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Dairy in Crisis - Part 3: Farmers seek lifeline for dairy industry

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Posted on March 26, 2009 |
By Kathryn Flagg



farmfeed.jpg
DERRICK DYKSTRA DISTRIBUTES feed to cows on his New Haven dairy farm Tuesday afternoon. Dykstra will continue to sell his milk on the commodity market, but would like to see changes in the system. Independent photo/Trent Campbell

ADDISON COUNTY — As Vermont’s dairy farmers lose money on every gallon of milk they produce, dairymen these days are wondering if they’ll survive the latest downturn in the volatile milk market. The crash in the price farmers get for their milk has forced 24 Vermont farms out of business since December, according to the Agency of Agriculture.

But even if they make it through this current crisis — which, with its $10 and $11 per hundredweight (cwt) milk prices is admittedly the worst farmers have seen in years — the long-term outlook for the industry is murky.

Even once prices begin to climb this coming fall, dairy experts worry that another crash is inevitable. New Haven dairy farmer Derrick Dykstra said that the peaks and valleys in milk prices are getting more and more dramatic. The high prices are higher, he said, but the up cycles are shorter, and the downturns longer and deeper than ever before.

“We definitely need a change,” Dykstra said.

Conventional farmers say the federal milk marketing order, which sets the price that farmers get for their milk, is ripe for just that change, and more than 200 farmers gathered in South Burlington last week to brainstorm ideas for stabilizing prices on a federal level (see related story).

But on individual farms around Addison County, other farmers are hashing out solutions of their own — from producing value-added products to distributing milk themselves — to evade the volatile milk market, striving to get by in the faltering industry. 

ORGANIC DAIRIES

One model is organic dairy farming. It’s an option that’s been lauded by some dairy experts as a way for farmers to command a markedly higher price for their milk than the one they can pull on the commodity milk market.

James Maroney, a former organic dairy farmer in Leicester and the author of “The Political Economy of Milk,” argued in a Feb. 5 community forum in this newspaper that conventional farmers should consider filing for Chapter 12 bankruptcy, which was designed to help financially distressed family farmers.

Under Chapter 12 farmers can propose and then carry out a plan to repay their debts, while keeping their farm and drafting a new business plan.

It’s the perfect opportunity, Maroney argues, for farmers to transition to organics.

“Because it sells for $34 per hundredweight, converting to organic milk provides a unique opportunity for dairy farmers to regain profitability,” he wrote.

Maroney is skeptical that dairy farmers will ever get a decent wage by looking to the government for help or leadership in reorganizing the milk market. He points to the overproduction of milk as the culprit behind volatile milk prices, but said in an interview that it’s in the government’s best interest to keep too much milk on the market, holding down prices for consumers.

Organic farming, he said, would not only help curb overproduction, but would also allow farmers to more control over their own businesses.

But wide-scale organic dairy farming isn’t the “miracle cure” that some dairy experts would make it out to be, said Cheryl DeVos of North Ferrisburgh-based Kimball Brook Farm. The DeVos farm was certified organic in 2005, after the mandatory two-year transition period.

“It’s not as easy as everybody says,” DeVos said. “Thirty-four dollars a hundredweight is maybe the best you can get, and I’ve never hit that yet.”

The cost of organic production is higher than it is for conventional farming, she explained. DeVos and her husband, J.D., milk 160 cows right now — down from 200 a few months ago. They saw a 75 percent hike in feed costs last year, and like all farmers, they struggled with high fuel costs last summer.

“It’s been tight, very tight,” DeVos said.

The reason for Kimball Brook’s transition to organic, DeVos said, boiled down to money. But now she says she would never go back to conventional farming. She sees it as a better approach to farming, and said her cows are healthier.

But that doesn’t mean she thinks transitioning to organic farming will help all Vermont dairymen. Two years ago that may have worked, according to DeVos — but these days she said the market for organic milk is saturated.

“It’s a great theory,” she said, “but organic procurers right now aren’t taking any more milk.”

Catlin Fox, who has run an organic dairy in Leicester with Annie Claghorn since 1996, agreed that now’s a hard time for farmers looking to make that switch.

Fox and Claghorn got in on the organic movement early — they’d wanted to farm that way forever, Fox said. Their land went organic in 1988, but it wasn’t until the mid-1990s that they were able to procure organic grain. Now, he said, it takes longer for farmers to make the switch to certified organic, and even once they do, he worries there may not be a place to sell their milk.

“I don’t know what the market’s going to do,” Fox said. “I think it’s sort of leveled off. I just don’t know what the market could bear, to be honest.”

Organic farmers aren’t the only ones skeptical. Many conventional farmers doubt that transitioning to organic farming is the cure-all for the Vermont dairy industry’s ailments.

Cornwall dairy farmer John Roberts said he’d heard reports of organic dairy co-operatives cutting back on the amount of milk they were accepting from farmers, and even letting farms go.

“The real market share for organic is not that tremendous,” Roberts said. “Right now, (organic farmers are) suffering the same thing we’re suffering through.”

Consumers are cutting back on more expensive organic milk, he said — and “that sort of puts the pin in that balloon.”

Despite the market’s perceived limitations, DeVos said she’s happy — “very happy” — she’s an organic dairy farmer. In February she said she was making $33.50 per cwt, and her guaranteed price from Horizon Organic is $27 per cwt.

“Our milk price has been steady,” she said, “and I’m probably in a better position than a lot of farms in the area.”

Sarah and Mark Russell are organic dairy farmers in Orwell. They milk 80 cows at Swallow Dale Farm, and like DeVos, Sarah Russell is glad to be off the milk price “roller coaster” that conventional farmers are on.

“You never know what you’re going to get paid until you open up your check,” she recalled. But since making the switch to organic in 1996, she said a lot of that uncertainty has been removed from the equation.

