Since January when milk prices fell to $10 per hundredweight and then $9 in February, dairy farmers across Wisconsin have been struggling to survive.
"We're hearing from farmers from all over the state," says Paul Dietmann, Wisconsin Farm Center director. The milk price for May milk is still hovering near $10.
Wisconsin Farm Center Financial Analyst Roger James says the call volume at the Farm Center started increasing last summer after the flooding last June.
"There are farmers in the northern part of the state who have had three drought years in a row and farmers in the western part of the state dealt with back-to-back floods in 2007 and 2008," says James. "The general economy is bad, too. Now there are fewer jobs available and more layoffs. A lot of farm families were depending on off-farm income and now they don't even have that option. You throw in low milk prices and it's easy to see there is a lot of pain out there."
The pain is pretty universal among dairy farmers, big, small, old and young.
"With such low milk prices, the vast majority of dairy producers are not making money right now," says Frank Friar, economic development consultant and farm financial adviser for the Wisconsin Department of Agriculture Trade and Consumer Protection and the Wisconsin Farm Center. "The average dairy farmer is projected to lose about $1,000 per cow this year. That's a big loss."
Friar believes most dairy producers will be milking cows a year from now, but they will go deeper in debt this year in order to survive financially. Others will choose to sell out while some will have no choice but to quit.
"In the past, farmers who got in trouble could sell off the Back 40 for recreation land," says Dietmann. "There is no market for that right now, so that's one less option they have."
Friar says timing is the problem for a lot of young farmers.
"If you are a young farmer who bought your cows in 2007 or 2008, paid $2,000 or more per cow and started farming on their own, then this is a train wreck."
James says many farmers are making their payments at the bank, but haven't paid the feed mill, the vet or the utility company and others.
"If you haven't paid the utility company in four months, then you're probably going to be on a list where you will have to negotiate with the electric company to work out a payment plan," James says. "I talked to one farmer who was four months behind to the electric company. They threatened to shut him off, so he paid them some. Then the feed mill said they weren't going to bring out feed. That's when it's time to sit down and examine whether you have a viable operation or not."
Friar recommends dairy farmers update their financial statement and look into the future and try to project where you will be in January.
"You need to talk to your lender," Friar says.
The Farm Center can assist farmers who need help figuring out a balance sheet, projecting cash flows for 2010, or coming up with a viable plan to take to the bank. All services are confidential and free of charge.
"We're here to work with farmers," Friar says. "We offer a cash flow and enterprise analysis. That's what we do. We also offer debt analysis and that would include restructuring."
Dietmann says Harvest of Hope can offer help to distressed farmers, too.
"Harvest of Hope is a non-profit group in Madison that has been going since the farm crisis in the 1980s. They give out grants of up to $800 per farm family," Dietmann says. "There is a limit of two grants per family per lifetime."
Farmers who need help from the Wisconsin Farm Center or Harvest of Hope or have questions may call the Farm Center at 1-800-942-2474.