Dairy Crisis

Vermont feature September 4, 2009

by Bethany M. Dunbar

Hi there. You are looking at Vermont Feature, a brand new blog designed to cast a bit of extra attention on a news story each Friday. I’m starting with dairy farming because it’s near and dear to my heart. It is a life I lived for 11 years, and my two grown children were born on a farm. We had beautiful Jersey cows. The life was difficult but rewarding in so many ways. I have no regrets.

Posted below are two recent dairy stories. The first is the Borland auction, which got media attention from all over the place, and a longer piece I did in July, a more general story about the dairy crisis.

The dairy crisis is not new. Farmers have struggled with cycles of low milk prices for decades, and it’s not for lack of support from the Vermont public and consumers. The problems with the federal pricing system are severe and deep-seated, and it will be no easy task to solve them. But we have some incredible advocates who are doing what they can for the farmers — including our congressional delegation.

A recent survey by the Council on the Future of Vermont showed that 98 percent of Vermonters value the working landscape and its heritage, which was the highest-rated statement in a poll.

My intention here is to get some feedback about issues like this. I’d love to get comments from people about that statement. What is the most important part of the working landscape and its heritage to keep? The farmers? The work that they do? The farm economy? The cows? The milk? The scenery? The memories?

How do we do it?

Thanks for reading this. Please comment at the bottom or send me an e-mail directly at bethany@bartonchronicle.com. If you are not already on the Chronicle’s web site, you will find more background articles there: http://www.bartonchronicle.com. Please also support the actual newspapers: especially the Chronicle and New England Country Folks!

Thanks,

Bethany M. Dunbar

co-editor, the Chronicle

Borland dairy auction draws buyers from all over

August 12, 2009

A Holstein looks out at the crowd during the auction.

A Holstein looks out at the crowd during the auction.

by Bethany M. Dunbar

GLOVER, Vt. — By the end of a long day Wednesday, August 5, Ken and Carol Borland were relieved and tired.

The auction of their dairy cows and equipment was done.

“At our ages you can’t keep going in debt waiting for things to get better,” said Carol Borland. She said she knows that her husband told a newspaper reporter that there are probably 1,100 dairy farmers in Vermont who would trade places with him that day.

That would be all of them.

These days dairy farmers are getting about 95 cents to $1 for each gallon of milk they produce, which is about 50 cents less than the average cost of producing that milk. It is about the same as the price they received 30 years ago. Meanwhile the cost of fuel and grain and other supplies are drastically higher.

U.S. Senator Bernie Sanders and others are putting forth a number of proposals to provide emergency funds to keep farmers going, and to work on a more long-range solution to the constant roller-coaster ride of farm milk prices.

The senator said in a press release that the Senate approved an amendment on August 4 that would increase federal price supports by about 13 cents a gallon.

The senator is also calling for an investigation of price fixing by Dean Foods, a company that controls 70 percent of the milk sold in New England and 40 percent nationally, according to Senator Sanders.

“The drop in prices paid to farmers has not coincided with a drop in prices for consumers. While New England dairy farmers receive just $1 per gallon of milk, Americans are paying on average $3.01 per gallon at their local store.” says a press release.

One program to help farmers who want to get out of dairying is a buyout, established by dairy cooperatives.

Ken Borland decided against going into that program, which would have meant that all his cattle would have to be slaughtered for beef. The herd of Holsteins was built up over several generations. Genetics was part of the draw for dairy farmers from New York, Maine, Rhode Island, and Pennsylvania, who were interested in buying them to milk them.

“Ken’s one of the most respected individuals in the country,” said Burton Hinton of Westmore. “I know what I’m getting.”

He added, “It’s tough buying them from a Yankee fan though.”

Cows in the Borland herd with top breeding are producing over 100 pounds of milk each day, the auctioneers noted. These cows were drawing bids of $2,000.

The Borlands are selling their maple sugar bush to Mark and Hope Colburn and their family.

