The U.S. Department of Agriculture began processing payments under the Dairy Economic Loss Assistance Payment program just prior to Christmas. Farmers have already begun seeing deposits.

Sen. Patrick Leahy (D-Vt.), a senior member of the Senate appropriations committee, and Rep. Peter Welch (D-Vt.), cochairman of the Congressional Dairy Farmers Caucus, helped guide the measure through the congressional appropriations process.

This funding will result in a payment of about $8,000 to the typical Vermont farmer.   The Sanders dairy assistance measure provides $290 million for direct support to dairy farmers and another $60 million set aside nationwide to purchase cheese for food banks and nutrition programs.

The county-specific funding levels as calculated by the U.S. Department of Agriculture are $1,206,542 for Addison County; $89,328 for Bennington County; $378,141 for Caledonia Country; $241,599 for Chittenden County; $113,441 for Essex County; $1,505,072 for Franklin County; $114,982 for Grand Isle County; $161,587 for Lamoille County; $371,581 for Orange County; $730,752 for Orleans County; $273,943 for Rutland County; $143,378 for Washington County; $139,186 for Windham County; and $114,225 for Windsor County.  In total, Vermont farmers will receive $5,783,757 in emergency aid.

Sanders said; “At a time when family-based dairy farmers in Vermont and across the country have received the lowest milk prices in 40 years, these emergency payments will be a real help in keeping many Vermont farms viable and in business.  The truth is, however, that we need long-term solutions to the dairy crisis in order to create a situation where farmers receive fair and stable prices for their product.  My office is now working with dairy farmers and their organizations in Vermont and around the country to examine how we go forward – including the need for supply-management.”

Leahy said, “Slumping revenues have pushed dairy farmers to the brink, and these payments will help many to hang on.  Secretary Vilsack pledged to promptly get these funds into farmers’ hands, and we appreciate his efforts.  We also commend the Farm Service Agency county staff for working so hard to get these payments out to farmers so quickly during the holidays.”

Welch said, “2009 has been a tremendously difficult year for Vermont’s hardworking dairy farmers. While this emergency assistance will be helpful to many farmers struggling to hold on until prices rebound, it is clearly just a drop in the barrel. I am hopeful that, working with Vermont farmers and the Congressional Dairy Farmers Caucus, we will make great strides in 2010 toward building a dairy industry that is sustainable in the long term.”

The average price farmers received for their milk fell this year to as low as $11.30 per hundredweight, down from $19.30 in July 2008.  Prices have recently rebounded to $15 per hundredweight. It costs farmers at least $18 per hundredweight to produce milk. As prices plunged, family dairy farms in Vermont and around the country went out of business.

For farmers who may not have participated in the Milk Income Loss Contract or MILC program, sign-up for this aid remains open until January 19, 2010.  They should go to their local FSA County Office and submit their production numbers for February through July 2009.

Contacts:

Will Wiquist (Sanders): 202 224-5141

David Carle (Leahy): 202 224-3693

Paul Heintz (Welch): 202 577-7970

VTDigger

Senators say dairy industry consolidation hurting farmers

Sen. Patrick Leahy and Sen. Bernie Sanders listen to testimony at the Senate Judiciary Committee hearing on antitrust issues in the dairy industry on Saturday in St. Albans. Photo by Terry J. Allen.

A lack of competition may allow dominant dairy processors to “exert power” and depress the price farmers receive for raw milk, according to Christine Varney, the assistant attorney general for the Antitrust Division of the U.S. Department of Justice, who spoke at a congressional hearing held in St. Albans on Saturday.

The largest dairy processor in the country, Dean Foods, buys 70 percent of the milk produced in the Northeast. Sen. Bernie Sanders, I-Vt., has asked the Department of Justice to investigate the Dallas-based corporation’s alleged anti-competitive market practices.

Sen. Patrick Leahy, D-Vt., who called the hearing as part of a congressional investigation into “anti-competitive” dairy industry practices, asked Varney if that level of industry buying power “bothers” her.

“Competition is not very well served when you have one player in the market who controls 70 percent of the market,” Varney said. “We look very carefully at the activity in a market when you have that kind of dominance.”


