U.S. dairy producers might have lost as much as one third of their equity due to the perfect storm of low milk prices and high input costs in 2009.
That's according to John Noble, a dairy producer from Linwood, N.Y., who spoke today at the U.S. Dairy Forum in Phoenix, Ariz. Producers lost $1,000 or more per cow in 2009, with cow values dropping from $1,600 or more per head to $1,100 or $1,200. Specialized dairy facilities are worth 30¢ on the dollar.
"The full story of 2009 has not yet been written,” says Noble, as more producers are likely to exit in 2010 either voluntarily or through forced liquidations.
"It will require a coordinated effort by producers, processors and lenders to rebuild working capital,” he says.
Dennis Haubenschild of Princeton, Minn., agrees with Noble's assessment.
Haubenschild notes that lenders are now valuing real estate at 50% of appraised tax valuations, especially if that land is being used as collateral against new land purchase. It will take years for U.S. producers to regain their equity positions to allow them to expand and take advantage of these emerging markets.
Haubenschild was also named the 2010 Innovative Dairy Farmer of the Year by the International Dairy Foods Association and Dairy Today magazine.
Jim Dickrell is editor for Dairy Today. You can reach him at firstname.lastname@example.org.