“It’s interesting that what for us is a second income is what sold the farm,” said Carol Borland. They will keep some of the land on which to build a new house. They will move the 1898 sugarhouse. Ken Borland plans to continue doing some sugaring.

Dairy crisis called worst in 30 years

July 15, 2009

Tule Fogg and Mark Dunbar at their dairy farm.

Tule Fogg and Mark Dunbar at their dairy farm.

by Bethany M. Dunbar

EAST CRAFTSBURY — Mark Dunbar is philosophical.

He says if it comes right down to it, his priority will be saving the farm before he saves the cows. This farm has seen seven generations of his family working the land. He doesn’t want to be the guy who loses it all.

Mr. Dunbar and his wife, Tule Fogg, are hoping they can hang on and continue dairying, but with the milk price received by farmers at around $11 for a hundred pounds (about 95 cents a gallon) he’s not sure how long he can stick with it.

The average cost of making milk in Vermont is about $19 for a hundredweight, or $1.63 a gallon, according to the Vermont Agency of Agriculture.

Mr. Dunbar and Ms. Fogg are one of 1,046 dairy farms left in Vermont. No doubt most — if not all — are going through some soul-searching to figure out how to keep farming or how to stop. Meanwhile advocates and officials are struggling to come up with programs to help keep as many as possible in business.

For farmers who have lost their ability to remain philosophical, a suicide prevention hotline has been established.

“The National Suicide Prevention Hotline is available to help,” says a newsletter from the United States Department of Agriculture. “If you know a farmer or a rancher who is under stress and is reluctant to ask for help, or if you just need to talk to someone call 1-800-273 TALK (8255). Your call will be routed to the crisis center nearest you, where trained staffers are available 24/7. This nationwide service is free and confidential. Help is just a phone call away.”

“The Vermont dairy industry is going to change dramatically,” said Rick LeVitre of the University of Vermont Extension system, who has worked in Extension for 29 years — most of that time with dairy farmers. Mr. LeVitre runs the Farm Viability Enhancement Program, which is currently working with about 50 farms. He said when the current crisis has past there will be large farms (over 500 cows) that can last through the price fluctuations. There will be small farms that find a niche market, a value-added product or specialty. The ones in the middle are facing the biggest squeeze. These will have the hardest time to survive, he predicted.

Even organic farmers are struggling as the market for the more-expensive organic dairy products has dropped substantially.

•••

The Dunbars have done everything they can think of to bring down expenses and draw in a bit of extra income here and there to make ends meet. They have stopped doing monthly veterinary health checks and quit getting their milk tested by the Dairy Herd Improvement Association. Both of these steps might hurt their dairy in the long run, but they have to cut these costs for now. They are thinking about using a bull instead of using artificial insemination services.

Mr. Dunbar teaches a basic tractor class, on the farm, to Sterling College students. Ms. Fogg teaches art and sells T-shirts. She rides the school bus to work to save on gasoline.

Mr. Dunbar said he’s considering working with someone to make a specialty cheese. He’s been selling cull dairy cows as beef. He is considering selling feed and lumber.

“We need to think way outside the box,” he said.

“People are helping each other a lot,” Mr. Dunbar added. He said former employees are coming around to help as volunteers, and his son John, who is 17, is working full-time (and then some) on the farm for no pay. His father, Wayne, is also helping out. They also got a student employee through a grant program.

Yankee Farm Credit and the vendors are doing what they can to help as well, Mr. Dunbar said. They are not hounding him if a payment is late.

“The IBA guy says we’re all in it together,” Mr. Dunbar said. IBA is a dairy supply company. “As long as I keep giving him a little money, he keeps me going.”

He added, “Some of it is self-preservation on their part.”

•••

An antiquated federal milk price system is blamed for the situation.

Vermont Agency of Agriculture Secretary Roger Allbee said the system is just not working any more. U.S. Agriculture Secretary Tom Vilsack visited Concord, New Hampshire, on July 6, and Mr. Allbee met with him. He reported that the Obama Administration is concerned and understanding.

