GOT WORK? AREA DAIRY FARMERS FACE DROP IN PRICES

Art Simmers connected an automated pumping device to a cow's udders. Dairy farmers are faced with a drop in price after a recent USDA decision.

Southeast Missouri dairy farmers won't soon forget the day Uncle Sam took their milk money.

That day was March 5, when the U.S. Department of Agriculture slashed wholesale milk prices 40 percent.

The effect on retailers is unknown, although many national wholesale distributors believe consumers will see prices drop within two months.

However, the effect on area dairy farm operators may be more immediate and relevant than any changes taking place in the grocer's dairy aisle.

"I believe we are going to lose quite a few dairy farmers," said Charlie Schabbing, a milk producer and area director for the Dairy Farmers of America.

"And you're not going to see milk prices drop at the store like what we're experiencing."

Although a decline in wholesale milk prices was rumored, few farmers -- if any -- anticipated the USDA's drastic price drop.

"We started hearing rumors back in December that there was going to be a big decline, but I didn't believe it would be like this," said Schabbing from his farm in Cape Girardeau. "I didn't believe it until I saw it."

According to the USDA, strong milk prices and low feed costs created an environment in which dairy farmers increased herd and milk production.

The increase in production ultimately led to oversupply and a national milk glut. To remedy the problem, the USDA cut the wholesale price of milk from $16.27 to $10.27 per hundred weight of milk -- the lowest price since 1991.

The wholesale figure is not necessarily the price a farmer will receive, but it is the starting price fixed by the government for all milk producers.

Unlike many commodities, milk is not sold on the open market and it cannot be contained until prices rebound.

"Our product has to be shipped off the farm within 48 hours -- we can't wait for prices or store our product like beans or corn," said Schabbing.

Because of the complexity of commodity markets and governmental price structuring, the future of some dairy operations may be limited.

Schabbing said a lot of farmers cannot continue to operate at the current wholesale price.

"We need to be in the $16 range to break even because our expenses keep going up -- our repair costs, feed and seed, all our expenses keep going up," said Schabbing, with a hint of despair in his voice.

"We've already cut back on everything and you keep cutting and cutting until you finally reach a point that you just can't cut back anymore," he said. "The only thing left is getting rid of the cattle and closing the door."

The Dairy Farmers of America, the largest dairy co-op organization in the U.S., expects the wholesale price to average $11.82 in 1999. If that is correct, local agribusiness will also feel the squeeze.

"There is no doubt that we will feel it," said Bill Hahs of Semo Ag & Dairy, a dairy farm supplier near Jackson. "We will have to extend credit more than we normally would and some farms will close."

Hahs said the low milk price could force some dairy farmers into retirement and others will close because of financial problems.

"We've got to be more competitive in the foreign markets," Schabbing said. "The U.S. export markets aren't there because other countries can produce at a lower cost than the U.S."

Dairy farmers can't wage a protest by withholding product or turning the streets white with milk because most farmers are living on shoestring budgets and rely on the daily sale of milk to survive.

"If you could get all the dairy farmers in America to dump their milk (in protest), it might wake this country up," said Schabbing.

But dumping instead of selling would be financial suicide for many farmers -- especially those already on the edge of the pail.