percent to 4 percent of U.S. sales, Gordon said.
Prices have sunk from about $15 per hundredweight of milk prior to Sept. 11, to $10.13 in March, Gordon said. Now, he said, the rule of thumb is that for every cow you own, you're losing $1 a cow a day.
With prices so low, farmers' primary hope of staying profitable is to expand production to capture economies of scale.
"Everybody tries to produce more milk and sell more milk to buyers, as a way to make it up in volume," said Blair Thompson, consumer communications manager for the Washington Dairy Products Commission in Lynnwood. In a few cases, farmers are successfully operating boutique or organic dairies catering to specific markets, or have turned to making value-added products like gourmet cheese.
Owners of the Doelman Dairy Farm responded to the pressure by filing for Chapter
11 and selling nearly all of the company's 5,000 dairy cows. Only 25 percent
of the cows stayed in Washington, while the rest were moved to dairy farms in
Idaho and California, according to Capital Press.
In recent years, many operators of large dairy farms have been moving their herds to the east side of the Cascade mountains as a way to trim costs.
In late 2001 and early 2002, for instance, Smith Brothers Farms Inc. of Kent moved 3,000 dairy cows to Grant County, leaving only a few cows in Kent. Even so, the low prices are making it hard to stay profitable, said Smith Brothers president Alexis Koester.
"We've had to sharpen our pencils and cut costs," she said. "It's definitely affecting our bottom line."
Mainstream dairy farms in Eastern Washington have become so much larger than their Western Washington counterparts that now the 70 farms in Yakima County produce substantially more milk than the 200 farms in Whatcom County, Thompson said.
By Steve Wilhelm seattle.bizjournals.com
HISTORY:
The Federation was formed in 1892 by a group of concerned dairy farmers. These dairy farmers were concerned about the legislative process and the impact it was having on the dairy industry. For the last century, the Dairy Federation has been an active trade association representing the state’s dairy farmers in legislative, marketing, herd health, and environmental issues.
The Dairy Federation is a voluntary membership organization, currently representing the state’s 655 dairy farmers. The Washington State Dairy Federation has been representing dairy farmers in the state longer than any other association of its kind.
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