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U.S. dairy producers feel pinch from inflation, severe weather

As the U.S. nears a potential recession, dairy producers are finding themselves impacted by both inflation and severe weather.

“There’s certainly been a lot of talk about the inflation at the shelf and food prices,” Tillamook County Creamery Association CEO Patrick Criteser told Yahoo Finance Live (video above). “And there should be because that’s an 8-12% — even higher in some categories — increase in costs year-over-year that’s impacting families.”

Although inflation in the U.S. has shown signs of easing, it still remains relatively elevated at 6.5%, according to the latest Consumer Price Index (CPI) print.

The price of household staples like eggs, butter, and milk are still up substantially over the past year. The latest CPI report indicated that egg prices rose just under 60% year-over-year and 11.1% month-over-month, largely due to an outbreak of avian flu. Butter prices, meanwhile, rose by 35.3% annually while milk prices rose by 12.5%.

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These higher costs not only weigh on consumers — they also affect dairy producers and companies like Tillamook, an Oregon-based dairy co-op that relies on obtaining dairy products at an affordable price. (The price of ice cream, which is made with products such as milk and eggs, rose by 15% annually in the latest CPI print.)

“It’s also important to remember what the current economic conditions are, the impact they’re having on the nation’s farmers,” Criteser said. “Input costs at the farm level are up substantially."

According to the Purdue University/CME Group Ag Economy Barometer from November 2022, 42% of farmers cited high input costs as their top concern for 2023 while 21% chose rising interest rates.

"Farmers are price takers, not price setters," Criteser explained. "So this cycle of cost increases and then price increases, it rolls through other supply chains. It gets stopped at the farm level in the supply chain to the extent that farmers are having to bear the impact of high input costs without the ability to necessarily pass on higher prices.”

Dairy farmer Fred Stone checks on his cows at the Stoneridge Farm in Arundel, Maine, March 11, 2019. REUTERS/Brian Snyder
Dairy farmer Fred Stone checks on his cows at the Stoneridge Farm in Arundel, Maine, March 11, 2019. REUTERS/Brian Snyder (Brian Snyder / reuters)

Another factor driving uncertainty and higher prices for farmers has been variable weather conditions, which Criteser described as "challenging."

California's bomb cyclone earlier this month led to more than 10 inches of rain, which can destroy animal feeds for farmers. The floods are the latest in a pattern of severe weather events that bog down the agriculture sector.

“Weather conditions have a big impact on farming and the environment within which farming is taking place,” Criteser said. “Just a month or so ago, in a 10-day period, we had an ice storm and then a wind storm that caused power outages. And we’re moving generators all around to different farms and trying to keep farms operating.”

Consequently, he added, "many farmers across various sectors and regions in the West are faced with a choice about eating into sometimes multi-generational equity, multiple years of losses, just to keep the farm operating."

Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at adriana@yahoofinance.com.

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