Dairy farm numbers still in decline; farmers seek solutions for below-cost milk prices

VERMONT — In 2017, there was an average of 796 dairy farms in operation in Vermont. As of August, there were just 711.
That’s a loss of almost 11 percent in eight months, and the disappearance of 340 (or 32 percent) since 2009, when the Vermont Agency of Agriculture reported 1,051 dairy farms.
In Addison County, three of 110 farms have gone out of business since January; that’s on top of the eight that shuttered in 2017. Franklin County, the state’s largest dairy county, saw 11 of its 138 dairy farms go out of business this year; Orleans County went from 123 to 117 dairy farms in eight months.
Talk to farmers or their suppliers and you’ll hear of many more operations on the brink.
Loss of farms poses a threat not only to farmers themselves, but to the businesses they frequent, from the corner store to equipment and feed dealers.
As farmers enter their fourth year of milk prices below the cost of production, they’re sharing stories of neighbors whose milk checks are zero after payments are sent to their lender, feed dealer and other suppliers, or farmers who want to go out of business but can’t because their lender is pressuring them to stay in operation, even as they lose money, because the lender has no hope of recouping what’s owed to them.
Enosburgh farmer Phil Parent, who recently refinanced his farm, said, “I’m 32 years at it and I’m starting all over again.”
Jacques Rainville, a farm owner who also works as a milk hauler, has a dramatic solution — cut the milk supply 15 percent for six months. “Let’s say there’s one trailer less, we’re dumping it anyway,” he said.
That oversupply is the problem is well known.
Even as the number of dairy farms has fallen, the production of milk in Vermont has grown from 2.46 billion pounds in 2009 to 2.73 billion pounds in 2017.
Farmers are trapped in a cycle in which when prices fall, they make more milk to try and bring in enough income to cover their fixed costs in land, buildings and equipment. When prices rise, they make more milk to try and make up for the losses they sustained when prices were low.
The only way the supply falls is when enough farmers go out of business to reduce the supply and raise the price.
Each trip through the cycle leaves only the most tenacious, or sometimes the most fortunate, farmers standing.
That cycle takes a toll on suppliers as well, who offer credit when times are poor and then must stand in line to collect when prices rise. Cutting off credit to farms means losing customers.
Rainville’s proposal would have U.S. Secretary of Agriculture Sonny Perdue order a cut in the supply for six months. If the price doesn’t rise enough to cover the cost of production, then the cut would remain in place for another six months.
“We’ve got to get some money back to the farmers,” said Rainville. “We’re losing them left and right.”
“We have made more product than what the market demands. We need to face that,” said Parent, who co-authored Rainville’s proposal. “For way too long we’ve been focusing on production, production, production.”
Others have suggested Rainville’s proposal is too drastic and will “shock the market,” Rainville said. But he believes a market shock is needed.
A dramatic reduction in milk supply might help to reduce the oversupplies of cheese, butter and milk powder. Under the current pricing formula, the price farmers receive for fluid milk — the milk people drink or pour on their cereal — is tied to the price of cheese and powder.
In July, there were 1.4 billion pounds of cheese sitting in U.S. warehouses, according to data from the U.S. Dept. of Agriculture — an all-time high. Butter stocks were at 318,000 pounds, an increase of 3 percent over July 2017, although it was a reduction from June.
Farmers are also in a quandary over what to do with the excess milk they’re making. Milk that can’t be bottled or used to make dairy products such as cheese, ice cream and yogurt is turned into milk powder to “balance” the market.
“It’s either dump it or powder it,” said Rainville. “The more we powder, the lower the price will go.”
Having large stocks of powder increases the supply above demand, lowering the price, which, in turn, impacts the price farmers receive for their milk.
A sharp, immediate reduction in the supply of milk is just the first step in Rainville and Parent’s proposal. Phase two would be a national committee to develop two supply management proposals and present them to farmers for a vote. Once farmers have selected the proposal they favor, it would go to Congress.
