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.Dairyman Frank Faria looks over cows at the Faria Dairy Farm June 2, 2009 in Escalon, California. As milk prices continue to plummet due to a weakening international and national demand, dairy farmers across the U.S. are struggling to turn a profit prompting many to sell off their cattle for slaughter and turn fields into corn crops. Within the past year, milk went from $17 per one hundred pounds down to $10 per hundred pounds. Most dairy farmers need to make at least $15 per hundred pounds to break even. (Photo by Justin Sullivan/Getty Images) * Local Caption * Frank Faria
The cut means that Britain’s 10,700 dairy farmers will receive around 26 pence per litre for their milk.
Some farmers say this is below the cost of production and could force them out of business. The cost of producing a litre of milk – including overheads such as animal feed and vets bills – is between 28 pence and 30 pence a litre, farmers say.
Prices are being slashed because there is a surplus of liquid milk on the world market, meaning that its price is falling. The cost of cream has also fallen sharply recently.
Processors say that they are simply responding to changes in market conditions. Large middleman such as Wiseman, Arla, Muller and Cotteswold Dairies will all cut the price they pay dairy farmers by 2 pence at the start of next month. Others, such as Diary Crest, cut prices on May 1.
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.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.
Posted in Food & Agriculture | Tagged Dairy Security Act, farm bill, milk prices, Senate Agriculture Committee, Vermont dairy farms
