No Cash Cows for Squeezed NE Dairies: Dairy Farmers Struggle with Low Prices, High Costs
The Recorder, August 26, 2016, by Richie Davis
The lowing of cattle on Franklin County pastures like Deerfield’s Bar-Way Farm is nothing compared to the moaning of farmers experiencing months of the lowest prices they’ve seen in years.
“Our income is down by 30 percent,” says Peter Melnik, who like many of the fewer than 35 dairy farms remaining in Franklin County have seen prices paid per dozen-gallons (hundredweight) of milk stuck at about $15 for the first six months of this year — far below the cost of making that milk.
“You know, $14, $15 was what we were getting 20 years ago,” says Melnik, whose Bar-Way Farm has been in business for about 90 years, and, like other dairy farms, struggles with the roller coaster prices paid by milk processors according to federally set minimums. “Two years ago, we were getting $25.”
The struggle is nothing new, but this year has been particularly painful, the worst since 2002-09, when prices hovered as low as $13 or $14, according to Robert Wellington, an economist with the farmer-owned Agri-Mark dairy cooperative.
Costs Keep Rising
“The issue is, cost of production has continued to rise,” said Wellington.
Most dairy farmers claim their production costs are in the range of $18 to $20 per hundredweight, but even that doesn’t present the full picture, because most of them don’t even include the cost of their own labor or those of unpaid family members who often pitch in. According to Daniel Lass, a University of Massachusetts resource economist, who figures the median production cost around New England is a little over $21. Adding in the value of labor — farmers find it hard to calculate because it feels like they’re constantly working — brings the median production cost to $27 per hundredweight.
When farmers look back at their ledgers for 2016, Lass says, “This year is going to be terrible. Horrible,” largely because of an oversupply of milk in New England as well as most places around the world.
Agri-Mark spokesman Douglas Dimento adds, “The farmers are always crying that prices are too low, because they are too low. The prices go up and down seasonally, but the cost of production is steady throughout the year. You just can’t be efficient enough to recover that kind of devastating loss of income. There’s farmers going out of business this year, no question.”
Rising prices for cheese should mean higher pay for dairy farmers in the coming months. Agri-Mark forecasts average prices based on the federally set “Boston Blend Price” to rise above $17 and $18 for much of the remainder of this year and through next year. Yet, in an illustration of just how complex the milk marketing maze can be, you have to deduct from that price a dime for every 10 miles they are from Boston.
It’s Complicated
And out of their milk checks, they have to pay into a promotional fund and also pay for having milk hauled off the farm — a fee that’s just been hiked by about 10 percent.
“It’s just tough,” said Melnik. “It’s tough business. It always has been, probably always will be.”
Yet with all that, Melnick says he’s thankful for state and federal grants of more than $700,000 to install a methane digester to help convert the manure from his 500 cows into electricity, as well as a state tax credit for dairy farmers, along with state programs to help preserve farmland and to help farmers diversify.
“We’re using all those programs and they’re not going to save you,” he says. “You can only save yourself. But they definitely help. They give you incentives, and that’s all you can ask for.”
Community Involved in Sustaining Agriculture, the Deerfield-based nonprofit that has helped raise the profile of farmers as “local heroes,” has also been working to help get dairy farmers’ voices out in front of people,” said project manager Claire Morenon, to help consumers know there are real people — in some cases, their neighbors — producing the milk.
Darryl Williams, a 13th generation farmer on Hatfield’s Luther Belden Farm, agrees milk prices have “been awful. That’s been a huge stress on dairy farmers this year. Grain prices are down a little, fertilizer prices are down a little, but it’s not enough to really make up that $10 (per dozen gallon hundredweight) that we’re losing compared to two years ago.”
Tax Credit
And while farmers are helped by the tax credits, one of several 2007 state programs established to help dairy farmers that kicks in when their prices dip below a certain threshold, Williams says that help comes after a year of losses and is simply used as a way to catch up with back bills.
“Nobody’s buying tractors or manure spreaders with their tax credit money,” he says. “We appreciate what we get from the state, but it doesn’t make us whole. And this year’s drought makes things more stressful.”