Varney explained to the audience of 100 people in the St. Albans City Hall that some dairy processors have become “vertically integrated.” These manufacturers not only process raw milk, but also may own parts of the supply chain “such as distribution of its products or supply of its inputs.”

“Vertical relationships in dairy markets would include, for example, a processor entering into exclusive agreements with a specific cooperative to buy raw milk,” Varney testified.

Varney said her division would pursue an investigation of anti-trust violations allegedly perpetrated by dairy processors and would examine complaints about a lack of transparency in the industry as a whole.

“Transparency is something we all need in order to understand how we can improve the production, the health and life of the dairy industry in the United States,” Varney said.
Leahy and Sanders reiterated that Dean Foods has reaped enormous profits this year at a time when dairy farmers are facing a rip tide of red ink and going deep into debt to stay afloat.

Milk prices, which have reached 30-year lows, hovering in the $11 per hundredweight range are not expected to reach $15 per hundredweight until next summer according to USDA economists.
Meanwhile the cost to produce raw milk in Vermont has remained high – at around $18 per hundredweight – partly because farmers must buy more grain here due to the state’s short growing season.

As a result of this whipsaw of low prices and high costs, agricultural economist Bob Parsons at UVM Extension has said Vermont could lose 150 farms in the coming year.

Willard Rowell, owner of Green Mountain Dairy in Highgate, testified on Saturday that his farm will likely lose $1.6 million this year. He and his family milk 900 cows. Last year their income was $2.5 million.

Paul Doton, who milks about 60 cows with his wife and son on their 200-acre farm in Barnard, says he is scraping by because he sells maple syrup, vegetables and does some custom mowing and snowplowing.

“Without this income, I would already be out of business,” Doton said. “Doton farm, much like many other Vermont farms, cannot hang on much longer. How long can we go on losing $4,500 per month? My answer is – not long at all.”

Dean Foods reported first quarter profits of $76.2 million this year, up 147 percent above its reported earnings in the same quarter in 2008, Sanders reported at the hearing.

Sanders said the corporation paid its CEO, Gregg Engles, $116.38 million over the last five years.

“What we are seeing in recent years is a growing concentration of ownership, specifically in dairy processing,” Sanders said. “According to the dairy industry press, one company, the largest milk producer in America, Dean Foods, controls approximately 90 percent of the milk market in Michigan, about 80 percent of the milk market in Massachusetts, 80 to 90 percent in Tennessee, over 80 percent in northern Alabama, over 70 percent in northern New Jersey and in New England about 70 percent.”

In 2001, Suiza Corp. bought Dean Foods, adopted the company’s name, and formed the largest dairy manufacturing corporation in the United States. The company sells milk and other dairy products under 50 “well-known local and regional brands and a wide array of private labels,” according to its web site.

Sanders asked Varney if she would pick up an investigation into the “far-ranging anti-competitive practices” of Dean Foods and Dairy Farmers of America. The 26-month probe, conducted by career investigators at the Department of Justice, was dropped in 2006.

“It is my understanding that in August of 2006 that team recommended action against some of the dairy industry’s biggest firms, including Dean Foods, Dairy Farmers of America and National Dairy Holdings,” Sanders said. “Unfortunately, under the Bush administration it was kicked over to the political people and they decided not to pursue that investigation or take any action. Can you give us assurance that you in fact will continue that investigation and if it leads you to the conclusion that action should be taken that in fact you’re prepared to take action?”

Varney replied, “I can give you every assurance that any investigation I undertake that leads us to believe there is evidence sufficient to prosecute will be prosecuted. There is no doubt that we will prosecute that kind of activity should we find it.”

The Senate Judiciary Committee will accept written testimony from dairy farmers through Sept. 30 at Dairy_Hearing@Judiciary-dem.senate.gov.

Bob Wellington testifies

VTDigger

Eric Clifford's Holsteins in Starksboro.

Fair dairy? State hopes consumers will pay more for milk, make donations to farmers

The cost of production calculus

Dairy farmers tough out costliest downturn

Economist says state could lose 150 farms by next summer

Vermont’s dairy industry blip on national radar

Communities where dairy is king take a hit economically

Losses driving farms deep into debt

Dairy downturn whacks related businesses

VTDigger

for milk, make donations to farmers

Got milk?