“You know exactly what you’re going to get paid for a whole year,” Russell said, referring to organic farmers’ contracts with their co-ops. “You can sit down, push the pencil, and figure it out.”

That doesn’t mean the business is lucrative — but for the Russells, the dairy business generates enough to live on, “as long we grown our own vegetables.”

“It’s certainly better than when we were conventional and always biting our nails,” Russell said.

But those more secure milk prices doesn’t preclude farmers like DeVos and Russell from worrying about the organic market — particularly in a time when consumers are pinching pennies. 

“Ours is a value-added product,” DeVos said. “You can buy conventional milk for half the price of organic. Will the consumer do that? They may.”

LOCAL PROCESSING

Organic farmers aren’t the only ones hoping for customer loyalty these days: located in the center of Weybridge, Monument Farms Dairy has been producing, bottling and distributing milk in the Champlain Valley since 1930. In tough economic times, the family-owned business is banking on customers to continue buying the local brand, despite the fact that larger milk distributors like Hood can offer lower prices.

Foregoing sales to co-operatives and large processing companies, Monument Farms shepherds its milk from its milking parlors, to its James Street processing and bottling facility, and then onto delivery trucks — often all within the course of one day. They deliver their milk to Middlebury College and supermarkets from Orwell to Richmond.

The company gets to set the price of its own milk based solely on the cost of producing that milk, explained Jon Rooney, who oversees the processing facility. He shares responsibility for the dairy with his cousins, Peter and Bob James, who oversee the farm and distribution, respectively.

What Monument Farms does — bundling milk production, processing and distribution all under one local umbrella — is a surprisingly rare model not just in Vermont, but throughout the country. The dairy is one of just two operations in the state that Rooney knows of producing and bottling its own fluid milk (Stafford Organic Creamery in Strafford is the other).

But Rooney thinks that the producer/handler model is an avenue other dairies could explore.

“I think in Vermont in particular there’s a market for it,” he said.

That said, he warned that processing and distributing milk, in addition to producing it, isn’t as easy as some might think. Acquiring used bottling equipment is expensive, but doable — that’s not the primary challenge.

“The biggest problem is that it’s very easy to get the product into a bottle — it’s a whole other story selling it, marketing it, and producing a quality product,” Rooney said.

That Monument Farms can control its own prices means it is fairly well shielded from the ups and downs of the volatile federal commodity milk market — but it also means that competing with larger milk distributors like Hood can be tough. In times of nationally low milk prices, Hood and others can acquire milk at prices that do not reflect the cost of production and still make a profit on retail sales.

“All of our competitors, Hood and Garelick, not only are they monstrous compared to our size, they’re also buying their raw milk supply through co-operatives,” Rooney said. “Milk prices are ridiculously low, so they’re buying that milk for next to nothing.”

But Rooney’s not complaining. While Monument Farms this year has cut back production from around 250,000 pounds of milk a week to 190,000 pounds, he said that slump is related to the economic downturn — not the volatile outside forces of the federal milk market order.

“Ordinarily when farm prices might dip we’re certainly in a better position than just a straight producer,” Rooney said. “We do have complete control over what we charge for our milk.”

STAYING THE COURSE

But for many of the state’s farmers, there’s yet another model for getting by — one that doesn’t involve a lengthy transition to organics, a foray into the world of value-added products like butter or cheese, or an investment in processing equipment and distribution networks.

In New Haven, 27-year-old dairyman Derrick Dykstra is simply digging in for the downturn. He’s out of equity, but in an industry based on good relationships, he’s hoping his creditors hold out faith for a little while longer.

“You starve Peter to pay Paul, but at some point Paul wants his money,” Dykstra said.

He’s milking 190 cows in two barns in New Haven. It’s not the life he initially saw for himself — after graduating from high school, Dykstra left the farm for three years, moving to Pennsylvania to build houses.

When his father offered him an incentive plan to come back and take over the family farm, he took the offer, and took over the 75-head operation. Then, last spring, when milk prices were high, Dykstra expanded, buying 120 cows down the road.

“I took this place over with futures looking great,” Dykstra said, standing in the larger of his two barns, which he started renting last spring. But since then, milk prices have been coming down — precipitously so this winter. For Dykstra, who sells to the St. Albans Co-Op, his milk prices are anticipated to be in the neighborhood of $10.65 per cwt this month.

Dykstra is keeping his finger to the pulse of the industry as best he can. He helped form a young dairy farmers’ association in the county, and he’s an active participant in events like trips to Montpelier or the Northeast Dairy Summit.

He thinks groups like the Addison County young farmers’ association are important for the future of the industry, but worries that volatile milk prices dissuade young farmers from pursuing a career in dairy. Not too many people want to jump into what’s perceived to be a sinking industry, he said.

It’s a brutally tough life. Dykstra said he puts in between 60 and 80 hours a week in the winter on the farm — and come spring and summer, that number routinely climbs to over 100 hours a week.

“You don’t rest,” he said simply. “Farming is a mandatory seven-days-a-week, 365-days-a-year job.”

But Dykstra likes the work. He said that being able to treat his animals with antibiotics when they’re sick is too important to him to go organic, and he’s not interested in making value-added products. To do that successfully, he said, a farmer has to have a passion for that path.

For Dykstra’s part, he’s simply passionate about milking cows.

“I like the life,” Dykstra said. “I like working outside. I like working with the animals. … For me, I think it’s the pride of knowing that we’re caring for the land and we’re caring for the animals.”

So his plan, for now, is straightforward enough. He’ll keep on his three employees, and batten down the hatches. 

“Hopefully I can wake up with a smile in the morning,” he said. “I guess I’m going to ride it out as long as I can.”

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