Business & Economy

Vermont dairy farmers struggle as milk prices in the Northeast drop

Dairy
Cows at Mike Eastman’s 40-cow dairy farm in Addison feed on grass just weeks before moving outside to graze. Photo by John Herrick/VTDigger
Milk prices are down across the Northeast and are even lower this summer than they were a year ago, when farmers produced so much milk cooperatives had to start dumping it into manure pits.

In Federal Milk Order Number One, which includes Vermont’s roughly 800 dairy farms, the listed price of milk dropped to $14.73 per hundredweight, equal to a hundred pounds of milk, in May, down from $16.82 a year prior.

Farmers are not dumping their milk right now, but Agri-Mark, one of the major cooperatives for Vermont dairy farmers, can’t guarantee that dumping won’t start later this summer, or even on the Fourth of July weekend.

“Milk prices right now are extremely low, in the $14 range,” said Doug DiMento, a spokesperson for Agri-Mark in Massachusetts. “We don’t expect much price recovery until we get into the late fall.”

“We expect prices to be around the $15 range, $14.75, $15.50 range throughout the summer, and then maybe going up in the fall, but right now we’re not as optimistic simply because of the amount of dairy products in inventories,” Dimento said.

He said the prices are being pushed lower because of an oversupply of milk across the world. Only about 13 percent of U.S. milk is being exported, according to Dimento, down from the typical level of 16 percent to 17 percent.

“Even though that price looks like it’s $14.73, everyone’s receiving less,” Dimento said. “It’s unfortunate that we can’t find, the USDA can’t come up with, a good mechanism to pay farmers fairly for the product they produce.”

Farmers in Vermont say the low prices are caused by shifts in international trade. The president of Russia imposed a trade embargo on the European Union, leading to a glut of milk in the European Union. China is also demanding less milk from the United States, according to Bloomberg. The dollar is strong, and as a result U.S. milk is comparatively more expensive.

Struggling farmers often react by producing as much milk as they possibly can, and the increased supply pushes the price down further. The federal Margin Protection Program gives farmers insurance if the price of milk is $4 below the cost of production, but the subsidy is not substantial enough when prices are this low.

Chuck Ross, the secretary of the Agency of Agriculture, says the federal insurance program has “yet to click in a way that makes a real difference” for farmers. “There is no national dairy policy that helps dairy farmers run their businesses with some stability,” Ross said. Congress has failed to address milk supply stabilization, he said, and until policymakers are willing to do so, dairy farmers will continue to be buffeted by market swings beyond their control.

“It’s tough times. It really is. And it doesn’t look to be much improvement at least for the next several months, and it will probably be into next year,” said Robert Foster, who owns the Foster Brothers Farm in Middlebury with this family. “The problem with this is it shakes out whole families. You’re either in or you’re out.”

Beth Kennett owns Liberty Hill Farm in Rochester, part of the Agri-Mark cooperative, with her husband and family. She called milk prices “unconscionably low.” The farm is being paid $14.60 per hundred pounds of milk, she said, but pays between $22 and $23 to produce the milk.

“You can only try to trim costs so far without it having a negative impact on the cows, or the farm, or the family, so you borrow against your equity, you be as creative as you can,” Kennett said. “Those farmers that can diversify are doing so, and everyone—every farmer—is praying for the milk prices to change.”

Liberty Hill Farm started promoting itself as an agritourism destination in the early 1980s, Kennett said, back when milk prices were not only low but the national economy was volatile. She said the difference is that Vermont has substantially fewer farms than in the 1980s.

Paul Doton owns Doton Farm in Barnard, also part of Agri-Mark, with his wife and son. Doton said the farm was most recently paid $15.21 per hundredweight of milk, and the last time he remembers prices being this low was in 2009.

“We’re a family operation, so we don’t have any outside labor, and we’re just able to tighten our belts and just watch carefully to make sure we don’t overspend,” Doton said. He said the family also mows property nearby and makes hay bales for neighbors in order to make ends meet.

“The outlook is not positive right through the middle of 2017,” Doton said. “There are economists around the country who are making price forecasts and there aren’t any that are looking positive or bright right into 2017.”

DiMento, who works for Agri-Mark in Massachusetts, said the cooperative bought extra equipment since last year so it could store milk instead of dumping it. “We’re not dumping milk, but we’ll see what happens over the next couple months,” he said.

Kennett, from Rochester, said she’s grateful that Agri-Mark has taken steps to avoid dumping milk. Additionally, she said the cooperative is launching six new dairy products starting July 15 to help bring in revenue.

“We are strong,” Kennett said. “It’s kind of like the whole mantra from Irene. We are Vermont strong, we are survivors, and we will get through this.”