Got a little extra money to pay for it? And by the way, wanna donate cash for a T-shirt?

Those are the questions Vermont’s Agency of Agriculture is putting to the public on the new Web site it’s unveiling today at a press conference at the Conant Farm in Richmond.

The site, http://www.keeplocalfarms.org/, encourages people to make direct donations to the New England Family Dairy Farms Cooperative. For $30, donors get a Keep Local Farms bumper sticker; for $250 “dairy defenders” get a bumper sticker and a T-shirt. Tote bags are available for a $100 donation. (Contributors should know, however, that these donations are not tax-deductible, as NEFDFC is not a 501C3, IRS authorized public charity.)

In addition, officials hope to use the certified fair trade model to encourage consumers to pay a small surcharge for milk products from retailers, hospitals and colleges that participate in the Keep Local Farms program.

The idea is to put more money in farmers’ pockets at a time when dairy farmers are losing hundreds of dollars every day they stay in business.

For every $3 gallon of milk sold at a grocery store, the farmer gets 90 cents. The kicker? That gallon cost $1.80 to produce. In addition to record low milk prices, Vermont farmers are facing higher-than-ever input costs for grain, fertilizer and supplies.

Keep Local Farms products would bear the program logo, and would be marketed in the same way fair trade products like coffee and chocolate, are promoted. The money would be collected by NEFDFC and distributed to the 75 percent of farmers who are members of the cooperative (lifetime membership is $5), according to Jenny Bourbeau, of the New England Dairy Promotion Board.

Officials couldn’t say how much retailers and colleges would be asked to charge, nor could they say how much money they hope keeplocalfarms.org will generate.

Three universities and one major retailer have expressed interest in the program, according to Jacques Parent, a member of the board that oversees Keep Local Farms.

The agency says it has conducted studies that show the milk-drinking public is willing to shell out a little spare change for dairy products to keep farms going. Though how much they’re willing to spend seemed to be something of a mystery. Officials I spoke with, Bourbeau, Parent and Kelly Loftus, the communications director for the agency, didn’t know what the Keep Local Farms surcharge fees would be.

“We did some studies with consumers two or three years ago and it was found that consumers were willing to pay more for a gallon of milk if they knew that that extra money was going directly to the farmers,” Loftus says. “We’re working with hospitals and universities to incorporate this program into their food service aspects.”

Loftus says the state doesn’t have the money to step in this time to help tide farmers over in this dairy downturn the way it did in 2006 when prices hit a trough. Keep Local Farms is an alternative to state support, she says.

“We don’t have that financial flexibility and that’s not a long-term fix,” Loftus says.

When asked whether the web site will make a difference for farmers in the coming months, Parent, a farmer from Highgate said it’s worth a shot.

“It could be a real big deal or a big flop,” Parent says. “It’s going to depend on public opinion.”

VTDigger

The recession has forced most of us to do some serious belt tightening. Buying frivolous stuff and eating out are somewhere on the top of the list of guilty pleasures these days. Many Vermonters face more serious sacrifices, such as putting off repairs to vehicles or giving up health insurance.

But what if you had hundreds of big hungry mouths to feed, in this economy? The kind that bellow and moo?

There’s no question that dairy farmers are in a bigger pinch than most of us because of record low milk prices, but there’s another factor to consider, too — the escalating costs of production.

Cows eat a lot. High producing milkers eat a lot more. And grain is a dairy farmer’s biggest expense.

Each day, a cow consumes 110-120 pounds of wet feed (silage) or 55-60 pounds of dry matter (hay and grain). More if she’s producing milk, according to the UMass Extension service.

In slightly warmer climes, such Pennsylvania, farmers can grow enough corn, soybeans and hay to feed livestock through the winter. Vermont’s climate constrains the nutritional value of grain crops, and so though dairymen (and women) here do grow corn – largely for silage – they have to buy supplemental corn and soybeans to feed their cows.

This means the “input” costs, or the expenses farmers incur for day-to-day operations, are higher here than they are in other dairy states like Florida or Ohio.

