Gloomy forecast dims spring for dairy farmers

Raw milk being collected at a dairy farm. Photo by Josh Larkin.

Raw milk being collected at a dairy farm. Photo by Josh Larkin.

Green spring pastures are finally brightening farmers’ fields but for dairy farmers, it’s looking gloomy thanks to a major drop forecast for the milk prices they’re paid.

Following a year when prices were high enough to allow farmers to recover some of their losses from the 2008 recession, dairy experts, state officials, farmers and milk co-op managers all expressed concerns about signs of another cyclical decline in the price per hundredweight paid to the state’s roughly 975 dairy farmers.

At the same time, they also highlighted Vermont’s strengths as a state where technical innovation, a reputation for wholesome quality food, new dairy products and better marketing offer hope for the future, though lack of financial capital and farm labor issues remain big concerns.

And they all urged lawmakers and policymakers to fight for a new farm bill and the Dairy Security Act, a three-component bill in Congress that takes a new approach to assuring farmers get a fair price for their milk and costs the federal government less money.

Appearing in the Statehouse before the Senate Agriculture Committee and some members of the House panel as well, Vermont Agriculture Secretary Chuck Ross said the state has enjoyed “the best prices we’ve seen in years and years” with milk getting over $20 a hundredweight. But he said forecasts are that prices will slide into the teens and drop to $18 and even as low as $15 a hundredweight, which he called a “major problem” since that is below the cost of producing the milk.

Former Agriculture Commissioner Leon Graves echoed his views. Citing dramatic increases in prices for everything farmers need — diesel fuel, fertilizer, feed grain and seeds — Graves said “farmers are very nervous” about where prices are headed.

Graves said a serious oversupply of milk was the familiar culprit, citing national production that was up 4.6 percent in the top 23 dairying states and commenting that milk was actually being dumped in the Midwest last week. Farmers nationally also have boosted production per cow 3.3 percent, he said.

“We do not think we’ve seen the end of it yet,” he said, pointing out that a milk supply increase of more than 2.5 percent can bring a 25 percent to 30 percent decrease in prices paid to farmers.

Dairy farmers are in a tough squeeze as well because the costs of everything they need to do business has gone up, pressuring their profit margin. Graves, who is now vice president for Dairy Marketing Services, told lawmakers one example is that it now costs $500 to plant an acre of corn, up from $200 a few years ago.

“The 2012 margins are going to be difficult,” he said.

Chairwoman Sen. Sara Kittell, D-Franklin, said the decline was unwelcome considering farmers are still recovering from the crash in milk prices in the recession.

“Two years ago it was so bad; I don’t think our farmers have dug out of the hole they were in yet,” she said.

Vermont Agency of Agriculture Secretary Chuck Ross is bringing a new focus to the economic role agriculture plays in the state’s economy. Photo by Josh Larkin.

Chuck Ross, Vermont Agriculture secretary

Despite a national increase in milk production, Vermont actually has a deficit of milk now, which Ross called “both an opportunity and a challenge.” Farmers last year were hit with a spring flood, Irene and a fall snowstorm, making the year difficult, and producers have had to bring in milk from outside the state.

The simple key to maintaining production is to eliminate price swings and assure farmers of a price that covers their costs, he said.

“The price has to be predictable and profitable,” said Ross, who called uncertainty over passage of a new farm bill a detriment to farmers’ security.

Ross said the bill provides funds for conservation, and also nutrition outreach and education of consumers, which is a key to attracting consumers to buy Vermont dairy products.

The good news is that demand for value-added Vermont products such as cheese and yogurt is growing internationally and that provides a “stronger return for the farmer,” Ross said. The state has also seen “an explosion in on-farm processing” of products, he said.

While he praised the renaissance in all the diverse forms of Vermont agriculture, he said dairying remains the state’s foundation, producing 2.5 billion pounds of milk a year and $2.5 billion in economic impact when all facets are considered. The dairying industry, Ross said, still counts for approximately 90 percent of the total agricultural production in the state – or around $14,000 per cow, he said – and provides some 15,000 jobs.

However dairy farmer Doug Nelson of Derby, who runs the state’s largest dairy operations with five satellite dairies and some 3,000 cattle, said Vermont is a small pail in a big tank when it comes to dairying nationwide, reputation notwithstanding, and is at the mercy of market forces.

He said three-tenths of the farmers in the U.S. produce 50 percent of the milk and one Idaho dairy farmer has 65,000 cows. Vermont makes 2 percent of the nation’s milk – and the Idaho farmer produces 1 percent alone, he said.

“Who’s to say he can’t double? He can do that. We’re in a tremendously competitive business,” he said. Vermont also has built-in inefficiencies, such as the cost of transporting in feed and trucking out milk, he said.

