Monday, September 4, 2017

Dairy Farmers Persevering During Adverse Industry Trends; Look for Silver Lining

From EMPIRE FARM & Dairy magazine



Dairy farmers like Amy Beyer want industry conditions to improve after years of working to produce more milk to keep up with bills — to compensate for earning less for each pound of milk her cows produce.

Beyer, who with her husband, Ernest, owns Glory Days Farm in Lowville, said despite working harder than ever, they have only earned enough to cover their costs and support their family. There is no revenue to put into upgrades, new equipment or other improvements to their operation.

“Your head is down and you just stay focused,” she said. “There’s not a lot of time to look up and say, ‘Boy, this is a wonderful life.’”

Trying to preserve their operations despite receiving a lower price for their milk and dealing with consistent, if not rising, costs, difficulties securing labor and losing crops during harsh weather conditions have drained many farmers of their energy and morale.

“Believe me, there’s days where you start to think if it’s all worth it,” said Ronald Robbins, who owns North Harbor Dairy in Hounsfield, Jefferson County.

More than two years of low earnings have pushed Robbins to farm while predominantly breaking even or losing money. Despite adverse conditions, he said dairy farming is in his DNA.

“It’s been good to (my) family,” he said.

Beyer said farming is still the best way to raise her five children because it teaches them the values of hard work that translate to the farm, school and sports.

At the same time, Beyer said, she and her husband have discouraged their oldest son, William, from taking over the family farm or starting his own because they want him to avoid the financial stress and earn enough money to raise a family and retire someday.

William Beyer, 18, will begin his first term at St. Lawrence University this fall. He has in the past expressed a desire to become a farmer.

“We don’t want to encourage that, and we are certainly not setting him up for it,” she said.

Some experts, however, predict slightly higher prices and improved market productions in 2017, providing a few farmers with optimistic outlooks.

“It’s got to get better at some point,” said Lyle Wood, who owns H Wood Farms in Cape Vincent with Scott Bourcy.


Prices paid to farmers for their milk in the Northeast peaked in 2014, a peak that broke a record high throughout most of the region.

The average statistical uniform price, or blend price, paid to farmers who had their milk shipped to handlers in the Northeast Market Area, which covers most of the Northeast, reported at 3.5 percent butterfat content, was $24.28 per hundredweight, according to the Market Administrator’s Annual Statistical Bulletin for 2014.

That price was reportedly the highest average price for Northeast farmers since the order’s inception and was $4.03, or 20 percent, more than the 2013 average.

Bruce Krupke, executive vice president of the Northeast Dairy Association Inc., said producers and processors in 2011 and 2012 began to reach out to the world marketplace, creating a spike in exports to countries including China, Mexico and Canada.

U.S. dairy producers previously exported 1 to 3 percent of dairy products, but exports increased to about 16 percent.

“We were finding a new place to sell our products — a whole new consumer to sell to,” Krupke said. “It kind of created a new opportunity and industry for us.”

At the same time, demand for dairy products at home continued to increase, an increase Krupke, who also is chairman of the Empire State Council of Agricultural Organizations, said continues to this day. He also said an economy improving from the 2008 recession and a resurgence in processing plants also helped bring prices to record highs.

Robbins said he remembers state officials’ ambitions to boost yogurt production at the Yogurt and Dairy Summit in 2014, when New York state was the leading yogurt producer in the country.

“We were going to be the yogurt capital of the world,” Robbins said of the state’s goals at the time, but “the yogurt boom never materialized.”

The price paid to farmers in the Northeast for their milk dropped dramatically in late 2014 and early 2015 and continued, for the most part, to decline into 2017.

The average blend price at 3.5 percent butterfat in the Northeast Marketing Area dropped in 2015 by $7.14 per hundred-weight, from $24.28 in 2014, to $17.14. That price dropped again in 2016 by an additional $1.24, to $15.90.

The blend price was up in January this year, but decreased consecutively into April, according to the monthly reports for the marketing area.

Andrew Novakovic, a professor of agriculture economics at Cornell University, Ithaca, said the price dairy farmers receive for their milk almost routinely fluctuates in three-year cycles.

