Dairy producers have not been exempt from the clutches of the economic crisis.

Because of the drastic 25-percent drop in milk prices at the farm gate at the end of 2008, dairy producers in Illinois are finding it difficult to turn a profit.

In early 2008, the price for cattle feed was very high, while the milk prices farmers received were modest. They were still able to be somewhat profitable, said Mike Hutjens, a UI Extension dairy specialist.

However, the milk price has come down $3 per hundredweight and the feed price has come down about $1.50 per hundredweight, meaning the farmer loses a $1.50 in that trade-off, which leaves him worse off today than he was in the summer, Hutjens said.

“In the last two or three months, things are really getting tight because the price of milk is going down faster than the price of feed is going down,” Hutjens said. “The real problem is that if milk prices continue to drop, which is forecasted … it’s going to cost (the farmer) more to produce the milk than what he can receive for the product.”

In June 2008, milk prices at the farm gate were $20.25 per hundredweight and have dropped to $15.51 per hundredweight in November, said Jim Endress, UI Extension educator in farm business management and marketing.

“If the economy straightens itself (out), so that consumers feel good about things, they’ll tend to consume more dairy products, which will translate to a higher (milk) price,” Endress said. “On the flip side, if the economy continues to be depressed, maybe things like ice cream or some cheeses might become luxury items that people forego and that will depress milk prices.”

The University’s dairy farms are affected by the economic downturn as well.

The farms have cut back on labor and are searching for feed alternatives, said Michael Katterhenry, interim dairy manager and general farms manager for the Department of Animal Sciences’ farm units.

Additionally, the farms are tightening their belts by putting off things like farm maintenance in order to focus on the critical cost of feeding and taking care of the cows. And in March, they started milking their cows three times a day compared to two times a day in order to increase milk production, said Richard Wallace, UI Extension dairy specialist and faculty coordinator of the University’s Dairy Cattle Research Unit.

“The dairy producer either has to weather the storm and not make money or make less than what it costs him to live, and hopefully milk prices come back up and he can ride that storm out,” Wallace said.

Jim Fraley, manager of the Illinois Milk Producers’ Association, said it is the nature of the milk market to experience periods of high and low prices.

“Dairy farmers are always the eternal optimists,” Fraley said. “They know that usually periods of lower prices don’t last very long and they weather the storm and they look ahead and know that prices will eventually return to a more profitable area. They always do.”