Home News Local News Dairies face ‘double-whammy’ of low prices, excess supply

Dairies face ‘double-whammy’ of low prices, excess supply

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Submitted Photo Nationwide, dairies are experiencing significant business difficulties. The head of a cooperative that works with New Mexico dairies says Pecos Valley milk producers face the same pressures.

Copyright © 2021 Roswell Daily Record

Chaves County ranks No. 1 in the state for the size of its dairy industry, but that industry, like so many others, is facing extreme financial pressures as the coronavirus crisis affects the global economy.

Grocery shoppers sometimes can find empty shelves for milk and other dairy products as retail consumption has increased, said an industry leader. But the larger picture for dairy producers is that prices are way down due to international trade issues and the disruption of the supply chain and that overall demand has slumped as restaurants and food suppliers have dealt with government restrictions due to the coronavirus crisis.

“We are under a tremendous amount of stress with the volume of milk we have as well as the price,” said Rance Miles, chief executive officer of Select Milk Producers Inc. He called it a “double-whammy” for the industry.

Select Milk is a cooperative based in Dallas, Texas, that includes dairy producers in the Midwest as well as the southwestern states of Texas, New Mexico and Oklahoma. He estimates that about 35 of his producers are from New Mexico.

He said that his organization notified its producers on Friday to expect prices to drop to somewhere around $10.50 per 100 weight of milk, when the break-even price for most producers is about $16 to $18 per 100 weight.

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He doesn’t think producers are in a position to lay off workers because the cows still must be cared for and milked, so he estimates that a producer with 2,500 to 3,000 head could lose as much as $300,000 a month.

“They have been having some tough times anyway, because we have had two or three years of tough prices,” Miles said.

Now the coronavirus business restrictions that limit restaurants to delivery or take-out only are causing even worse conditions.

Products like feta cheese, butter, mozzarella cheese and sour cream that normally would be going to restaurants aren’t being purchased for the most part, he said.

“We are seeing customers both on the fluid side and on the manufacturing side drop the amounts of (products) they are ordering,” he said.

Leprino Foods, which has a Chaves County cheese and dairy by-products plant, continues to “take our planned milk volumes,” said Kimberly DeVigil, director of communications for the global food company.

She chose not to answer how the current situation is affecting sales, but said the company has implemented stricter sanitation, cleaning and distancing rules to ensure the safety and health of workers and allow for continued operations. The company also has instituted paid leaves, flexible attendance policies and bonuses so that operations will continue to run smoothly while employees care for themselves and families, DeVigil said.

Miles said that his group is working with grocery stores and other customers to donate as much milk and dairy products as possible to food banks or similar organizations. Excess milk also goes to “balancing” plants to make into dairy by-products. But there is still too much supply. As a result, he said, recently 400 tankers in Texas and New Mexico carrying about 6,200 gallons each had to dump the milk.

He added that the oversupply and dumping are occurring nationally, not just in the southwest.

“It breaks our heart to see this healthy product go down the drain,” Miles said, “especially when we know we need to get these food products in the hands of people who need it.”

He said that Select Milk has shared with its members the Payroll Protection Program funds that are part of the recently passed Coronavirus Aid, Relief and Economic Security (CARES) Act. The funding available through qualified 7(a) Small Business Administration lenders can provide up to 2.5 times a company’s payroll expenses, up to a maximum of $10 million. Some portions of the loan can be forgiven in some cases.

The loans might cover a month’s worth of losses for some producers, Miles said.

“Every little bit helps,” he said, “but given how much money these guys could be losing, that is not going to go that far.”

Miles said the industry is also waiting to hear how another $9.8 billion of the CARES funding that is earmarked for agriculture will be used. The industry is suggesting a “supply reduction program.” That would provide payments to producers who agree to reduce production.

“We have great customers and great relationships and everybody is doing everything that they can,” he said. “We are hoping to hang in there and hopefully everything will straighten out sooner rather than later.”

According to the most recent New Mexico Agricultural Statistics publication produced in November 2019 by the New Mexico Department of Agriculture, New Mexico ranked ninth in the nation in 2018 for value of gross milk production, which was $1.21 billion, 3.8% of the U.S. gross production value. Chaves County, with 2.1 billion pounds of milk produced in 2018, is the biggest dairy producer in the state.

Senior Writer Lisa Dunlap can be reached at 575-622-7710, ext. 351, or at reporter02@rdrnews.com.

 

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Lisa Dunlap is a general assignment reporter for the Roswell Daily Record.