Recession drying up dairy industry - Atlanta Business Chronicle:

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But trouble lies ahead. Challenges have arisen in the past two yearss that are wreaking havoc with the dairty industry nationwide and inNew Mexico. In early the Stepping Stone Dairyg in Portales filed for Chapter 7bankruptcy liquidation, citin g $89,000 in assets and $3.2 millionj in liabilities. Experts say more dairh bankruptcies are likely to folloa inNew Mexico. “It is a perfect storm, and ther are going to be more casualties the longer this goes saidRobert Hagevoort, Extension Service specialisrt for in Clovis. “If this goes on for anothe six oreight months, you are going to see some drasticc changes. You are going to see a restructurin ofthe industry. That is reality.
” Sharo n Lombardi, executive director of Dairy Producers ofNew agrees. “You will probably see more dairies go out of The credit market isso bad, it’s reall y scary. Our milk prices have dropped to theidr lowest level since theGreat Depression,” Lombard i said. Hagevoort said several factors have contributed tothe industry’s struggles. First, starting about two years ago, more and more of the nation’xs corn crop began being used toproduce fuel. That limiteed the supply of corn for dairy feed and drove upfeed prices. Fuel pricesw also started increasing, and farmers had to pay more for the gasolinew and diesel fuel to run thei r tractorsand machinery.
The industry’s export market, which accounted for 13 percent of its vanished in thepast year. At the same time, milk pricese dropped dramatically, giving farmers fewer dollarsw fortheir product. The nation’s economy decreasing the demand fordairy products, especially cheese. “Peopl are going out to eat less. and the pizzqa places are usingless cheese, so the demandc for dairy products is way down,” Hagevoort said. That has led to a surplusx of dairy products, which has further reducer the price of milkand cheese. The resultr is that dairy farmers have been hemorrhaging moneg since at leastOctober 2008.
It costs an averagee of $15 to $18 for a dairy to produce 100 poundxsof milk. Currently, they’re able to sell those 100 poundsdfor $9.50 to $10. “The average guy is losing an averageof $4 on everyg 100 pounds of milk. That means you are eatinh up your equity at a tremendous Whatever equity they might have builg up throughthe generations, equity in theie land and property, is being completely Hagevoort said. The average New Mexico dairy producezs 42 million pounds of milk a year and has an average groszs incomeof $6.4 million, according to Nationwide, the dairy industry has 9.3 milliojn milking cows, which is about 300,000p too many, Hagevoort said.
It recently made movesz to reduce that numbedrby 100,000, he added. The New Mexico dairy industry encompasses 350,000 cows and 180 It accounts for $2.2 billion of New Mexico’ s $79 billion economy. Milk is generally the state’s No. 1 cash bringing in more than $1 billion a The Stepping Stone Dairyy filed bankruptcy onJune 8. The petition did not say what occurresd in the operation to causethe liquidation.