US Dairy Crisis

Many of the more than 60,000 dairy farms in the United States have been cutting costs, selling off their cows, or leaving the dairy business altogether as milk prices plummet 35 percent in just the past two months while dairy farm operating costs remain uncomfortably high.

Some farms are losing $200 per head every month.

Milk prices are down more than 50 percent from last summer after hitting all-time highs in 2007 and notching the second highest prices on record in 2008.

Analysts expect milk prices to remain depressed through at least the first half of the year, and prices later this year may only be high enough to cover production costs.

Farmers have an opportunity to get paid for culling their herds via the farmer-funded CWT program

Industry analysts say the reason for the steep drop in milk prices is simple-- too much milk and not enough demand for it.

Restaurant traffic is down in the United States as recession jitters have consumers reeling in their spending.

About 40 percent of U.S. milk production is made into cheese and roughly 60 percent of the cheese is used in the restaurant and food-service sectors, according to analysts.

Dairy exports, which helped drive U.S. milk prices to the sky-high levels in 2007 and 2008, are also down sharply.

Importing nations are buying less amid global economic woes and a firmer dollar, which makes dollar-denominated commodities like milk more expensive for buyers holding other currencies.

From Reuters.