The Energy Crisis and Dairy Trade
Milk takes a lot of energy to make, cool, process and ship. An energy crisis changes the price of every step, and it changes who can compete in world markets.
Where does a dairy use energy?
On the farm, power runs milking systems, vacuum pumps, cooling tanks, ventilation, fans and lighting. Diesel runs trucks and tractors. Natural gas and propane may heat water or buildings. Off the farm, processing plants use steam, refrigeration and drying equipment, and trucks haul milk and product.
The headline refers to an energy crisis. Price levels and dates should be verified at official sources like the Economic Research Service and FRED, and we do not add any here.
A dairy that cools milk quickly and efficiently also protects quality, so energy is not only a cost but part of the product. That is why cutting power use blindly can backfire. Aim to reduce waste without compromising cooling or sanitation. A walk through the barn with your electric bill in hand is a surprisingly good way to spot waste.
Why does it change trade competitiveness?
If energy costs rise more in one country than another, producers there may find it harder to compete. Powder drying and cheese making use much energy, so a regional gas price spike can raise the cost of exports from that region.
When competitors face higher costs, buyers may turn to other sources, and U.S. suppliers may benefit. When costs rise at home, the opposite can happen. The effect also depends on currency and on how contracts are priced.
Some competitor regions have faced steep energy costs in the past and responded by rationing, closing plants or changing product mix. Watching how they respond gives early hints about export supply, so follow the market commentary from the Foreign Agricultural Service.
- Processing energy at the plant
- Refrigeration and storage
- Transport by road, rail and sea
- Currency and contract pricing
What can a farm do to manage energy costs?
Start with an energy audit. Look at the largest uses, which are often cooling, water heating and pumping. Heat recovery from milk cooling can preheat water, efficient motors and variable speed drives can cut waste, and good maintenance keeps equipment efficient.
Programs may help with equipment upgrades. The USDA Rural Development and NRCS have offered assistance for energy efficiency in the past, and you should check what is available now and who qualifies. Utilities and electric cooperatives may also offer audits or rebates.
Simple steps can make a difference: clean condenser coils, fix air leaks, check hot water temperatures and time heavy loads to avoid peak rates where the rate schedule allows. None of it is glamorous, but the savings repeat every month. Ask equipment dealers for the energy use of any new unit before you buy, and compare it with the one it replaces.
How does it affect your milk price?
Processors pass some of their energy costs on through lower prices to suppliers or higher prices to buyers, and that depends on their contracts. Your own energy costs come directly out of margin. Think about both sides when you talk to your processor.
Keep an eye on the weekly Dairy Market News for product prices, and compare them with energy trends. The dairy herd guide also explains how herd efficiency can offset some cost pressure. If you sell milk under a contract with an energy surcharge or fuel adjustment, read that clause carefully.
What does it mean for Texas specifically?
Texas has abundant energy resources, which can cushion some price spikes, but dairies still pay market prices for most energy. Electric rates vary by utility and by region, and rural dairies in the Panhandle may face different rate structures than urban ones. Compare your rate schedule with your usage pattern.
The Texas Department of Agriculture and AgriLife Extension can point you to regional resources, and the Dallas Fed follows Southwest energy and economic trends.
The Panhandle's wind power industry has changed the regional electric picture, but retail rates are set by your utility, so ask them directly how your rate is calculated and whether a different schedule would suit your usage.
Where can you read more?
For farm business coverage in plain English, visit the economics section at farm.FM and dairy stories, and a farm.FM story on energy costs.
Our tractor and equipment guide covers fuel and machinery efficiency. This site is independent, and official sources have the current data. Neighbors who have installed efficiency upgrades are usually happy to share what they paid and what they saved.
Sources and further reading
- USDA Economic Research Service: farm economy data and analysis
- FRED: Federal Reserve economic data
- USDA Rural Development: rural business and community programs
- USDA NRCS: conservation programs and technical help
- USDA Dairy Market News: weekly dairy price reports
- Dallas Fed: regional economy including Texas and Oklahoma
Ask locally: Ask your electric utility for an energy audit and your Extension agent about efficiency options for dairies.