It’s going to be a tough year for dairy farmers, according to Mike Schutz, a specialist in dairy management, genetic improvement and milk quality at Purdue University.

“It’s still a little uncertain what milk prices will be in 2008,” he said. “There’s a $2 to $3 drop expected, and feed prices will continue to go up.”

Rising feed and fuel costs have shifted the focus at smaller dairy operations from total milk production to efficiency in production. Many farmers who were raised in the classic school of more milk equaling more profits, however, are wary of slackening off on production to increase the ratio of profits to cost.

“People need to realize they can’t do it like dad did it anymore,” Daniel Imhoff, dairy farmer and Goshen resident, said.

Imhoff, 27, has his own style of coping with market fluctuations that is earning him confused stares and playful joking from friends. After deciding to try and cut his feed costs in half, he came up with a relatively unheard of plan to feed his cows over 80 percent forage, with a mixture of about one pound of crushed corn, four and a half pounds of crushed soybeans and 24 pounds of forage.

“That’s a much higher forage content than most dairy farmers use. Many people try to cut feed costs by grazing more,” he said. “I’ve found the cows simply don’t need that much grain.”

True forage consists of grasses or dry hay, but Imhoff includes corn silage and haylage in his mixture. Although he has sacrificed some ground in milk production, he has succeeded in cutting his grain bill in half.

“Feed efficiency is my number one goal,” he said. “Right now I’m getting about 1.6 to 1.8 pounds of milk per one pound of dry matter. My goal is two to one.”

Imhoff was milking his cows three times a day for two and a half years and was able to collect about 100 pounds of milk each day, but went back to a twice daily schedule when his wife, Vivian, gave birth to their third child a year ago. Part of an increasingly noticable trend, Imhoff has a business on the side to supplement income from the farm.

John Adam, whose 60 head dairy farm is just east of New Paris, rents out equipment to other farms and sets up a corn maze in the fall to bring in extra income.

“People are picking up full-time jobs off the farm,” Schutz said. “You see it in a lot of farm families.”

Adam has started to change over to more grazing to offset rising supply costs. Due to the change, he has been able to eliminate cutting, raking and baling of the graze area. He also rents out 270 acres of land in addition to the 80 acres he owns to be used for multiple purposes, including growing most of his own grain.

“You have to find a niche for what you’re comfortable with if you want to survive (in the small dairy business) right now,” Adam said.

One reason behind the increases in grain costs has more to do with Washington D.C. than problems in Indiana.

“Feed costs have been heavily affected by bioenergy production, mostly corn-based ethanol,” Schutz said. “A lot of farmers switched their fields to corn because it looked like it would have a profitable year, which it did. But that also means there are fewer farmers planting soy beans and wheat, increasing their prices as well.”

Ethanol is an active business in the state, with Morning Star Energy LLC preparing to begin construction on a 110 million gallon per year plant later this year in Vermillion County near Clinton. In Marshall County, residents banded together and filed a petition against the opening of an ethanol plant by Indiana Renewable Fuels LLC on the basis that the town of Argos, where it would have been located, failed to properly follow zoning regulations. A circuit court judge ruled in favor of the petitioners Feb. 29.

“Dairy farmers need to find niche markets like selling breeding stock, marketing their own dairy products by processing them on the farm or getting into organic milk production, which has a growing demand right now,” Schutz said. “The biggest challenge for them going forward other than cost will be competing with commodity milk.”

Competition from large commercial dairy farms, however, won’t come from within Indiana, Schutz said. It will instead come from farms in plains states and the Southwest.

Although industry stability has been good for the last year or so and milk is doing very strong, “some of its profitability has been eroded by input cost,” according to Schutz. Where milk prices go over the next few months may determine the success or failure of some small operations.

“Anything that changes milk prices will be an obstacle,” he said. “If it goes down a lot, it’s going to hurt a lot of small dairy farmers who haven’t locked in their prices.”

Adam is worried most for family farmers, whose average age works against them.

“It’s hard to bring children into farming when the profits aren’t that high. It has to be a lifestyle change and they have to like it,” he said, adding that “it’s kind of scary to see so many farms leaving.”