Washington Dairy Farmers Welcome Higher Milk Prices

11:43AM Apr 21, 2014
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Dairy producers in Washington are enjoying the increased milk checks they are receiving. 
By: Dave Gallagher, The Bellingham Herald

BELLINGHAM, Wash. (AP) — With milk prices steadily rising in recent months, Whatcom County dairy farmers are finding themselves in the unusual position of earning enough to rebuild savings accounts and pay back loans from the years of lean times.

In February dairy farmers were being paid around $23.50 for 100 pounds of milk, according to data from the U.S. Department of Agriculture. That's up from around $21 in January and from around $17.25 in February 2013. Prices vary depending on what class of milk is being sold.

The recent price levels are the highest Whatcom farmer Larry DeHaan can recall.

"I can't speak for other farmers, but we are now able to start digging out of a hole," DeHaan said. "I do see a lot of optimism (among farmers). This gives many a chance to do maintenance on things that had been put off."

A variety of factors are driving up milk prices. U.S. dairy product exports are at historic highs, while the drought in California is impacting that market, including reduced hay and forage production, according to a report from Northwest Farm Credit Services.

The report indicates milk prices should remain strong in 2014 but could drop some as milk production is expected to increase domestically and across the globe.

The price increase is a big deal for the Whatcom County economy because this area produces plenty of milk. In January local cows produced 83.7 million pounds of milk, according to the USDA. That's the second most in the state, trailing only Yakima County's production of 224.4 million pounds.

For many farmers, it's a welcome relief after a decade of struggling to break even, said Henry Bierlink, executive director at Whatcom Farm Friends, as well as the Washington Red Raspberry Commission.

"It's really a sense of 'thank goodness,'" Bierlink said.

Duane Scholten of Scholten's Equipment in Lynden said he's seen dairy farmers who are in a bit of shock about the turn in milk prices.

"Even in recent years when milk prices were decent, feed prices would be so high that they would still be in survival mode," Scholten said. "Now they must be thinking, 'Wow, this is nice.'"

It's certainly been a volatile several years when it comes to milk prices. In 2009, the blended price dropped to $11.76 for 100 pounds of milk; by 2011, it had jumped to $19.20 per 100 pounds, according to the USDA.

With milk prices at current levels, many local dairy farmers are focused on rebuilding current infrastructure and savings account levels, not expansion or new investment, because they know lean times can be right around the corner, Bierlink said.

Scholten agreed, noting that at his store farmers are replacing rakes to tractors when they are worn out. A store like Scholten's is quickly impacted when milk prices change. When money is tight for dairy farmers, it is quickly noticed on the equipment side of the business.

"Dairy farmers put a lot of money back into the community," Scholten said. "They go through equipment four times as fast as other farmers, because a dairy farm is a year-round operation."

The local dairy industry received a boost of confidence last year, when Darigold completed a $22 million investment to put in a 143-foot milk powder dryer in Lynden, replacing equipment damaged by a February 2012 fire. The new dryer is capable of producing 46 percent more milk powder annually than the previous dryer.

"That (project) sent a clear message that Darigold would stick around," said Bierlink, who added that the stabilizing dairy market is slowing down the sale of dairy farms to blueberry farmers, a trend that's taken place in recent years. He added that this area currently has around 115 dairy farms.

The dairy farmers that produce their own hay are in particularly good shape. With the first cuts of the year coming soon, those farmers can avoid the cost of purchasing feed. Currently feed prices are going up at a slower rate than milk prices, but that could change, particularly if the California drought increases demand for Pacific Northwest hay.

In its review of other Pacific Northwest agriculture, the Northwest Farm Credit Services report indicates a mixed year for Washington state apples. Production is poised for a record year, but exports could be down this year and labor availability could challenge the industry.

With California's drought hampering production, it could be a good year for Pacific Northwest wine.