These are hard times for beef and dairy producers.

Since the first of the year, milk prices have dropped to near $10 cwt in many dairying areas. This is half the price dairymen were receiving last summer when Australia and New Zealand were in a severe drought. American dairymen expanded to fill these countries’ export markets and to help supply the growing Chinese demand for dairy products. Since then Australia and New Zealand have recovered, the American dollar has risen and the Chinese are scared to death of any dairy product since the melamine scandal. Dairy cows that were worth $3000 last summer are selling for $800 today and male Holstein calves are only worth $5.00 a head. Add to this a severe drought in California that has sent alfalfa hay prices through the roof . . . Dairy cow slaughter is up 30% over last year whereas beef cow slaughter is down 14%. Last week DFA held a meeting in Memphis, Tennessee, to tell the 350 dairymen assembled there that their best hope was to convert to New Zealand-style grassland dairying. Who would have thought such a day would ever come?

Well, I did, and have been advocating it for a couple of decades. This isn't precisely the way I saw it happening though. I expected the price of grain to be more important than the price of hay.

It's a good thing that I do grow grass well since my costs will remain low. My advice to the local fellows is that now is the time to begin herd expansion on grass forage. By the time the heifers are grown there may again be good prices. It's a gamble, but one that has worked in the past. I'm also advising them to improve their pastures now. There are capital costs, but the pay back is quick and you continue to get dividends in future.

Another consideration, same page.

Argentine cattle numbers fell by 15 million head last year as drought and government policies continue to undermine what was once Argentina’s primary industry. As recently as 2005, Argentina was the world’s third largest beef exporter. Now, it is seventh and was recently passed by the small neighboring country of Uruguay. The leftist Argentine government has been keeping beef prices artificially low to shore up its political base among the urban poor in Buenos Aires and to encourage the conversion of the more fertile Pampas region to export soybean production. The government currently gets the majority of its income from export taxes on soybeans. The cheap beef policy has pushed domestic per capita consumption to 154 pounds, the highest in the world. Beef is now cheaper in Buenos Aires than chicken, fish or even pasta. The Argentine newspaper La Nacion quoted a leading Argentine farmer as saying that Argentina will probably have to import beef next year due to the continuing decline in the nation’s cowherd.

This means that world supply is falling and could raise prices next year. It's a shame to see some of the best grassland in the world go under the plow.