Grain expenses add significantly to the cost of milk production in Vermont and that makes it harder for dairy farmers to ride out the current milk price crash and compete with farmers in other states on the open market, according to Bob Parsons, an agricultural economist with UVM Extension.

Right now, farmers are losing $100 per cow per month, and many have eaten into their equity to survive. (See related story.) As they gear up for winter, one of the biggest challenges they face is significantly lowering the cost of producing milk.

The biggest ticket item on a farmer’s balance sheet is grain, according to data from the 2008 Yankee Farm Credit Northeast Dairy Summary, an analysis of the financial health of 500 New England farms.

Northeast Dairy Summary cost of production table, 2008, from Yankee Farm Credit.

Net Farm Earnings Per CWT, or hundredweight, from the 2008 Northeast Dairy Summary, Yankee Farm Credit

Last year, feed accounted for $6.19 of the cost of production per hundredweight (a unit of measure that translates to 11.6 gallons of milk), double the amount farmers paid out for hired help, and nearly a third of the total cost of production, $18.19 per hundredweight, on the farms included in the analysis. In 2008, the farmers brought in $19.59 per hundredweight.

This year, the average cost of production for farmers statewide is $17-$18 per hundredweight, and the milk price has hovered in the $11-$12 per hundredweight range since February.

Even when milk prices hit new heights in 2007 and 2008 (after a record slump in 2006), farmers saw short-lived profits because of the inflated cost of corn and soybeans.

Demand for ethanol drove up the wholesale price for corn, according to Don Blayney, an agricultural economist at USDA Economic Research Service.

“Feed inputs have gone up for dairy farmers over the last two or three years,” Blayney says, “mainly because of all the ethanol regulations and outside effects of ethanol on corn and soybeans. All that added demand, taking corn away from feed production immediately shot up feed input prices for all farmers. For quite a while, corn was so very, very cheap that people got used to it.”

Blayney says corn prices are expected to moderate slightly and that will blunt the cost of production losses farmers are enduring. It won’t be enough, however, to pull farmers out of the red ink this winter and next spring. Particularly since many farmers, especially those in Addison County will likely have poor yields for silage and hay this year because of the wet summer growing conditions.

Economist Bob Parsons says some farmers are looking at 30 to 40 percent crop yields in certain fields. Many, he says, will be forced to buy more grain than they normally would.

“You’d have to kind of wake up and think that the planets and stars are all lined up against you,” Parsons says. “A poor harvest at the same time you have low milk prices and high feed prices – that combination is like three hits in the gut in a row.”

It’s not just grain that’s gone up. Farmers are also being squeezed by higher prices for fertilizer, dairy supplies and fuel, according to Tom Gates, cooperative relations manager for St. Albans Cooperative Creamery, Inc. All of these expenses are cutting into their profit margins, Gates says.

“If they can’t find a way to reduce their cost of production significantly, that will be a big challenge for dairy farmers,” according to George Putnam, CEO of Yankee Farm Credit, a government-sponsored enterprise that provides loans to farm businesses in New England. “The situation is dire. In 2006, we thought that that was the worst it had ever been in the memory of anybody working. But this is considerably worse than 2006.”

VTDigger

Eric Clifford on his farm in Starksboro. Since the beginning of the year, Clifford says he's lost $250,000.

The Clifford Farm in Starksboro

In spite of what some in the industry are calling the worst ever returns on dairying, Eric Clifford is carrying on the family tradition come hell or high water. He’s determined to keep the land his forebears cultivated – all seven generations of them – in farming.

It hasn’t been easy. Since dairy prices plummeted to $11-$12 hundredweight  (the equivalent of 11.6 gallons of milk) last February, Clifford estimates he’s lost approximately $250,000 on his 215-cow dairy farm in Starksboro. He and his wife, Jane, are looking into refinancing their 498-acre property.

“We have made the choice to stay in business,” Jane Clifford says. “The dairy farm has been in operation since the late 1790s, and we’ve chosen to say, OK, we’re going to use some of the equity we’ve built up. Our strategy has always been when times are good you pay down debt, you work within your means, you try to be as efficient as you possibly can and you work really hard.”