“We’ve now broken that cycle for the first time. We’re now in three years of really depressed prices,” Robbins said.

The decline in international demand when China dropped out of the market played a crucial role in the drop in milk prices, Novakovic said.

In addition to China reducing its demand, Robbins said, a few processing plant closures reduced the number of outlets for farmers or the cooperatives that represent them. Chobani opened a processing plant in Idaho and cut its production in New York, Robbins said. The Muller Quaker Dairy plant in Batavia closed in early 2016.

“You had a perfect storm of events,” Robbins said.

Farmers, however, continued producing enough milk for a demand that no longer existed at the time, pushing the price they received down and flooding the market.

The amount of milk handlers in the Northeast received from producers in 2016 reportedly exceeded 27 billion pounds for the first time, according to the Northeast 2016 bulletin. Milk pooled in the marketing area was slightly more than 26 billion pounds in 2015, about 25.8 billion in 2014 and 25.4 billion in 2013, according to each year’s respective report.

Robbins said many farmers purchased additional cows and expanded production around 2014 to take advantage of the increasing milk prices. Some, however, have continued buying more cows and increasing production just to keep up with the costs of their operations.

State Department of Agriculture and Markets Commissioner Richard Ball said state milk production is up 5 percent while exports have declined by 2 to 3 percent.

“There’s a whole lot of milk being made and not enough homes to go to for it to be processed,” said John D. Peck, a Jefferson County legislator who owns Peck Homestead Farm in Carthage.

Jon Greenwood, owner of a large Potsdam dairy farm, said dairy prices have always been determined by the relationship between supply and demand.

Until a few decades ago, milk prices fluctuated based solely on what was happening in a particular region of the country.

However, today, local farmers can be impacted by supply and demand changes around the world, according to Greenwood, who is president of the St. Lawrence County Farm Bureau.

“We never used to export, but we were up to exporting 18 percent,” he said.

Giving an example, he said a lessening demand for U.S. milk products from China and Southeast Asia contributed to the drop in milk prices that started about two years ago.

In particular, China was importing a lot of powdered milk used in baby formula.

”That market has gone down significantly,” Greenwood said.

While international demand dropped, Ronald Kuck, livestock educator for Cornell Cooperative Extension of Jefferson County, said demand for dairy products per capita has increased since 2015. The problem, Kuck said, still lies with overproduction.

“Supply and demand,” he said. “It’s that simple.”

Novakovic said cutting production could balance supply and demand, but few, if any, producers would cut down their own production.“No farmer would rationally cut back the number of cows they’re milking,” Peck said. “That’s the main thing we can control to be able to get back more.”


Farmers still need to keep up with their routine expenses despite earning less, and while some farmers’ costs have remained stable, others’ expenses have risen.

Robbins said he recently had an in-depth analysis conducted to review his expenses from 2012 to 2017.

He said costs including labor, insurance, workers compensation, health insurance, utilities and technical supplies all increased from the five-year-period. At the same time, his cost for feed remained stable and the cost of fuel decreased.

“What we found was those cost-of-production increases are centered around a lot of things we don’t have control over,” he said.

While Peck said feed and supply expenses have remained relatively stable, he has to pay more for his family’s health insurance.

Beyer said many of her costs, including veterinary bills, have climbed in recent years.

“We basically are just kind of surviving,” she said.

Kuck said farmers typically plan five years in advance, including what upgrades and practices to implement. 

Farms that evolve by investing in more efficient equipment, cow comfort and infrastructure will survive in the industry, Kuck said. The past few years, however, have pushed dairy farmers to adjust those plans, accommodate for decreased cash flow, and prioritize.

“They just can’t do as much as they would like to do,” he said.

Wood said he wanted to expand his feed storage and build a new garage, but lower revenue in recent years has halted those plans.

Earning less revenue also has prevented the Beyer family from upgrading or replacing equipment, Amy Beyer said. The family, instead, has to predominantly repair equipment by themselves and “pray everything holds out.”

“You want to be a progressive farmer, but you can’t,” she said. “Your hands are tied.”

Reduction in investments on the farm not only hinders dairy operations, but impacts several agribusiness sectors in the industry.

