Dairy industry braces for a tough winter
By KATHRYN FLAGG
ADDISON COUNTY — Local dairy farmers could soon be producing milk at a loss, with high production costs — driven by expensive fuel, feed and fertilizer — and falling milk prices pushing many farmers toward tighter, and in some cases negative, profit margins.
With milk prices hovering around $16 or $17 per hundredweight for most farmers, according to President of the Addison County Farm Bureau Bill Scott, even the best managers are going to have trouble making ends meet.
“Farmers tend to be an optimistic group,” Scott said. “I think they love what they’re doing, and they’ll keep sharpening their pencil to find ways to save money.”
That said, Scott predicted that falling revenues and skyrocketing expenses — he pointed to fuel and fertilizer prices that have doubled in the last year — will mean that the county could see the “marginal” farms go under.
The latest drop in milk prices comes after a spike that occurred a little over a year ago, explained Glenn Rogers, a farm business management specialist with the University of Vermont Extension in St. Albans. Prices stayed high through the spring and early summer — with a July blend price of $20.61 per hundredweight for milk, according to figures from the AgriMark dairy cooperative — but are tapering off now.
Rogers said he anticipates that milk prices will continue to “drift downward” and stay low over the next six months, and AgriMark projections for this winter show blend prices around $17.50 per hundredweight. Individual farmers could receive anywhere between roughly $14 and $20 per hundredweight of their milk, depending on the quality of their product.
AgriMark’s prices reflect the price paid for milk in Boston. Vermont farmers can expect to see slightly lower rates than AgriMark’s figures because of additional transportation costs.
While prices are more stable for organic dairy producers, who tend to lock into yearlong milk contracts, those prices have not kept up with increasing costs, particularly when it comes to feed prices.
“It’s going to be a tough year for the organic guys as well,” Rogers said.
The first step farmers can take, Rogers said, is to tighten their belts on the farm.
“You put off purchasing items,” Rogers said. “You end up looking at ways to be more efficient, ways to become less costly, you look at the weak links in the business and you try to figure out how to plug those holes.”
That’s the approach Cornwall dairy farmer John Roberts is taking. Roberts milks around 200 cows, and said that while he’s generally an optimist — and wouldn’t be a dairy farmer if he wasn’t — he’s heading into the winter in “kind of a wary situation.”
Roberts is able to feed his cows a high amount of “forage,” or hay and silage he grows on his farm, which means he’s less susceptible to rising grain prices, but he said he’s still worried about business.
“There’s a degree of uncertainty in all of this. There’s a fair degree of uncertainty,” he said. Some of that comes from falling milk prices, but Roberts also cited the country’s economic turmoil as cause for concern.
“If people in America are feeling the pinch financially, then they’re not going to buy as much dairy products as they did, even though it is a high nutrition source,” he said.
Roberts said that the current milk scandal in China — in which several Chinese dairies have been found to have tainted their milk with the industrial chemical melamine — could drive up demand for U.S. dairy products, but that any boost in prices wouldn’t been seen for another month or two.
He’s also worried about the affect the economic meltdown on Wall Street could have on dairy farmers, particularly if loans or credit become more difficult to obtain.
“We’re in sort of scary territory right now,” Roberts said.
So he’s doing what he can to cut corners. He’s hooking up an old Norwegian wood furnace again, in hopes of generating heat and hot water for his milking parlor. Roberts is also looking into value-added products, like butter and soft cheeses.
When it comes to selling fluid milk, Roberts explained, “you’re pretty much at the mercy of the marketplace.” He and other dairy farmers have little control over their revenue or expenses — and Roberts hopes that a value-added product would offer some insulation from the marketplace.
That dairy prices are unpredictable is little surprise for those working in the industry.
“The price of milk is one of those things that’s pretty volatile,” said Gary Braman, the loan officer at the Middlebury office of the USDA’s Farm Service Agency. “It goes up and down.”
PRICES ARE CYCLICAL
And according to UVM’s Rogers, dairy farmers see prices rise and fall in cycles — but lately, these cycles have gone up and down much faster.
Judging from the farmers he works with, he said that moods on the farm vary.
“It’s going to be a tough winter,” Rogers said. “But it’s going to be a tough winter for the homeowner and a touch winter for businesses in this state.”
Some farmers, he said, have grown to accept the ups and downs in prices, and are working that into their overall projections as best they can. But, he explained, there are only so many “corrections” that farmers can make.
“There are a certain number of things that you’ve got to do n the farm every day,” Rogers said. “You’ve got to turn the lights on. You’ve got to get the feed to the cows.”