Extension: Dairy slide continued in 2020
COLLEGE PARK, Md. — No surprise here: Maryland’s dairy industry continued to contract in 2020, according to a dairy expert at the University of Maryland Extension.
The number of dairy farms in the state was projected to fall from 348 in 2019 to 330 in 2020, according to a recent report by Extension agent Dale Johnson. For years, Johnson has released an end-of-year report that provides an economic snapshot of the state’s dairy industry and the financial health of its farms.
“The main reason for the loss of dairy farms is that farm gate milk prices have plummeted from a high of $25 per (hundredweight) in 2014 to below $20 per (hundredweight) every year since then as national supply has outpaced demand,” Johnson wrote.
Producing milk in Maryland continues to be a challenge, he said. Since 2014, the average price has been $17.49 per hundredweight while the cost of production is about $19, not including family-living withdrawals, loan principal payments or major capital improvements.
“Dairy farmers must try to make up the difference with cull & calf sales, crop sales, federal payments and other miscellaneous income,” he said.
Farmers looking to stay in the region but move to a more hospitable dairy economy might want to try Pennsylvania or Virginia. Since 2010, Maryland dairymen, on average, have been paid $19.07 per hundredweight while Virginians and Pennsylvanians have been paid $20.69 and $19.76 respectively. It’s worse when it comes to the cost of farmland. Marylanders pay about $8,080 per acre including buildings. In Pennsylvania it’s $6,600, and in Virginia it’s just $4,620.
“Our economics work to the detriment of Maryland dairy farms,” Johnson said.
While the higher cost boosts Maryland farmers’ net worth and provides more collateral to borrow against, the pricey land makes it more difficult to expand operations, and it prevents young farmers from entering the market, he said.
Johnson typically provides an update to his ongoing analysis of nearly 20 dairy farms across the state. COVID-19, however, made those farm visits impossible in 2020. But between 2016 and 2018, on average, the highest-performing eight farms (non-organic) produced a net profit of about $145,000 per year while the lowest-performing nine farms produced a net profit of about $9,000. (That’s before living expenses and debt payments.) The seven organic farms he monitored produced a net profit of nearly $66,000.
The main difference between the high eight farms and the low seven: feed costs and other sources of farm income.
The number of dairy farms in Maryland has fallen by more than half since 2003 when there were 710 of them. The number of dairy cows has fallen by nearly half to 40,000 while the average number of cows per farm has grown from 108 to 121 due to consolidation.
One positive: Milk production per cow has risen by more than a third from 15,286 pounds in 2003 to 20,500 in 2020.