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Farmers hit with high cost of feed

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WASHINGTON — Skyrocketing feed prices will stretch dairy farmers this year, but higher milk prices will prevent the sort of financial bloodbath that hit producers in 2009, a government economist said Friday.

Some farmers may even make a profit, said economist Roger Hoskin of the U.S. Department of Agriculture's Economic Research Service.

The Department of Agriculture expects milk production nationally to climb to 196.1 billion pounds, aided by a slight increase in output per cow.

Steady consumer demand for dairy products in the United States and stronger demand in China and other countries should keep milk prices high enough to help many farmers survive higher feed costs, Mr. Hoskin predicted.

He gave the predictions at the USDA's annual outlook conference in Arlington, Va., where two dairy producers also shared their outlook on the year ahead, focusing on farmers' need to protect themselves against higher feed prices by forward contracting or other means.

Although the outlook for milk prices is bright, the cost of soybeans, corn and other key feeds will be high enough to more than make up for gains in milk, Mr. Hoskin said.

"In 2011, the outlook is not so good," he said.

He predicted that net cash income on dairy farms, which rebounded to $212,000 on average last year after a disastrous 2009, will dip to $184,000 this year. Indeed, the dairy business will see the biggest decline in net cash income of all livestock sectors — but still among the highest levels since 1996.

One farmer who shared his family's story at Friday's session, Bobby Prigel of Glen Arm, Md., said he has had to change his business in major ways several times over the years to survive. First he moved from typical feed rations to pasturing his cows, which now number 550. Then he changed to organic production, which gains a higher price.

Now, he has ventured into ice cream, building a plant on his farm and selling to high-end stores and restaurants, he said.

The mixed financial outlook comes as Congress prepares possibly to revamp dairy policy in the 2012 farm bill — a debate often shaped by farmers' fortunes at the time. Discussions on that legislation will intensify this year; dairy cooperatives that sell farmers' milk are pushing for some changes before the new farm bill.

Dairy economists generally agree on the impact of high feed costs this year. Robert A. Cropp, a dairy economist at the University of Wisconsin, has said that 2011 appears to be shaping up much better for farmers than earlier predicted and that milk prices, while likely to decline later this year, could still be higher than in late 2010.

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