New York Farm Bureau President David Fisher, who is also a family owner of Mapleview Dairy in Madrid, said farmers having to cut back their spending brings less revenue to agribusinesses such as machinery, milking equipment and feed suppliers.

“It affects the whole economy,” he said.

Labor expenses have also increased for several dairy farmers, particularly New York farmers who have to compete with other industries as the state minimum wage rises annually. The state minimum wage is set to increase 70 cents every year in areas outside of New York City, Nassau, Suffolk and Westchester counties until it reaches $12.50 on Dec. 31, 2020.

“Who’s going to want to go milk a cow for eight hours a day when they can go flip a burger and make more?” Peck said.

At the same time, farmers nationwide are finding it more challenging to find prospective employees willing to work long hours milking cows and harvesting crops for feed.

Robbins argued that farming provides competitive pay rates when compared to other industries, but hours of hard work deter people from applying for farm jobs. A stigma also surrounds farm labor that leads many 
Americans to believe farm work is beneath them, Robbins said.

Novakovic also said farm labor allows little room for breaks and vacations.

“The work is demanding, and frankly, the work is very dirty,” Novakovic said. “It doesn’t matter how much you get paid.”

In response to a lack of interest from American laborers, several farmers hire and rely on migrant workers, a method made difficult under federal regulations.

Krupke said all agriculture in New York relies on a work force made up of legal migrant workers and the ability to hire those workers. Congress, he said, must enact new laws that will make it easier for people from other countries to work at U.S. farms.

Robbins said lawmakers need to create a workable guest program that meets the needs of the industry while maintaining the interests of national security.

“It’s just Washington’s lack of fortitude to make that happen,” Robbins said.

Weather in recent years, including drought conditions last year and excess rainfall in several parts of the country this year, have harmed crop quality and yield for many dairy farmers, which can have adverse effects on cows’ nutrition and reduce production.

Robbins said a cold summer and fall in 2015 lowered his crop quality, the 2016 drought reduced quality and volume and this year’s excess rainfall has drawn insects that have damaged his crops.

Wood said his farm experienced about average weather in 2014 and 2015, but excess heat in 2016 reduced his soybean and hay yield, and excess rainfall this year has inhibited his harvesting plans.

Hot and humid weather at Peck Homestead Farm make cows uncomfortable and heat stressed, Peck said, which reduces production. The 2016 drought dried up the grass in Mr. Peck’s pasture early on, but he said 2015 and this year haven’t inhibited his operations.

“Weather’s always a challenging thing,” he said. “You have no choice but to take what comes. There’s no point complaining about it.”

Farmers are naturally resilient when facing adversity, Ball said, and they haven’t stood idle during recent challenging years. They have continued to adapt by exploring opportunities such as planting new crops and have advanced their education and marketing abilities.

“When adversity comes their way ... they keep going and figure out how to get it done,” he said.

In order to at least break even, Robbins said he pre-sells 50 to 60 percent of his milk, meaning he earns revenue at the current price before having it shipped months later. Milk prices fluctuate monthly, and Robbins said pre-selling his milk allows him to take advantage of months with slightly higher prices.

Farmers like Robbins are also reviewing their bills and deciding what, if any, expenses they can reduce.

When compiling information for the 2016 Northeast Dairy Farm Summary, Farm Credit East staff members found farmers on average earned $15 per cow last year, up from a loss of $30 per cow in 2015, by cutting costs. One example includes a more than $4 decrease in net cost of production from 2014 to $16.79 per hundredweight last year.

“We’re tightening our belts and trying to save money wherever we can,” Fisher said. “Try to get by with whatever you got and make do.”

Despite trying to reduce costs, Novakovic said farmers have to be careful not to let their attempts to cut costs reduce their herd health and, in turn, production. Farmers who stick with their plans typically avoid a loss of production, Novakovic said, which doesn’t provide them with many options for cost reduction.

“Farmers, especially the better ones, develop a plan and stick to it,” he said. “They will continue to do it no matter what happens with these prices … when it’s bad, you just lie down and take a beating and the trick is how resilient you are.”

