The News Behind the Headlines
Oct 28, 2009
It was quite a coincidence, but a chance encounter of headlines nonetheless: on the same day (the 27th) that Cooperatives Working Together announced the results of its third herd retirement of 2009, the Associated Press ran a story nationwide reporting that dairy farmers are killing cows to make ends meet.
I know some producers are upset about the headline attached to that story, which if you just read it and had no other context, makes it sound like some avenging angel or Terminator is offing cows in their parlors. The story itself, once you read it, is more balanced, and in fact provides a reasonable rationale for how the accelerated culling of the past 12 months has been necessary to help bring supply into balance with demand, and give farmers the chance to make money again, someday. (Disclaimer note: I did speak to the reporter, Michael Crumb, at least twice this month to explain dairy economics and the function of CWT).
The fact is that poultry and pork sectors have essentially been doing the same thing as the dairy sector this year: reducing the size of their breeding herds and flocks in order to stop the flow of red ink. The entire livestock industry’s balance sheet has also been upended by recession-driven economics. The vertically-integrated chicken and pig businesses adjust their production in a different way than dairy, because the levers that control production and marketing decisions are much simpler. Precisely because dairy is still made up of individual independent business men (and women), they have to collaborate on an industry-funded program, CWT, to help accelerate the trends that need to happen.
When 2009 started, the gap between supply and demand was at least five billion pounds of milk. CWT has narrowed, and depending on October’s tally, actually eliminated most all of that imbalance. The marketplace is catching up to that reality, and I am willing to wager that the headlines next year will be much more positive about dairy economics than all of the doom and gloom of 2009.