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  • James Maroney

    Farmers have eagerly adopted a range of technologies that promised to cut costs and boost production. They work but they come with two unfortunate side effects: over production, which drives prices down and lake pollution, which inspires calls for cleaning up the water. Vermont values its dairy farmers but now asks them to change their practices. Farmers insist on the need for these technologies, which bring over production low prices and lake pollution and the EPA insists that we attain our water quality standards, which we cannot do while farmers are applying these technologies. We can’t have both so who should change?

  • Michel Guite

    I would like to see VT Digger do more writing on the cause.

    I am no expert, but think Vermont milk wholesale prices have been hovering in the range of $12 to $18 per 100 pounds for long over a decade. I’m told farm production costs for milk, after setting land and equipment and labor at $0.00 or free, are about $12 to $14. Meanwhile the purchase price for a half-gallon container of milk at every supermarket in Vermont, and in America, climbs every year, with milk now a relatively costly commodity out of reach to many families.

    Vermont’s head of agriculture, Chuck Ross, has long and senior ties throughout Washington. He seems more able than almost anyone to develop solutions, if any exist.

    Something here seems terribly wrong. We have agricultural policies that pay billions of dollars to giant sugar producers, and to giant soybean producers. Why is it so hard to develop policies to keep small Vermont family dairy farms from shutting down?

    Could it be that organic milk sells for much more, and Vermont should be pushing to persuade more Vermont dairy family farms to migrate to organic? Could it be that wholesale milk buyers are setting prices illegally? Could it be that selling co-ops are needed with state leadership? I would welcome reporting that helps explain the issues, and that tells what percent of Vermont dairy farms have closed in the past 20, 10, and 5 years. I suspect it is much higher than we think.

  • If you think this is bad, wait until you farmers have to adhere to the States new rules and regulations. similar as when the State made all farms install bulk tanks. When half the Farmers left town. Never to return.
    Never mind that half the world does not have enough to eat, its my guess that the politicians made this crises. Why not export it to those countries?

    • Jon Corrigan

      Reminds me of the saying: ‘Politicians are the only people in the world who create problems and then campaign against them.’

  • Jan van Eck

    The underlying problem with the dairy market is that it has a large number of small producers and only a few buyers. That is a classic case of Oligopsony. In those cases, the producers are always exploited. Canada faced this with their wheat farms, and off-shore buyers with lots of market power. Canada responded with the Canada Wheat Board. You are an off-shore buyer and want Canadian wheat? You have to buy it from the Wheat Board – you cannot go to the small farm directly. That broke the cycle and Canadian farmers get good prices.

    Countries that have done well in dairy export have a customer that is prepared to pay a premium. The better example is Danmark, which is pretty much the exclusive supplier to Saudi Arabia. The Danes charge top dollar for great product, and the Saudis had the cash to pay for it. Vermont cannot do that because of the mendacity of politicians and bureaucrats, and the vapid stupidity of the public. For milk to go long distances, say to Africa, today it would have to be refrigerated, at huge expense. but if milk and dairy products including cheese were irradiated, then the bacteria would be dead and it could go are regular cargo in containers. Americans refuse to irradiate their food because – well, a combination of vapidity, stupidity, bureaucratic mendacity, and no education in either physics or biology. The result is that staggering amounts of food is wasted, and these export markets are unattainable.

    Just think: there could be this whole new industry manufacturing food irradiation machinery, to be put to use on Vermont milk. Will it ever happen? No chance. Enjoy your poverty and go dump your milk.

  • We have so many local families struggling to afford food and many have kids that need milk for healthy development. It feels a bit obscene that we would rather destroy the milk than distribute to those local families. Couldn’t the farms donate the excess and receive a tax write-off instead of simply dumping it, which helps no one at all? I think we have some local organizations that collect leftover food from other sources, so why can’t we use them to collect the extra milk and distribute to those in need?

  • Why can’t we donate the excess milk to local families that are struggling and have kids that need milk for healthy development? It would be better than dumping into manure pits. And couldn’t the farms receive a tax write off for donating the milk instead of dumping it? Just seems sad that we would waste such an important thing that families need but can’t always afford.

  • Jamie Carter

    Perhaps some farms should consider culling their herd a bit. Beef prices are as high as ever and milk really low. It would seem to make sense to bring milk production down and take advantage of the higher beef prices.

  • Barbara Forauer

    Yesterday we had the opportunity to attend the Breakfast on the Farm event in Ferrisburg. The farm we visited has incredible modern technology and thus we were impressed. A fact
    that was posted was this: in 1965 VT had 6,000 farms. In 2010 VT had a little over 1,000 farms. Just food for thought as we face where we get our food.

  • Anna Smith

    Please include what brands support local farmers so retail buyers can make informed choices.