This fiscal conservatism has enabled the Cliffords to ride out previous milk market crashes. They don’t buy new “toys,” i.e. tractors and equipment, or borrow money for big expansions. Frugality is a way of life for them.

The Clifford’s place, located on Route 116, is a modest working farm in a valley lined with fields along the banks of Lewis Creek. The clapboard house and low-slung barns sit near the road.  Wooded hillsides in the near distance bound the flat tracts of farmland.

Eric Clifford was on a skidsteer, moving silage from a concrete bunker to a steel dumpster when I stopped by recently. He took a good half-hour out of his day to talk about how the farm is faring.

Though the workload never bothers him, he says the constant worry about finances is getting to him. Normally, he says he usually has no difficulty working out solutions to the day-to-day issues that come up on the farm, but lately he finds himself aimlessly standing in the farmyard contemplating his finances for minutes at a time. The facile answers typically at hand aren’t coming to him. The only thing he’s counting on right now is doing everything he can to tough out the slump.

“When consumption in the United States is down for dairy products and the export market is just a fraction of what it used to be and production is up, it’s not a very rosy picture out there,” Eric Clifford says. “Believe me, I’d love to be telling you that by Christmas we’d be getting cost of production and things would be booming. But there’s farms out there that don’t have any more borrowing power and the financial institutions just aren’t going to be willing to lend them any more money.”

The Cliffords, who belong to Dairy Farmers of America, an 18,000-member national dairy cooperative, received $10.50 cwt, or per hundredweight, last month for their raw milk.

Like most farms in Vermont, the cost of production at the Clifford’s – the expenses the business incurs for labor, grain and equipment – is in the $17-$18 cwt range.

Because the milk price is far below the cost of production, losses are mounting for farmers every day.  According to Vermont Agency of Agriculture estimates, the state’s dairy farmers are spending roughly $100 per cow per month to stay in operation.

The Cliffords have lost more than $26,000 a month on average since the beginning of the year.

Eric Clifford runs a skidsteer on his farm in Starksboro.

“We’re looking at what the Farm Services Agenc y (USDA) has to offer,” Jane Clifford says. “We are in a position where we have built up equity over the years. We will be using that to get through this next downturn.”

The Cliffords don’t anticipate a turnaround in dairy prices anytime soon. It could be next summer before their milk check gets close to the cost of production. USDA predicts the average market price will be $14.65-$15.65 per hundredweight in 2010.

“Hopefully, the industry will make some choices that we don’t get hit this hard again,” Jane Clifford says. “It’s always going to be cyclical. Milk is a very perishable product, but it seems that the cycles are longer and lower than any of us can remember so we need to do something about that.”

Blue Spruce Farm in Bridport

Marie Audet, who helps to run Blue Spruce Farm in Bridport, is working to change the cyclical nature of the milk market. She believes farmers must find a way to control the supply of milk in order to stabilize prices over the long term. Audet is one of the organizers of Dairy Farmers Working Together, a nonprofit group with national reach that is lobbying Congress to pass the Dairy Price Stabilization Act, which is designed to give farmers an opportunity to manage the milk supply more efficiently.

Blue Spruce Farm is one of the state’s few large farms. The three Audet brothers – Earnest, Earl and Eugene – milk 1,200 cows. They have 25 full-time employees, half of which are family members.

“There used to be a misconception,” Marie Audet says. “People thought if you had a bigger barn that you were a business, but it’s still all farm families, it’s just some families have grown bigger than others.”

Audet declined to say how much money the farm has lost since the beginning of the year, but if you do the math — 1,200 cows at an average cost of $100 per cow per month, based on Agency of Agriculture figures – you get the idea.

Audet summed up the situation this way: “We’re losing money everywhere.

“We’re making the same amount of money we were 40 years ago per hundredweight,” Audet says. “Ask yourself how you could survive if you were making the same money you did 40 years ago for a whole year. You would have to borrow money off your equity as well to pay your bills and feed your family. “

Grain, fertilizer, seed, insurance and equipment are not selling at 1970s prices. In fact, what the dairy industry calls “input” costs have escalated over the last five years.

The combination of higher expenses and record low milk prices puts farmers in an untenable position.

