"Ol' Bossy's In The Red!"
Dairy Farmers Continue to Struggle
With National "Price Squeeze"
by: Bobby McDonald
Everyone "in the know" in Hopkins County knows that local dairy farmers are suffering financially! It's a trend that contiues to thwart profitability since last fall, when milk prices took a downward turn and production costs remained the same and escalated.
Well, another economic indicator, the size of the U.S. milk supply, released this week, indicated that milk production in the top 23 dairy states, rose .1% above July 2008, according to USDA. With the greatest increase in production being in Minnesota and Wisconsin, where summer temperatures have been more moderate. That wasn't good news for dairy farmers.
"It's going to be hard for milk prices to rise significantly, when the supply continues to increase," expressed one local observer. "So, that means lower prices, until some of the milk and dairy products are off the market. Hopefully, with school starting and the holiday season in the autumn, folks will eat more cheese and drink more milk, while the industry gets supplies under control!"
Rumors have circulated around the country of banks foreclosing on dairy operations and a number of other plights for dairy farmers. However, a visit with some of the local lenders, indicates that certainly isn't the trend here in Northeast Texas.
An early morning visit with Tom Sellers, President of Alliance Bank, in Sulphur Springs, the largest lender of dairy loans in Northeast Texas, revealed a concern for their many customers that are suffering from the troubles in the dairy industry. "Our lending practices are based on relationships," expressed Sellers. "This bank has been making dairy loans since the beginning of the commercial dairy industry, back in the 1930's, when this area found local cotton farmers 'squeezed' by the Great Depression. The dairy industry then was a 'savior' for those farmers, and now we find that same industry experiencing some very hard times. However, our customers have 'weathered the storms' and the cycles of the industry, building-up equity during the good times and we're working with them now!"
"We encourage our customers to have updated financial records in the good times and the bad times," continued Sellers. "And, now that the cycle has turned down, they are even more important, so that we can sit down and discuss what needs to be done to continue operations, until the prices and expenses improve. We've got dairy farmers that have been with us for a lifetime and we aren't going to desert them now. It's a time to look at ways to help them survive and maintain, while the market adjusts itself to more profitable times. Our loan officers have always had an 'open door' policy and encouraged our customers to come in and discuss their needs and financial positions, and that's certainly the process now, when things are not so profitable!"
"Hopkins County has seen trying times before, and probably if we live long enough, we'll see them again, but that's what local lenders are here for, to weather the storm and make certain that finacial needs are met and businesses survive!" expressed Sellers. "If I've learned anything in life, bad times don't last forever, and there is always something brighter down the road! And, the dairy industry is no different than anything else!"
"We're continuing to work with our dairy customers," stated Kregg Slakey, Vice-President and Ag Loan Officer at Texas Heritage Bank. "Most of them had enough equity 'built up' in the operations and continue to be able to maintain. Yes, they are 'using up their equity,' during these difficult times, but we're all looking toward the price outlook to improve and them being able to survive!"
"If you want to know what's happening out there," continued Slakey. "This time last year replacement heifers were costing $2200.00 each, and today, the market has fallen so that those same quality heifers are only bringing $1000.00 each. But, the bright side is that the cost of replacing some of the older cows in one's herd is cheaper now than it was a year ago. It's a great time for dairy farmers to cull their herds closely and get some of those marginal producers replaced. It's a time for creative financing and working with the individual producer."
A visit with Bryant Fisher, Dairy Farmers of America Board Member from Hopkins County, indicated that there was some "hope" on the horizon for local dairy farmers. "We're being told that the market outlook indicates that supply will get more in line with demand in the upcoming fall months and that we could possibly see some $15.00 per cwt milk by the end of the autumn season," stated Fisher. "Then, the Herd Buyout results will be helping with the milk supply, as well. In the Northeast Texas area, we know of only three herds that have gone on the buy-out. However, nation-wide, the response has been much greater and those cattle will be going for slaughter and their milk production out of the marketplace. The program is designed for that very thing happening and is supported by all the dairy farmers! Hopefully, there are some brighter days for all dairy farmers and the many, many businesses that they support in Hopkins County!"
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