Milk prices good for consumers, bad for Georgia farmers

Lorena O’Connor watched, perplexed, as the price of milk climbed past $4 a gallon last year. Lately she has watched, equally perplexed, as it fell under $2 at many stores.

“I just wondered, ‘What is going on’?” she said.

Turns out, the same recession that cost the Acworth mother of two her job last winter has now helped cut her weekly milk bill by about half. And it could cut it more.

Economies around the world have contracted, and exports of U.S.-produced milk are down about two-thirds, said Farrah Newberry, director of Georgia Milk Producers.

“Milk is a staple, but the recession is so bad that people have even cut back on buying milk.”

Meanwhile, many American farms boosted production when prices rose last year. The result: oversupply this spring — and tumbling prices.

Global factors also have played a role, first boosting overseas demand for U.S. milk and then dampening it. Moderating oil prices mean lower transportation costs, contributing to the ease in retail prices.

European Union dairy farmers on Monday protested the collapse of milk prices, which have fallen 50 percent in the past year.

In Georgia, more supply and lower prices is not good news for all. Milk production is a significant source of jobs and incomes in some parts of the state.

“We are receiving about half of what we did last year,” said Russell Johnston, owner of the 92-milk cow, third-generation Johnston Dairy Farm in Newborn, southeast of Covington. “The cost of feed and fuel fell off some, but it didn’t fall off 50 percent like the milk did.”

It now costs him 3 cents more to produce each pound of milk than he receives when he sells it, he said.

“It is a losing proposition. So we are going on reserves,” Johnston said. “To be a farmer, you’ve got to be an eternal optimist.”

The market isn’t done testing his optimism.

During the first quarter of this year, farmers got an average of $12.23 for every hundred pounds of milk, according to USDA senior economist Larry Salathe. That has slipped to $11.45 in the current quarter.

By comparison, last year’s average was $18.32 — and the peak was closer to $25.

Expectations now are for prices to keep declining for several months more, then stabilize and rise modestly this fall, Salathe said. Increases shouldn’t top about 15 cents a gallon, he said.

For Lorena O’Connor, cheaper milk is welcome.

“When you’ve got kids, it’s one of those things that you have to have,” O’Connor said.