Farmers must expand and diversify their operations during adverse market conditions, Peck said. Peck has implemented technology that allows him to harvest earlier and mix crop silage in ways that increase its nutritional benefits for his cows. He also said he is trying to sell farm-raised beef.


Many farmers and experts believe milk prices will increase slightly this year from 2016, although they will not soon return to the record-breaking prices of three years ago.

Average dairy prices are expected to rise by $2 per hundredweight from last year, according to Farm Credit East, bringing more revenue for farmers. Average blend prices for farmers who have their milk shipped to Northeast handlers has increased from $16.39 per hundredweight in April to $17.53 in June. July prices are not yet available.

“It’s going to remain a sober year,” Mr. Ball said, “a gradual improvement.”

China has returned to the market with a demand for more dairy exports, Novakovic said, and other countries, including Vietnam, are providing additional markets for U.S. dairy products. Robbins also said the U.S. prices for products have become more competitive in the international marketplace.

“That’s sort of the light at the end of the tunnel,” he said.

Companies have also expressed plans to open new processing plants, Novakovic said. HP Hood recently purchased the Muller Quaker Dairy plant in Batavia. . Wood also said Dairy Farmers of America are investing in opening new plants.

The lack of milk processing plants in the Northeast has contributed to a surplus of milk that also drives down prices, Greenwood said.

“We have more milk than we have processors,” he said. “It’s critical that we get some plants built to take this milk supply.”

Krupke said dairy pricing should slightly increase so long as the economy, weather and overseas demand remain constant and manageable.

“I think they’re going to be constant,” he said. “I think we’re on this slow incline.”

Not all farmers, however, are as optimistic about the projected trends.

Peck said he believes the price will not increase, but will at least not decline any longer. Beyer said whatever increase in earnings she receives will go straight toward hauling fees.

“I almost feel like I’ve lost hope,” she said.

Officials at the state and federal levels have implemented programs and policies in an attempt to remediate adverse industry conditions, and their efforts are ongoing.

Ball said the state introduced the Climate Resilient Farming Grant program this year to help fund projects that help farmers deal with adverse weather like droughts. 

Ball and his office have also pitched state agriculture products, including dairy, to Canada and Mexico and worked with the state Department of Labor to create more skilled laborers for agriculture by doubling the number of agriculture teachers and increasing aid for agricultural education.

U.S. Sens. Charles E. Schumer, and Kirsten E. Gillibrand, both D-N.Y., are looking to improve conditions for dairy farmers through the 2018 Farm Bill.

Sen. Schumer said in a statement that Congress, the U.S. Department of Agriculture, farmers and processors must work together to help farmers navigate volatile price fluctuations through a comprehensive policy for the upcoming Farm Bill.

“Simply put, the dairy price challenge is wreaking havoc across upstate farms, and I am devoting a lot of time and energy preparing for the 2018 Farm Bill, which must include flexible and sufficient support for the 21st century family dairy farmer,” Sen. Schumer said in a statement.

Sen. Gillibrand said in a statement that she wants to reform the Margin Protection Program for dairy producers, which was established in the 2014 Farm Bill to provide farmers with financial assistance when the difference between the price of milk and feed costs falls below a farmer’s selected coverage level.

She said the program hasn’t helped farmers when the price they are paid for their milk fell below the cost of production, and they should return to a system that uses a “reasonable base price” that adjusts to inflation.

“I plan to pressure (USDA) to use all of the tools at their disposal, like refunding premium payments, making useful decision tools, and joining me as I go out and talk to dairy farmers that struggle to make ends,” she said in a statement. “We owe our farmers more than a failed program and must do what we can to make things right.”

U.S. Rep. Elise M. Stefanik, R-Willsboro, has also joined others in Congress in a call for reforms to the Margin Protection Program, including premium rate reduction and ensuring farmers have a viable safety net, according to a news release.

Tom Flanagin, a spokesman for Stefanik, said in a statement that she also sponsored the Family Farm Relief Act, meant to expand the H-2A agricultural visa program to dairy farmers.

With 40 years of dairy farming experience under his belt, Greenwood is confident the milk price situation will eventually stabilize.

“Prices are going to go up, it’s just a matter of when and how much,” he said.

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