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July 28, 2010

See Land Opportunity, Not Threat

While some producers hate the thought of an investor outbidding them on land (see "Funds Enter Farmland"), others see an opportunity to lease or custom farm the land, allowing expansion without the capital investment required for a purchase.

"We have 10,000- to 15,000-acre farmers who know that they have to double in size and are coming to us to buy land so they can farm it," says Gary Taylor, president of Agri Cura, which buys and manages farmland in the U.S. This sometimes results in a direct sale. Taylor, who owns 7,000 acres himself, says he bought 17 properties and 14 of them were never on the market.

Randy Hertz of Hertz Farm Management says that sometimes an operator knows the owner who is planning to sell. "They come to us and ask if we could put the deal together. Networking is everything—get to know the farm managers in your area and scout for land for sale." —Linda H. Smith

Gap Widens for Farm and Retail Milk Prices

Dairy producers understand the market forces behind the 50% decline in milk prices during this past year’s Great Recession. What frustrates them is that it took months for those low prices to be reflected in the retail dairy case—if they ever were. This widening gap between farm and retail prices came under scrutiny during the third hearing on consolidation in agriculture conducted by USDA and the U.S. Department of Justice, held in Madison, Wis., in late June.

"When dairy farmers were losing $100 per cow per month, there was no change in retail prices and processors were posting record profits, you have to ask: Where is the money going?" said Sen. Russ Feingold (D-Wis).

The U.S. Bureau of Labor Statistics has documented dairy farmers’ shrinking share of retail milk prices. In 2001, the retail markup on milk was about $1.50. In 2009, it was $2 per gallon.

"Milk is the cash cow with 40% to 45% [retail] margins. It used to be 20%," says Ron Cotterill, University of Connecticut economist. With 11.6 gal. of milk per cwt., a 50¢ per gallon loss equates to $5 per cwt. This loss adds up to thousands of dollars

for a 150-cow herd.

Even today, with the merger of regional co-ops into megacooperatives, the total revenue of all dairy co-ops is still less than $40 billion.

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FEATURED IN: Top Producer - Summer 2010

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