12/19/2009 9:40:00 AM Extracting maximum amount of milk with minimum amount of money
LuAnn Schindler/Correspondent
Family-owned dairy farms may not be able to recover from the current economic crisis. Bailey Schindler and Alex Schindler of Ewing help feed calves at their grandparents' dairy farm south of Ewing.
Editor’s note: This is the final of a three-day series of stories examining the challenges facing the dairy industry. * * * It’s a domino effect.
That’s how Warren Snodgrass views the dilemma facing the dairy industry.
“Small dairies are in trouble. You either get bigger or you get out,” he says.
During the past 35 years, Snodgrass’ O & W Dairy Inc. located near Orchard has survived both good and bad economic times, but Snodgrass said the last two years have put a financial strain on dairy farmers, not only in Nebraska, but across the United States.
Snodgrass said the dairy dilemma is a combination of everything.
Fuel costs skyrocketed, making it difficult for family-owned dairies to recover. Add increased feed costs and small producers slip farther into debt. Reduced exports didn’t help.
The general economic status of the world controls how much money is spent and what products are purchased.
“We’re all subject to it. There’s no silver lining,” he said.
Snodgrass, along with two sons and six employees, milk a herd of 600 Holsteins. It’s a combination of hard work, long hours and family support.
The milk is contracted to the Dean Foods milk plant in LeMars, Iowa. Dean Foods is the largest processor and distributor of dairy products in the United States. The company owns the Land O’Lakes and Meadow Gold brands sold in the area, along with 38 other dairy brand names.
One problem facing farmers is the low price paid by processors for fluid milk.
Snodgrass said processing plants aren’t forced to pay a lot because a lot of fluids are available.
This translates into high profits for processors.
“The end product hasn’t come down,” Snodgrass said.
What can farmers do to guarantee fair pricing for milk?
Snodgrass said that’s the magic question. Ultimately, dairies need to manage input costs and market milk on the board. “It’s a good starting place,” he said. Operational costs continue to mount, but Snodgrass said producers have the means to control costs.
“Our operation is self-sufficient. We keep our feed costs close to us by growing alfalfa and corn,” he added.
O & W hasn’t changed feed rations. Distiller’s grain is added to the mix. A nutritionist tests the feed to guarantee the herd receives proper nutrition, which boosts milk production.
“You have to know the bottom line,” Snodgrass said.
In the past year, consumer milk prices decreased by 15 percent. Snodgrass said consumers quit purchasing milk byproducts — cheese, butter, and ice cream — due to the weak economy.
He said people are eating meals at home instead of dining at restaurants and that cuts into a market that has been dairy-industry friendly.
“There’s never a surplus of fluid milk. Once demand is met, the rest is processed into butter, cheese or other byproducts,” he said.
Although industry experts predict consumer dairy prices will increase by 4 percent in 2010, Snodgrass said prices shouldn’t go up because producers aren’t going to receive high prices.
The organic dairy industry hasn’t affected mainstream dairies. Snodgrass said organic dairy sales have also dropped during the economic crunch.
This isn’t the first time the dicey economy milked the dairy industry. In the 1970s, a shorter, less severe dairy emergency affected farmers. Snodgrass said the difference between now and then is the debt today’s dairies carry.
“Bankers are already beginning to tell dairy farmers ‘no’ for operational loans,” he said.
That leaves only one option: close the parlor doors. Hopefully, producers have built up enough assets to withstand the tough times.
Through the changes, one constant has remained. “Dairy producers have to live within their means,” he said.
Snodgrass said the dairy has evolved from mom and pop selling cream and eggs to O & W’s 10-year-old facility that can milk 50 cows at once.
“My parents gave me the opportunity, and I want to be able to give my kids the opportunity to continue in this business,” Snodgrass said.
Reader Comments
Posted: Sunday, December 20, 2009
Article comment by:
Andrew Johnson
Great story. In the story the gentleman talked about knowing the bottom line. That is a problem in any small business in America. People think that they can start a business and make money. Some do, but when it comes to crunch time they don't know what happened. It must be someone's fault but mine. It is time for people to wake up and take responsibility for their actions. Don't boo hoo about the family farm. Sad, but if it doesn't make money get out. Farming is for the big boys (the ones that know how a calculator works) not the wannabees. That goes for any business.
