After spiking in 2007 and staying high for most of 2008, the price dairy farmers get for their milk is falling and will likely make for a difficult year for Louisiana’s dairy industry. While many farmers are enjoying lower production costs compared to a year ago, these aren’t enough to offset the decline in milk prices, LSU Agricultural Center scientist Wayne Gauthier said. “I’m afraid for the Louisiana dairy industry we’re going to continue to see a shrinking at the farm level,” he said.

“I wouldn’t be surprised if we lost 20 or 30 farms this year.” “Based on what I hear, it’s going to be a heavier exodus than you would normally expect,” he said. Two years ago, drought in New Zealand and Australia took milk off the market, and European Union farm policies reduced supply in Europe. Fueled by a weak dollar that made exports cheap, the U.S. dairy industry rushed to fill the void.

“International markets really helped boost U.S. domestic milk prices,” Gauthier said. But by the end of last year the drought eased and the economy began its freefall, which has hurt prices for dairy farmers. Gauthier said the price peaked in 2007 at close to $20 per 100 pounds of raw milk and is about $14 per 100 pounds now. In 1981, when Gauthier began monitoring the dairy industry, Louisiana had 1,025 dairy farmers in the state and its production peaked two years later at about 1 billion pounds of milk. Today, the state is down to 185 dairy farmers and produces about 350 million pounds of milk. “At one time Louisiana was self-sufficient in milk production,” he said. “Now we’re importing it, depending on the time of year, anywhere from 40 to 60 percent.” Gauthier said the decline of the state’s dairy industry is not specific to Louisiana; just part of the evolution of American agriculture. In a strictly business sense, Gauthier said, the industry simply needs fewer production inputs to meet demand. But he knows it’s not just strictly business. The sadness and the sorrow is when you look at family farms disappearing and the personal heartache that goes with that.” Agricultural Center spokesman Richard Bogren said protecting the dwindling dairy cattle industry was one of the main goals of a state tax credit program a couple of years ago. The Dairy Producers’ Refundable Tax Credit provides a dollar-for-dollar reduction against the dairy producers’ state income taxes up to $30,000 per individual dairy producer. The total tax credit program cost is capped at $2.5 million per year. The credit kicked in the first and fourth quarters of 2007, paying dairy farmers between $2,500 and $15,000 each. And it looks like the first and fourth quarters of 2008 will be the same, the Agricultural Center said, adding that the economy may cause the tax credit to be in effect for all four quarters of 2009. Gauthier said lower prices for farmers won’t necessarily result in lower prices for consumers, for several reasons. Downstream costs such as transportation and packaging make retail pricing and farm pricing different, plus, he said, milk tends to go up quickly and come down slowly. Another factor, he said, is that the price of milk is inelastic, meaning the consuming public is less likely to cut back when prices rise. Milk, he said, “has kind of got a sacred place in the food system and in consumer budgets.”