By Rick Barrett of the Journal Sentinel

Wisconsin's dairy industry, still thousands of farms strong, is awash in trouble.

The average dairy farm in the state is losing about $100 per cow each month, according to the Wisconsin Farm Bureau Federation.

With more than 1.25 million cows in the state, it means the industry is losing about $4 million a day.

That's largely because farmers, who received about $20 for every hundred pounds of milk they produced last summer, have seen that price cut in half this summer. They've slashed expenses but are losing money on every gallon of milk they produce - partly because consumers are buying less ice cream, butter and cheese.

Some farmers have cashed out their farm equity and savings just to buy cattle feed and pay their utility bills.

Entire herds of cows have been slaughtered as part of a national program meant to reduce milk supplies and increase the amount that farmers receive in their milk checks.

Export markets also have dried up for U.S. dairy farmers. Last year, the U.S. exported nearly 11% of its milk production. When the global economy tanked, demand shrank and prices collapsed.

Meanwhile, American consumers who think they're getting real milk in their dairy products often are getting milk substitutes from overseas, said Paul Rozwadowski, a dairy farmer from Stanley who recently testified before Congress about the dairy crisis.

Especially bad year

Many of the problems besetting farming aren't new - it's been a boom-or-bust industry for decades. But the downturn that began earlier this year is especially severe.

Crisis counselors in rural areas have been inundated with calls from farmers, some of them suicidal.

"My parish priest in my small town has had to counsel one or more dairy farmers a week to prevent their suicides," Rozwadowski said. "And we know of reports from across the country of farm suicides that have already occurred."

The downturn has strained families and marriages because most farms are more than businesses. They're also homesteads where families have lived for generations.

When you lose a farm, in many cases, you lose your home, retirement, and a way of life. Everything you've worked for is destroyed, said Bruce Drinkman, a 46-year-old dairy farmer from Glenwood City.

He and his wife, Mari, recently cashed out Mari's retirement account so they could keep feeding their 55 cows.

Their farm, Desperation Acres, is an organic milk operation that had been profitable. Now the Drinkmans have fallen behind on their bills and can't persuade the bank to extend them additional credit.

"The utility company is going to shut off our lights one of these days," Bruce Drinkman said.

Only a year ago, the dairy industry was in pretty good shape. Farmers, flush with profits, expanded their herds and took on additional debt to buy land and equipment.

"We can't really look at the current prices without reflecting on last year's prices that were as high as they've ever been," said Bill Bruins, a Waupun dairy farmer and president of the Wisconsin Farm Bureau Federation.

A combination of factors, including overproduction and a collapse in export markets, sent farm milk prices plunging nearly 50% in a matter of months.

"The fact is we import more milk products in this country than we export," Bruins said. "Even with our low prices, domestic dairy processors (including major farm cooperatives) can buy foreign products cheaper than raw U.S. milk."

The crisis has sent a shock wave through Wisconsin, since the dairy industry contributes about $20 billion a year to the state's economy and is a lifeline for rural communities.

"Unless action is taken immediately, we will see one-third of our remaining dairy farmers go out of business very soon," Rozwadowski said in his testimony before the House of Representatives Agriculture Subcommittee.

Herd kill-off issues

What's been done to address the crisis may be too little, too late, for thousands of farmers.

A national program, called Cooperatives Working Together, has paid farmers to send more than 100,000 cows to the slaughterhouse. Several dozen Wisconsin farms have participated in the herd liquidation program.

Nationwide, the nearly 2 billion pounds of milk taken out of production by CWT, combined with other efforts, could help increase milk prices.

Yet it's heartbreaking and a poor way to manage the nation's milk supply, Rozwadowski said.

"Farmers who have been milking cows for decades are now seeing a lifetime's work go up in smoke as their herds, including even bred heifers, are sold off to the CWT program. At the same time, there are 924 million hungry people in the world . . . our dairy products could be used to feed the hungry."

The U.S. Department of Agriculture has a program called the Milk Income Loss Contract that issues payments to dairy farmers when market prices fall to a certain level.

But the price that farmers are receiving for their milk is so far below their cost of production that MILC payments don't make much of a difference.

On Friday, the USDA said it's raising the price the government pays for milk and cheddar cheese through a dairy price support program.

The department estimates the temporary increases, which will be in place until October, will boost dairy farmers' overall revenue by $243 million.

Farmers say the effort will help, but it's not enough.

Rozwadowski wants the USDA to set a minimum farm milk price of about $18 per hundred pounds - enough to return dairy farms to profitability.

The USDA has received more than 13,000 letters supporting a higher minimum price, which would be paid by dairy-product processors rather than the government.

But the same system that's blamed for low prices also gave farmers higher than average prices in 2007 and 2008.

"Yes, the government has a role in regulating the industry, and it does set the basic price for our milk. But that price is largely determined by the marketplace forces of supply and demand," Bruins said.

When the USDA raised the milk price during President Jimmy Carter's administration, government warehouses soon overflowed with dairy products as farmers ratcheted up production. So the USDA bought huge numbers of dairy cows and sent them to slaughter, which soon flooded the beef market.

"Beef producers never forgot what it did to their industry," Bruins said.

Economists say a better solution is for U.S. dairy farmers to become a reliable, competitive supplier to the world marketplace.

Trade agreements sought

That's going to require trade agreements giving American farmers equal footing with foreign competitors.

Government reductions of the domestic milk supply are doomed to fail because other dairy-producing nations will race to fill the void, Bruins said.

Consumers haven't seen big drops in dairy product prices because food companies - rather than farmers - largely set the prices.

On average, farmers receive only about 30 cents of every dollar that consumers spend on dairy products, according to the Wisconsin Farm Bureau.

Meanwhile, even some debt-free farmers have fallen behind on their bills since their milk checks shrank.

"There are good operators who have been forced out of business through no fault of their own," said Shelly Mayer, executive director of Professional Dairy Producers of Wisconsin.

The Drinkmans, from Glenwood City, are third-generation farmers. They hope to weather the current economic storm but say that some of their neighbors may not be as fortunate.

"I am aware of at least three farmers in my area who probably won't be in business by Christmas. One of them could be gone by Labor Day," Bruce Drinkman said.

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