A national surplus is currently driving the price down, Mr. Allbee said. Price fluctuations have been the norm for years but seem to get more extreme as time goes by. The price has been in the $11 or $12 per hundredweight range since February.

“It only takes 2 to 3 percent,” Mr. Allbee said, about the surplus. A year ago, China and India and other nations were buying 11 percent of the milk produced in the United States. Now they are not buying.

A program called Cooperatives Working Together (CWT) aims to reduce the surplus by taking dairy animals out of production. A CWT buyout this spring took 101,000 cows off farms, but Mr. Allbee said the national herd needed to be reduced by 300,000. The CWT buyouts are paid for by deductions from farm milk checks of 10 cents per hundred pounds. CWT is run by the cooperatives, not the government. Cattle bought out through the program are sold for beef.

He said that program could have a bigger impact if it was expanded.

Four farms in Vermont participated. One of them is already back in dairying.

Willy Ryan of Ryan Brothers Farm in Craftsbury said he put in a bid that he thought was high, but it was accepted. Bids are made per hundredweight. His was $6.65, which ended up being about $1,360 per cow or $1,000 net. They would have made more, but they are going back to milking before the year is over. In fact they only stopped for a day and a half.

That means Ryan Brothers Farm is paying a penalty of 10 percent.

“We’re back to milking nine cows,” Mr. Ryan said, and they will probably be shipping milk again fairly soon. The Ryan brothers have been able to buy animals for about $800 apiece.

“I’m buying back probably better cows,” Mr. Ryan added.

He said his brother felt badly about sending all his good dairy cows for beef, but it was a financial decision. They had to do it.

“Something’s wrong with the system when I have to kill my cows to survive,” he said.

“I’ve never seen anything like this in 33 years,” Mr. Ryan said about current economic conditions in dairying. “People that never owed any money to anyone owe money here, there, and everywhere.”

Mr. Ryan said if the price doesn’t get any better soon there will be a blood bath in two months. A lot of farmers are building up debt who never did before, he said.

“By September the grain companies are going to start shutting people off,” he said.

“It’s kind of a silent death,” he said. Some farmers have decided not to have an auction because the price of cattle, real estate, and farm equipment is so low that they might not come out even. Mr. Ryan went to one auction where the last eight or ten cows went for beef, even though they were nice dairy cows.

“They ran out of farmers to buy ‘em,” he said.

He added that the disaster might be an opportunity for someone who is just going into farming.

“You make your money when you buy, not when you sell.”

Yvon Lanoue is a farm management consultant who works for Mr. LeVitre on the Farm Viability Enhancement Program. He said farmers who are interested fill out a one-page application. Farmers accepted will get help writing a comprehensive business plan, setting priorities and exploring possible new business directions.

“It can help them survive,” Mr. Lanoue said.

Mr. LeVitre said some of the farmers are working on transitions, getting information about Chapter 12 bankruptcy, and some are just trying to figure out how to stay in business for two or three years.

He agreed with Mr. Ryan’s assessment, which Mr. Dunbar did too, that a lot of farmers are not selling out right now because of the general economy and lack of alternative jobs.

Some people are looking into making ice cream, bottling milk, or making cheese, but Mr. LeVitre noted that it takes an infusion of capital to do that.

“How much debt can one continue to assume?”

These are the day-to-day questions that the program tries to help farmers assess.

“It’s a world problem. It’s not just here,” Mr. LeVitre added.

Mr. Dunbar said the program was helpful for him — not that it provided any financial aid — but it was a fresh look at a situation from outside that was valuable.

•••••

The Vermont Agency of Agriculture and Vermont’s congressional delegation are struggling to find short-term aid and long-term solutions to the dairy crisis.

A press release this week from Congressman Peter Welch says he has introduced a bill to adjust the Milk Income Loss Contract (MILC) program for inflation. The MILC program helps fill the gap between the farm price and the cost of production. MILC payments cover 45 percent of the difference between the farm price and a “target price” of $17 a hundred pounds — which is still $2 below what the Agency of Agriculture says is the average cost of production in Vermont.

