US dairy farmers are facing an unprecedented crisis, as low prices continue to force people out of the business.
According to Jay Waldvogel of co-op Dairy Farmers of America, some farmers have lost as much equity in the past nine months as they had managed to build up over a decade.
But, despite efforts to contain supply through initiatives such as the Co-operatives Working Together programme, which had taken large numbers of cows out of production, he believed the real issue was the collapse in global demand.
“I don’t believe we have an excess supply problem,” he told the Dairy UK conference. But the response of consumers in China to the price hike in October 2007, combined with the toxic melamine crisis and the credit crunch, had led to the ongoing market slump.
US farmers were especially vulnerable to this, as they had expanded rapidly when global demand for dairy products took off in 2003, doubling their exports to 10% of domestic production.
The solution to the current crisis lay in trying to stimulate demand. But while markets had recovered pretty well in the domestic market, the large stock overhang of products that were previously destined for export continued to weigh on the market.