Fuel, feed prices spike for dairy, livestock producers

Jan Dejong left his native Holland in 1985 to start a dairy farm in America.

Through hard work and frugal living, Dejong and his wife, Rinske, have built a thriving family business in Slocomb and raised three sons. But increasing fuel, feed and fertilizer prices are squeezing his profit margins and turning the American dream of opportunity into a disappointing reality.

Dejong says most of his increased costs are related to rising fuel costs and a result of government-mandated programs requiring more ethanol production. The increased demand for corn that has resulted from the ethanol push has driven the price of the crop, which is commonly used as feed for livestock, drastically higher.

Dejong is not alone in feeling the pinch of higher feed and fuel costs. Other dairy farmers have also been bled dry by diminishing profit margins, many of them going under. In 2000, there were 156 dairy farms in Alabama. In 2007 there were 73. According to Sue Mosely, a federal milk market administrator, shrinking profit margins are the culprit in many cases of the dairy decline.

John Hollis went into dairy farming as a continuation of a family tradition. The 34-year-old likes the life, but sometimes regrets his choice of career.

“If I had know things were going to be like this ... I wouldn’t be in the dairy industry,” he said.

Although the costs of producing milk are increasing, the amount dairy farmers can get for their product isn’t keeping up with these costs. Milk is fetching around $4 per gallon in many grocery stores, but dairy farmers like Dejong and Hollis are only getting about $1.75 to $1.84 for it.

The federal government sets minimum prices dairy farmers can be paid for their product, but according to Dejong and Hollis these prices aren’t reflective of the costs involved in producing milk, and they have little room to bargain for higher prices.

To put it bluntly, dairy farmers are price takers, not price makers.

The higher fuel and feed prices are hurting other livestock farmers, too. Larry McDaniel has a hog farm and says he’s making less money from his livestock because of the corn crunch.

“The livestock industry is bearing the brunt of the whole deal,” he said.

Dejong is trying to increase the profitability of his dairy by producing organic milk, which fetches a higher price than regular milk. But although organic milk brings in more revenue, it also costs more to produce.

Even if things get better, Dejong said the future of small dairies is uncertain. Dejong said the dire straits of the industry has pretty much convinced his sons, now young adults, to pursue other careers because they can’t see a comfortable future in dairy farming.

“I’m worried what’s going to happen in 20 years,” he said. “There’s no young guy that wants to do this kind of work anymore.”