MONROE - Falling dairy prices are putting a pinch on farm equipment dealerships and manufacturers.
Farmers are holding off buying new equipment unless absolutely necessary, local farm equipment dealers said.
"It's a chain reaction," Peggy Dierickx, Communication Director for the Dairy Business Association, said.
Kuhn North America announced April 10 an indefinite layoff of 50 full-time employees. Kuhn had a similar layoff in March of about 60 employees.
The company is the largest manufacturer in North America of TMR mixers and manure spreaders, and a leading provider of hay and forage tools.
Kuhn attributed its situation to a lack of new equipment orders. In response, Kuhn is reducing its sales and production for 2009.
As farmers are losing revenue the demand for farm products has fallen as well.
"Dairy farmers are taking a pretty good hit, with their income cut in half," Gary Anderson, owner of Washington Implement Company, Monticello, said.
Milk prices fell dramatically in January and February, with USDA's all-milk prices falling from $19.40 per hundred weight in July 2008 to $11.50 per hundred weight by February 2009.
In that same time period, income over feed costs - milk prices minus feed costs - dropped 60 percent, from $7.49 per cow to $2.99, according to a Penn State University report. Penn State reports February income over feed costs were the lowest since it began collecting data in 2000.
According to a Penn State Dairy Outlook report for March 2009 the main reason milk prices fell was because cheese, butter and nonfat dry milk prices fell, which was caused by a sharp decline in dairy exports.
Dairy commodity prices - cheese, butter, nonfat dry milk and dry whey - directly affect how milk producers are paid.
Ernie Studer, of Studer Super Service, Inc., Monroe, said his customers are becoming a little more optimistic with the announcements of higher milk futures.
"Most of these guys don't think the government is going to come and bail them out," he said.
Milk prices have started to recover; cheese and butter prices are increasing on the Chicago Mercantile Exchange cash market. Having reached a low of less than $10 per hundred weight in January, milk futures are expected to reach $15 per hundred weight by the last quarter of this year - which is still $5 less than the more than $20 high in June 2008.
"It's a tough, tough spring out there," Teresa Zimmer, executive director for the Green County USDA Farm Service Agency, said.
Zimmer noted that the uncertainty of grain markets also has an impact on cash crop farmers' decisions.
"The inputs (costs of planting) are unknown. Soybeans are good, but corn is fluctuating a lot; and, you have to think nationally. Texas and other southern states are already planting, and that impacts local markets," Zimmer said.
Farmers are doing more repair of equipment, but the costs of planting and harvesting are still with them, Anderson said.
"Cash crop farmers purchase new equipment in the fall and early winter," Anderson said.
Equipment dealerships take early orders, the season prior to the planting season, so manufacturers can get their raw materials and get the equipment built before farmers need them, Anderson said.
"I have new corn planters still to come in, and planting starts in 10 days," Anderson said.
But the return of milk prices may not have an immediate effect on manufacturing and sales of farm equipment.
Milk prices on the Mercantile Exchange continue to lag, so producers won't see an increase in their checks until this month. Most gains will not show up until the second half of the year, according to the Penn State report.
After two good years in 2007 and 2008 fueled by favorable economic conditions, a strong growth in farming and consumer demands for farm equipment, companies like Studer Super Service, Washington Implement and Kuhn North America did not anticipate the rapid decline, Kuhn said in its layoff announcement.
By late 2008, a decline in farm commodity prices, lower anticipated farm incomes and a general lack of credit availability caught farm equipment manufacturers off-guard, the Kuhn statement said.
Kuhn North America said the deterioration of farm prices and available credit resulted in a lack of confidence in the future of agricultural markets, a substantial drop in retail sales of equipment production and an increase in field inventory of equipment, according to the company.
Farmers are holding off buying new equipment unless absolutely necessary, local farm equipment dealers said.
"It's a chain reaction," Peggy Dierickx, Communication Director for the Dairy Business Association, said.
Kuhn North America announced April 10 an indefinite layoff of 50 full-time employees. Kuhn had a similar layoff in March of about 60 employees.
The company is the largest manufacturer in North America of TMR mixers and manure spreaders, and a leading provider of hay and forage tools.
Kuhn attributed its situation to a lack of new equipment orders. In response, Kuhn is reducing its sales and production for 2009.
As farmers are losing revenue the demand for farm products has fallen as well.
"Dairy farmers are taking a pretty good hit, with their income cut in half," Gary Anderson, owner of Washington Implement Company, Monticello, said.
Milk prices fell dramatically in January and February, with USDA's all-milk prices falling from $19.40 per hundred weight in July 2008 to $11.50 per hundred weight by February 2009.
In that same time period, income over feed costs - milk prices minus feed costs - dropped 60 percent, from $7.49 per cow to $2.99, according to a Penn State University report. Penn State reports February income over feed costs were the lowest since it began collecting data in 2000.
According to a Penn State Dairy Outlook report for March 2009 the main reason milk prices fell was because cheese, butter and nonfat dry milk prices fell, which was caused by a sharp decline in dairy exports.
Dairy commodity prices - cheese, butter, nonfat dry milk and dry whey - directly affect how milk producers are paid.
Ernie Studer, of Studer Super Service, Inc., Monroe, said his customers are becoming a little more optimistic with the announcements of higher milk futures.
"Most of these guys don't think the government is going to come and bail them out," he said.
Milk prices have started to recover; cheese and butter prices are increasing on the Chicago Mercantile Exchange cash market. Having reached a low of less than $10 per hundred weight in January, milk futures are expected to reach $15 per hundred weight by the last quarter of this year - which is still $5 less than the more than $20 high in June 2008.
"It's a tough, tough spring out there," Teresa Zimmer, executive director for the Green County USDA Farm Service Agency, said.
Zimmer noted that the uncertainty of grain markets also has an impact on cash crop farmers' decisions.
"The inputs (costs of planting) are unknown. Soybeans are good, but corn is fluctuating a lot; and, you have to think nationally. Texas and other southern states are already planting, and that impacts local markets," Zimmer said.
Farmers are doing more repair of equipment, but the costs of planting and harvesting are still with them, Anderson said.
"Cash crop farmers purchase new equipment in the fall and early winter," Anderson said.
Equipment dealerships take early orders, the season prior to the planting season, so manufacturers can get their raw materials and get the equipment built before farmers need them, Anderson said.
"I have new corn planters still to come in, and planting starts in 10 days," Anderson said.
But the return of milk prices may not have an immediate effect on manufacturing and sales of farm equipment.
Milk prices on the Mercantile Exchange continue to lag, so producers won't see an increase in their checks until this month. Most gains will not show up until the second half of the year, according to the Penn State report.
After two good years in 2007 and 2008 fueled by favorable economic conditions, a strong growth in farming and consumer demands for farm equipment, companies like Studer Super Service, Washington Implement and Kuhn North America did not anticipate the rapid decline, Kuhn said in its layoff announcement.
By late 2008, a decline in farm commodity prices, lower anticipated farm incomes and a general lack of credit availability caught farm equipment manufacturers off-guard, the Kuhn statement said.
Kuhn North America said the deterioration of farm prices and available credit resulted in a lack of confidence in the future of agricultural markets, a substantial drop in retail sales of equipment production and an increase in field inventory of equipment, according to the company.