Dairy state: For farmers 2023 has been a ‘mixed bag’ but things are looking up

MOSES LAKE — Dairy farmers have had a rough summer, but things may be looking up, according to the Dairy Farmers of Washington, the Washington State Dairy Federation and area dairy farmers.

“The dairy industry landscape this last year, I think it’s kind of a mixed bag,” Dairy Farmers of Washington Executive Director Steve Seppi said. “I think the same inflation that’s hitting all consumers across all categories … it’s had a significant impact on the dairy industry.”

Seppi said farmers had seen good prices per hundredweight on milk last year, with prices above $20 for various classes of milk.

“This year, those have kind of receded a bit. We were well up over $20 last year. This year, they’ve come back under that $20 mark,” he said.

According to the USDA’s National Dairy Comprehensive Report, the market price per hundredweight averaged across class II, III and IV milk was $17.33 in June, $17.05 in July, $18.67 in August and $19.15 in September.

“I think things are pretty tough right now,” Washington State Dairy Federation Executive Director Dan Wood said. “What the farmer gets paid for the milk is expected to go up a bit this fall, but I don’t think it’s going to outpace the increase in supplies and operations.”

Margins for dairy producers are small right now, and there is some concern about the operating costs increasing to eat into profits. Maintenance on equipment, increased fuel costs and other expenses are all on the rise. Wood said he thinks it’s important that people understand that the price the farmer gets paid for milk is different than what the consumer sees in the store. Much of the cost of a gallon of milk at the market pays for processing, delivery and similar expenses, rather than paying the dairy the milk came from.

Seppi said a lot of dairy producers barely broke even over the last year.

Henry Benthem, a dairy farmer in Moses Lake, agreed that milk prices are low, but said he tries to stay positive.

“They’re trending upwards, as we speak, slowly, which I guess the dairy farmers that I know and I myself are always the ultimate optimists. Were like, ‘Hey, it’s going up, it’s going to get better,’ even though we’re probably breaking even at best right now, if that.”

Othello dairy farmer Chris Baginski echoed Benthem’s statements.

“It was a rough summer,” Baginski said.

Feed costs have trended down, Baginski said, adding to dairy farmers’ optimism.

Both Benthem and Baginski said they grow crops to offset their feed cost, something Seppi said is easier to do in Eastern Washington due to land availability. The cost of the feed the farms do buy is still very high though.

Transportation and fuel is another aspect dairy farmers must deal with. Most do not process their own products, sending their milk to processors like Darigold, which increases taxes affecting the farms.

“Dairy Gold is a co-op. They pick our milk up,” Benthem said. “This carbon tax hits us harder than most because, like I said, we buy a lot of our commodities and supplies and stuff. Our hauling cost goes up when we buy it since we’re part of the co-op … and fuel has gone up for them and then when they process (the milk), and then they ship it to the stores we cover that too, and then we use our own fuel.”

Baginski said LTI Milky Way, a bulk milk hauler, transports the milk to the processor. As the hauler’s fuel costs go up, they put a surcharge on the farmers, which can’t be passed on to the consumer, reducing the profits for milk producers.

Wood said this level of fuel taxation and taxes meant to reduce the carbon footprint was not supposed to happen.

“There was supposed to be a five-year exemption for fuel use to transport agricultural products on public roads, and it didn’t happen,” Wood said. “I mean the law is very clear, so there’s a lawsuit on that, there’s a task force trying to figure that out. I mean, we’re getting more and more distributors who are saying they’ve stopped charging the carbon tax to the farmers, but those exemptions are not fully realized.”

The tax the dairy farmers mentioned isn’t a traditional tax. The state legislature established a carbon emissions auction that carbon producers, such as fuel manufacturers or factories, pass on to the consumer in the form of higher gasoline prices.

Benthem said his biggest expense is feed, but he also has issues finding labor.

Baginski said he has to compete with orchards in the region for laborers, and when he does find workers they have a high minimum wage in Washington, which milk market prices do not reflect.

“The overall price of the milk is the same nationwide,” Baginski said. “So in Utah, their minimum wage is ten dollars, and all the hours they want to work, that’s beneficial for them, and that’s where the state of Washington is a little harder.”

Despite the struggles facing dairy farmers right now, optimism is trending upward in the market, according to Seppi.

“If demand continues to be high, the domestic market is strong, you expect some of these prices to rebound,” Seppi said. “The export market, despite the fact it’s been off kind of double digits from what it was last year, from a dollar perspective, I think there’s optimism that that will start to rebound.”

Wood said the WSDF has been looking at revenue options related to carbon reduction on dairy farms in state policy such as the Climate Commitment Act, which the WSDF is trying to help dairy farms in Washington benefit from.

“They sell the carbon credits, and then that money is invested into projects that reduce the carbon footprint,” Wood said. “But those things are long-term in the making, so it could be years, farm by farm, before there’s a revenue opportunity there.”

Every commodity is undergoing consolidation or the closure of farms, Wood said. Fewer farmers are in operation and those in the profession are getting older because it’s harder to make money as a dairy farmer, making the profession less attractive.

“Policymakers need to have more of a sense of urgency about this and say, ‘How do we get revenue so people aren’t losing money farming?’ I mean, farmers need to make a good living, not just break even, because the rest of us can’t live without our farmers,” Wood said.