Sen. Anthony Pollina, D/P-Washington, who founded the farm advocacy group Rural Vermont and has a long history in farm policy, said since the 1980s the national policy has been to make farms more efficient and to have fewer farms as a way to manage milk supplies, but that policy has failed, creating ever bigger farms that produce more and more milk.

“Today we define efficiency a little differently,” he said, noting Vermonters take into account the value of a working landscape, the high costs of importing food, and the benefits of maintaining a local economy. The irony is that as milk prices go down, “many are going hungry,” he said.

Pollina said Vermont has dropped the ball on leveraging its advantages as a state with a reputation for high-quality food but he said change is in the wind and dairy farmers are realizing the system of managing supplies isn’t working.

He urged lawmakers to look at a “fair trade” state or regional label, just as is used for coffee, and better state marketing of its milk, saying surveys show consumers would respond.

“Why doesn’t Vermont become the first state in the country to produce fair-trade milk,” he said.
The state also needs to push more value-added production, which brings farmers a better price, he said.

Bob Wellington, a senior vice president of the Agri-Mark dairy cooperative, which has 1,200 members in New England and upstate New York, said the co-op is focusing on value-added products such as yogurt, ice cream, cheese and cottage cheese to get the best prices for farmers.

“We’re all trying to do the best we can,” he said.

Farmer Mark Magnan, who sits on the board of the St. Albans Cooperative Creamery, echoed Pollina, saying he’d like Vermont to “invest in ag” with a “Grow Vermont” theme. He urged lawmakers to consider a capital pool of funds for efficiency improvements similar to Efficiency Vermont for homeowners, and said the state’s current use taxation program is essential for dairying’s success.”

Farmer Mark Magnan, who sits on the board of the St. Albans Cooperative Creamery, echoed Pollina, saying he’d like Vermont to “invest in ag” with a “Grow Vermont” theme. He urged lawmakers to consider a capital pool of funds for efficiency improvements similar to Efficiency Vermont for homeowners, and said the state’s current use taxation program is essential for dairying’s success.

“Maintaining costs will be critical to the future of farming in Vermont,” he said.

Amanda St. Pierre, of Dairy Farmers Working Together, a national organization, suggested a “Vermont Lottery ag ticket” as a way to raise funds for farm promotion and investments, which farmers can’t afford to make with milk prices low.

“Agriculture should get recognition for being an economic driver in the state,” she said, noting its importance in preserving a landscape valuable to drawing tourists and for recreation, urging everyone to “think outside the box” to preserve it.

“I am saying we are a full circle state and when you put investment into the dairy industry, it is going to come back to the state and other areas,” she said.

Andrew NemethyAndrew Nemethy

Comments

  1. James Maroney :

    Dear Senator Kittell:
    I see in the Addison Independent that you held an emergency meeting last week to address milk prices and you are quoted as saying you are “searching for a solution to this problem.”

    Surely you have been to dozens if not hundreds of meetings with this purpose over the years and I wonder why — I truly wonder why — you don’t tell the farmers that there is no fix for the problem while they insist upon applying the conventional paradigm, which is predicated upon over producing their markets and driving their own prices down. Are you not tired of this charade and is it not your duty to address the problem for the sake of your many constituents who are not farmers (99%) and whose water the large, conventional dairy farmers (0.1%) impair with impunity?

    Last year, the Lake Champlain Committee issued a report in which it projected that $800M (!!) would be required to clean up Lake Champlain, half of which would be required to address the pollution sent down from conventional dairy farms. That money was for prospective treatment only; it would not “clean up” that which had already been sent into the lake. And when $400M has been spent what would we have? A farm system that continues to expand production to make a product for which there is already insufficient demand, continues to cannibalize its neighbors, continues to lose hundreds of millions for itself and for its community, continues to subsidize the world’s richest demographic for milk and continues to pollute Lake Champlain. How can Vermont meet its TMDL while leaving in place the system that, with state sanction, delivers 100,000,000 lbs of artificial fertilizer/year to the waters of the state?

    While you are searching for a solution to this problem, it might be useful to consider that, after eighteen years, the Accepted Agricultural Practices rules, upon which this remediation plan is predicated, have achieved no reduction in agricultural pollutants entering the lake even as 900 more dairy farms, or half the 1,800 dairy farms in business in 1995 have slid into oblivion. Consider too, that since the $400M would be spent in pursuit of the tenets of the AAPs, which are empirically flawed, the money will be spent to no purpose. You can find a short version of my petition to Chuck Ross, David Mears and Deb Markowitz requesting that the AAPs be brought forward for review here: http://dl.dropbox.com/u/17953783/Petition%20revised_0408.pdf Secretary Ross, citing its flaws, denied the petition but scrupulously avoided any mention of its main point, which was simply that since the AAPs are not achieving reduction of pollutants entering the lake, which is in violation of the law, or saving Vermont farms, which is culturally important to all Vermonters, they be reviewed.