“Give the farmers two plans and let them vote. Farmer voted, not processor voted,” said Rainville.
At a meeting earlier last month in Albany, N.Y., which Rainville attended, attorneys advised those present that should the cooperatives attempt to control supply themselves, they could face an antitrust suit, such as the one that has targeted a Cooperatives Working Together (CWT) program that paid farmers to reduce their cow numbers by selling entire herds.
But getting changes through Congress is another challenge.
“We need a good price and a stable price,” said Rep. Peter Welch, D-Vt. He believes a supply management program is needed, but farmers across the country must put their combined weight behind a single proposal for it to have any hope of getting through Congress, he suggested. “The most important thing is dairy farmer unity.”
In 2012, farmers did come together around a program, which nearly made it through Congress only to be blocked by then House Speaker John Boehner, who called it “Soviet-style agriculture.”
Boehner, many noted, was also taking campaign contributions from milk processors who benefit when prices fall.
The Soviet-style remark clearly still stings. Parent pointed out that in the Soviet Union former peasants labored on land owned by the state.
Rainville added that Soviet-style agriculture is what’s coming to the U.S. when a handful of mega-farms are producing all of the milk and the work is done not by those who own the land, but hired help. It’s farms turned into factories. “We could have all dairy produced in 10 mega-farms. Is that where you want to go?” he asked.
It’s what his proposal is designed to prevent.
Rainville himself wants to see a two-tier supply management system in which all farms receive a base of equal size. New farmers would receive that same base. Unlike in Canada, it would not be a transferable asset, valuable in itself.
Any production above the base would be paid at whatever the market would bear.
Rainville said he came up with the plan after talking with Canadian farmers about what they do and don’t like with their system. “It would open the system to a lot of young farmers that want to come in,” he said.
“Big farms could expand,” Rainville added. “There’s nothing that stops them from expanding.” But the price they receive for that additional milk would be lower than the price for their base milk.
While he thinks his proposal has several advantages, Rainville isn’t wedded to it. He just wants to see something change, although he would prefer a proposal that protects small farms.
“Fifty to 100 cow farms aren’t the problem,” he said. “We shouldn’t be penalized.”
One of the challenges in getting supply-management through Congress is that “many people from non-agricultural states see that as interference in the market,” said Welch. Although, as any farmer can tell them, the federal government has been active in managing the supplies and prices of agricultural products, including dairy, since the Great Depression.
Opposition to supply management can also come from the very large dairies out west with tens of thousands of cows. “Some of the huge dairy farms… I think they see it as a threat to their business model,” Welch said.
The rise of mega-farms, Parent pointed out, is a threat to someone else’s business model — farm suppliers.
“Ten farms are going to buy 10 milk pumps, 10 different tractors,” Parent said. One large farm, just one. And some of the tasks currently outsourced to other businesses, such as custom cut operators, often move in-house on large farms.
The loss of those businesses, referred to as agriculture’s infrastructure, will impact non-dairy farms, which also seek goods and services from those suppliers, as well as completely unrelated businesses like restaurants and stores.
“I feel bad for the equipment people. We’re going to lose ’em. We’re going to lose the infrastructure,” said Parent.
The health of the farming economy is inextricably linked with the health of the rural economy overall. According to the 2015 Milk Matters report, from the Dairy Promotion Council, dairy adds $2.2 billion to Vermont’s economy each year, with $3 million a day coming into the state from dairy sales.
“There’s an important value here, and that’s to have strong, local agriculture,” said Welch. “For Vermont, that’s dairy.”
But saving dairy may mean a trade off for farmers, Welch suggested. “Supply management requires some farmers to come together and recognize that if they want stability and a better price they may have to give up the ability to ramp up production,” he said.
Farmers in the Northeast used to have a supply management tool that worked, the Northeast Dairy Compact. “That started with farmers coming together and coalescing around that tool,” said Welch.
Now farmers must do so again.
“Contact your co-op and try to get behind a program like we have,” said Rainville. “Go down to your co-op and push ’em.”

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