Skyrocketing feed costs hurt dairies

Foreign markets and ethanol production are driving up prices

April 29, 2011 

Another hit in the pocketbook is the last thing dairy farmers need.

Unfortunately, that's the reality as hay prices reach unprecedented heights, and other feeds aren't far behind.

According to the U.S. Department of Agriculture, supreme quality alfalfa hay, the hay fed to milking cows, is about $345 a ton in the Merced area. Last year, it was about $190 a ton.

"Corn is more than $300 a ton, soybeans almost $400 a ton and cottonseed is out of sight," said Michael Marsh, chief executive officer of Western United Dairymen, an organization that works to promote the industry.

Because cottonseed is priced so high, Marsh said some growers who had planted alfalfa in the past are turning to cotton, which gives them two crops -- cotton for lint and the seed for feed.

One of the driving forces of the cost of feed is the use of corn for ethanol, Marsh said.

"Appetite from foreign competition for our feed is driving the price up, too," he said.

China is importing corn at a record pace, along with Saudi Arabia, where dairies are springing up everywhere.

Although feed prices continue to rise, the price paid to dairy farmers has also gone up. It's above $17 a hundredweight, compared to less than $10 a year ago.

"There's a good improvement compared to what we were at in 2010," Marsh said. "But the farmer has no ability to increase his price -- it's not set by the farmers."

Marsh said about three weeks ago, Sen. Dianne Feinstein, D-Calif., introduced a bill in the Senate that would eliminate ethanol subsidies, and also reduce the tariff on imported ethanol from 54 cents a gallon to 45 cents.

Although dairy farmers are scrambling to substitute cheaper feeds for the more expensive ones, cutting back too steeply on rations causes milk production to go down.

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