By reducing hay and feed corn production this summer, farmers like Williams and Melnik say they’re considering either having to buy feed at steep prices, or reducing herd size.
An attempt to raise the amount available for the state dairy farm tax credit from $4 million to $6 million failed as an amendment to the state’s recently passed Economic Development Bill, but Rep. Stephen Kulik, D-Worthington, who sponsored it, said he plans to re-introduce it in the next session.
“The typical farm gets a $15,000 to $30,000 credit,” said Kulik, who helped author the credit as a way to help struggling farmers. “That might not seem like a lot of money, but it makes a huge difference and has helped keep many farmers afloat. I’m going to keep trying. It’s critically important. If we don’t do it now, we’re going to lose dairy farmers.”
‘Treading Water’
That may not be enough to stop the damage.
Agri-Mark’s Wellington says, “We’ve lost almost 60 members in the first six months of the year” in the New England-New York co-op. “That’s huge. We can’t sustain that over time.”
Shelburne dairy farmer Norman Davenport, who scaled back the herd on his family’s 102-year-old farm to 12 milking cows and got out of the wholesale fluid milk business, selling milk primarily to Sidehill Farm for yogurt production, laments the days nearly 50 years ago when local milk processing plants shut down and the milk-processing system changed from local haulers, processors and retailers to “industrializing milk production. It was the turning point, when that local connection was done in. (Before that) the milk never left the community, and the community’s coin never left the community on its way back to the farmer. That kind of evaporated.”
Davenport’s own farm benefited from the Agricultural Preservation Restriction program, which gives farm families cash by buying a farm’s development rights. But he laments that while that state program has saved farmland, it hasn’t stopped dairy farms — which he says numbered 3,000 in the 1960s — from going out of business, so that fewer than 140 now remain.
“In a very short period of time, there’s no milk made in the state of Massachusetts. That’s not far down the road. It’s very much a quality issue. And every day that everybody consumes dairy, that money is leaving town.”
Yet, as Kulik says, the APR program was never intended to keep dairy farmers from going out of business, but rather to protect prime-soil farmland, to ensure that it’s sold for agricultural farm production, not for houses or factories. Other programs, like the Farm Viability Program and the tax credit program and energy loans, were intended to help dairy farmers.
No Silver Bullet
While there’s no silver bullet to a problem that is exacerbated by a longstanding decline in milk drinking in favor of soy milk, almond milk and other beverages, federal action is needed as a long-term solution, said Kulik, who returned recently from the annual policy forum where a resolution called on Congress and the U.S. agriculture secretary to take action to address the national dairy crisis.
“We believe the secretary of agriculture could take action to support changing parts of the milk order,” said Kulik, adding that New England’s smaller dairy farms are “at the end of the pipeline for feed.”
The USDA’s solution, going back several decades, is that food prices should be kept low for consumers and that the market will force high-cost, “less efficient” producers to go out of the business of supplying milk, explains UMass’s Lass.
Make More Milk
But while that may address the problem of too much production, it doesn’t solve the ironic, vicious cycle of farmers feeling that the only way they can make ends meet is to keep making more milk.
Also, “That doesn’t fit with family farm ideals,” says Lass, who appreciates the thousands of acres of open space that working dairy farms help ensure.
“The visual benefits to people are tremendous, the scenic amenities of farms,” he says. “We don’t value that, that’s not put into the milk price.”
Short of federal action to make production costs part of the formula for minimum prices paid to farmers, or federal control of milk supply — a controversial position that’s been supported by Agri-Mark, according to DiMento — the dairy coop has been working to promote milk consumption as a way of raising dairy prices.
For Agri-Mark, that means boosting efficiency of Cabot cheese-making plants as well as its nonfat powder plant in West Springfield, and even subsidizing butter sales in European Union countries “to tighten up the market,” according to Wellington.
But for Davenport, who points out that most dairy farmers feel they’re “basically treading water,” with farmers in their 50s and 60s and no heirs willing to sink further with equipment that’s also aging, he sees a future when all of the dairy farms are simply gone.
You can reach Richie Davis at rdavis@recorder.com
or 413-772-0261, Ext. 269