“I recognize that the MILC program does not go far enough, even with possible increases, but it remains the fastest way to put money back in farmers’ pockets during this crisis. These bills are an effort to provide short-term assistance to farmers as we work together on a longer-term remedy to volatility in the milk market,” says the release from Congressman Welch.

Senator Bernie Sanders met recently with the head of the U.S. Justice Department antitrust division to talk about a formal investigation of the “concentration of ownership among processors and the lack of competition.”

The release says that Dean Foods processes about 70 percent of New England’s fluid milk.

Agriculture Secretary Roger Allbee said the dairy co-ops have no clout in the market any more.

The Vermont Milk Commission plans to meet in Montpelier next week and take public comment on the dairy crisis.

Secretary Allbee is working on another method to possibly help farmers by creating a new brand of Vermont fair trade milk, in hopes that consumers might support the farmers by buying that product. He said the state is working with a retailer in hopes of developing something.

On the subject of long-term solutions, supply management is often mentioned as a possible way to control the price fluctuations.

Mr. Allbee said CWT is a form of supply management, but the program did not go far enough.

He said supply management can range from a voluntary effort to a strict limit on how much milk each farmer is allowed to sell. Canada dairy farmers work under a quota system and have for decades.

The Holstein Association and a number of other farm advocacy organizations are supporting a supply management plan called the Dairy Price Stabilization Plan.

A group called Dairy Farmers Working Together describes the plan on its web site. It would establish base amounts for farmers in order to curb overproduction.

Under this plan, “allowable milk marketings” would be established based on past sales and a market forecast. Those who produce more than the allowed amount would be charged a “market access fee” of $2 or $3 per hundredweight.

The income from those fees would be redistributed to farmers who hold their production even.

Supply management plans have been debated on an off over the years. Independent Vermont dairy farmers have often balked at the notion that someone would tell them how much milk they could produce.

Asked his opinion on the concept, Mr. Ryan said it’s going to make it hard for anyone to start farming.

“I think when I was 35 I would have been against it, but I’m 65, so I’m for it.”

•••

Organic dairy farmers are already working within a supply management system of sorts, established by the companies that buy and sell organic milk.

Vermont has 197 certified organic dairy farms, according to Dave Rogers of the Northeast Organic Farming Organization (NOFA). There were 200, but one went out of business and two others lost their contracts.

Organic Valley is a cooperative. The board of directors decided that they would rather have all the farms cut production by 7 percent than cut some of the members off.

Horizon, the other major organic buyer, is not a cooperative. It has started with a voluntary production cut, but Mr. Rogers said it’s likely that’s a warning. Farmers will most likely need to comply or face mandatory cuts.

“All the organic buyers are trying to match up supply with demand,” he said.

He said there are farms still making money with the cut, but those who have debt related to the transition from conventional to organic dairying might be in trouble.

“As with the conventional side, people are hurting, their businesses are at risk,” he said.

For many years organic farmers enjoyed 20 percent increases in the market each year. But the troubled economy has forced consumers to choose less expensive options. Mr. Rogers said as the economy recovers, he expects the organic market to pick up again, but it’s anyone’s guess when that might happen.

“Nobody’s got a very good crystal ball,” he said.

Mr. Lanoue of the Farm Viability Enhancement Program provided some milk price predictions for the conventional milk side of things he had received from Agri-Mark. These show milk prices averaging $16.45 in 2010, about $3 more than the expected average for 2009 but still lower than the state’s estimated average cost of production.

•••

Agriculture Secretary Roger Allbee said he literally lies awake at night trying to think of what he can do to help the farmers.

“It’s the worst it’s been in over 30 years,” he said. He spoke with one farmer who said he is losing $500 a month per cow.

There are 1,046 dairy farms left in Vermont right now, he said. In January there were 1,078.

“Farmers are very resilient. They’re survivors,” he said.

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One response to “Dairy Crisis

  1. Great Article Bethany!

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