“We can’t really fix things as they need to be fixed,” Marie Audet says. “Our employees can’t get raises, we can’t make improvements that we had planned on making for our housing for animals. Everything’s been put on hold and then you’re borrowing money just to pay the bills.”

Ryan Brothers Farm in Craftsbury

Willie Ryan of Ryan Brothers Farm in Craftsbury decided he couldn’t stomach borrowing money to keep his dairy operation going. He and his brother, Marvin, sold their milkers under the Cooperatives Working Together herd buyout program in June.  Up to that point, Ryan says they were losing $10,000 a month on their 197-cow operation.

“The way it looked, I was going to have to start borrowing money by September to keep the cows going,” Ryan says. “I’m 60 and my brother’s 63 and we decided we were too damn old to borrow money. Back when we were 35 we would’ve just slugged it out.”

Ironically, selling the herd turned out to be the best way for the Ryan farm to stay in business.  The brothers planted crops last spring and kept 160 heifers. They plan to start milking again next spring, about the time the market begins to pick up.

“Instead of losing $100,000,” Ryan says. “I’m probably going to bank $100,000 out of the deal.”

Ryan, who is president of the Orleans County chapter of the Vermont Farm Bureau, is worried, though, about his fellow farmers.

“It’s gone beyond depressing,” Ryan says. “Farmers are actually scared. They owe more than their equity. I don’t know if you could sell a farm at the moment. A lot of people who’ve been conservative, all of a sudden, they couldn’t have an auction tomorrow and clear up their debts.”

VTDigger

Jane and Eric Clifford's farm in Starksboro.

Vermont is more dependent on one single commodity – milk – than any other state in the nation. Seventy percent of the state’s agricultural production comes from the dairy industry, according to Bob Parsons, University of Vermont Extension agricultural economist.

So it’s not surprising that dairy is a big economic driver in the state: It generates $2 billion in gross revenues.

What is surprising is this: If all the dairy farms in Vermont went out of business tomorrow, it’d be a mere blip on the nation’s radar.

Vermont’s 142,000 cows represent 1.5 percent of the 9 million dairy cows in the U.S. If every Vermont farmer took the herd buyout, it would help to shift production levels, and therefore raise prices, but the impact would be temporary.

The state’s farmers only produce 1.3 percent of the nation’s milk, Parsons says, and yet our population is too small to consume what they make. Eighty-five percent of Vermont’s milk has to be shipped out of state.

“On the national scene, if all the farms in Vermont went out of milk production, it would help the rest of the farmers but they’d probably like to see even a little bit more,” Parsons says.

Even though our milk production has been going down in Vermont, other states have been seeing an increase, according to Parsons. Last month, Vermont produced 4.5 percent less milk, while New York was up 2.5 percent and Wisconsin and Minnesota were up 4-5 percent.

While there are a handful of farms with 1,000 cows or more in Vermont, out West dairies have herds as large as 10,000. The average farm in California has 968 cows; New Mexico’s average herd is 2,100, according to Don Blayney, an agricultural economist with the Economic Research Service at USDA.

Still, Vermont’s average farm size of 120-130 isn’t that far off the national average of 167, Blayney says.

The factor that sets Vermont apart from the rest of the country is the cost of feeding cows. The state’s hilly terrain and cold weather make it more expensive to farm here. Farmers have to buy almost all of their grain, which significantly drives up the cost of production.

“We’d like to think Vermont’s a great place to live, but from an agricultural standpoint you’re competing with people in other parts of the country,” Parsons says. “We think we’re close to metro areas, but central Pennsylvania is just as close to Hartford, Conn., as Vermont is.

On a national level, Parsons says, Vermont has a declining share of the agricultural market.

And that fact has significant political implications. How can Vermont make the argument that its dairy industry is vital to the nation’s food security when it contributes such a small percentage to total market share?

“It’s ironic. If you go to Sens. Leahy and Sanders and Rep. Welch who are trying to get something done in Washington, they’re dealing with a national scene down there,” Parsons says. “Guys from Wisconsin say it’s a little tough, but we’re getting by. Unless you have a crisis all over I’m not sure what it will take to get attention down there.”

Copyright, Vtdigger.org

VTDigger