    It is ironic, when the House Agriculture Committee cannot pass out a bill to label GMO food, that the House and Senate Agriculture Committees voted unanimously for the Working Landscape bill, which is silent on the 900 lb gorilla in the room: conventional dairy, which of course endorses GMO seeds. Conventional dairy not only utilizes GMO technology and pollutes the lake, it sets the price for milk and makes infeasible small and organic farming, the ones the Save the Working Landscape bill would spend $3M to help, the ones 97% of respondents to the Survey on the Future of Vermont said they support. Bringing organic milk to market at $6/gal is largely futile when conventional milk is sitting right there for $3/gal beside it in the case. The Save the Working Landscape bill cannot possibly grow small and organic farms without first defeating the powerful force that for two generations has decimated Vermont’s small and organic farms; it is at best trying to ride a horse in two directions at once or, at worst, throwing $3M of taxpayers’ money away treating the symptoms of a problem while ignoring its cause.

    As you know, organic dairy farmers cannot house more than about 150 cows because of the pasture requirement. They do not over produce their markets, do not use artificial fertilizers or herbicides, do not (for the most part) spread liquid manure on those fields nearest the barn in concentrations out of all proportion to the needs of their crops, do not (for the most part) plant or feed corn, do not use hormones, GMO seeds or pharmaceuticals and do not depend upon federal milk income loss programs because organic farmers make a product for which demand is growing and that pays them double the FMMO rate.

    Let’s say that the median Vermont dairy farm (120 cows) can convert to organic for $100,000. With $400M to spend, the state could convert the remaining 600 small to medium-sized farms for $60,000,000 and have $340M left over with which to organize an organic, truly farmer-owned coop, to launch a brand, to write a marketing plan, to design distribution routes, to bring Vermont agriculture into compliance with the Clean Water Act and with its own Water Quality Standards. To help Vermont dairy farmers make a profit instead of a mess.

    You cannot find a solution to the problem of low milk prices if you are unwilling to acknowledge that the conventional paradigm is achieving its destructive purpose because over production, low milk prices, farm attrition, rural economic decay and lake pollution are what it was designed to achieve.

  2. MJ Farmer :

    The biggest gorilla in the room is EBT (food stamps) which lets the user purchase soda instead of milk. Limit spending on EBT to healthy food/milk/juice and watch demand for milk climb. If you don’t believe me, go to the supermarket on the first of the month and witness the “nutrition” being purchased. My generation grew up with milk every night for dinner – it supports strong bones and has no sugar to promote teeth decay. It will help with weight problems too.

  3. Dairy farms are an important industry in Vermont. The solutions or ways to address the price swings, every 32 to 35 months, is through many strategies to include more vale added and diversity on the farm, other risk management strategies, more capital to do research and marketing around valued added products, grass based and or organic farming for some. The old timers in the 1880′s who had seen the demise of the sheep industry, the loss of the butter market, said then and it is so true today too, “that Vermont farmers can never compete with the West on a commodity basis. Vermont farmers success will always be catering to consumers in the growing markets of the East, and always studying the changes in those needs and developing non commodity products to serve those needs.”. This is still true today too, but it takes capital, research. marketing savey, a unified strategy and leadership. The issues as well as methods to address these challenges have been known for a long, long time. Independence of action is often a vertue, but it often gets in the way of unified leadership and action. I commend Secretary Ross and his team for their continuing work with the dairy industry and others as it is not an easy task. Roger Allbee, former Vt Secretary of Agriculture

  4. Lyle Edwards :

    Until people recognize that the conventional milk pricing system is corrupt and a failure, nothing is going to change. There is something very wrong with a system that paid farmers more in 1979 than what they got in 2009. Fortunately for myself I switched to organic dairying 10 years ago. At that time the organic milk price was $21 and it is now currently 30 dollars, with with two to three dollars extra in quality premiums. It seems to me if organic can have stable milk pricing system, conventional could to. But unfortunately I don’t see that happening anytime soon.

  5. walter moses :

    james maroney is correct. dairy farming, true dairy farming vt style is long gone. when i was very young, some 60 years ago dairy farmers made money, now they make payments for equipment costing hundreds of thousands of dollars to follow the dept. of a g’s “bigger is better and more efficient policy”, a failure then and now. the vt dept of ag is a failure. the best act this year is the change of maple syrup grade names to conform with other states and take away the elite vermont name on our syrup. a total waste of tax money but a good example of vt. dept. of ag. in action.

Comments

*

Comment policy Privacy policy
Thanks for reporting an error with the story, "Gloomy forecast dims spring for dairy farmers"