The newest challenge to family farms: Low milk prices

A customer shops for milk in a Brooklyn supermarket in New York City, N.Y., on June 9, 2014. Due to record-low milk prices, family-owned dairy farms across the country are suffering significant loss.
A customer shops for milk in a Brooklyn supermarket in New York City, N.Y., on June 9, 2014. Due to record-low milk prices, family-owned dairy farms across the country are suffering significant loss. Getty Images

Arden Tewksbury has been a dairy farmer in northeast Pennsylvania for most of his 83 years. He’s also an agricultural activist who’s part of a movement to try to stop the loss of family-owned dairy farms across the country due to record-low milk prices, a glut of milk on the world and U.S. markets and reduced federal subsidies.

According to the U.S. Department of Agriculture, the price of milk in June was about $15 per 100 pounds – more than a 40 percent drop from 2014. Meanwhile, the USDA estimated milk production costs were about $22 per 100 pounds.

Darrel Aubertine, a former commissioner of the New York State Department of Agriculture and Markets, said many small family farms now faced a difficult decision: Sell their operations to larger dairy farms, borrow money to cover costs or diversify into other types of agriculture.

According to a USDA report, the number of family dairy farms decreased from 648,000 in 1970 to 46,005 in 2012, the most recent year for which a figure is available. During that time milk production increased twelvefold.

Tewksbury put part of the blame for the stark choices facing today’s dairy farmers on the Federal Agriculture Improvement and Reform Act of 1996, which allowed the USDA to set the price of milk using a formula that Tewksbury said didn’t take into account the cost of production.

He also blamed the law for cutting federal assistance available to dairy farmers from the Commodity Credit Corp., which provides loans and buybacks of surplus milk.

About 60 members of Congress from dairy states have taken up the cause, sending a letter to Secretary of Agriculture Tom Vilsack in June pointing out what they called the “troubling economic challenges facing U.S. dairy farmers and the entire U.S. dairy industry” due to low milk prices. They urged Vilsack to make “an immediate market financial injection and offer financial assistance that will directly support U.S. dairy farmers equally” under the CCC Charter Act.

The letter suggested many factors had contributed to the record-low milk price, from a surplus of milk in the American and global markets to the 2014 farm bill, which replaced the previous dairy farmer assistance program, the Milk Income Loss Contract program, with a new one, the Dairy Margin Protection Program, which requires farmers to buy into it before they can receive assistance.

The USDA’s semiannual “Dairy: World Markets and Trade Report” agrees with the list of reasons for low U.S. milk prices. And no significant recovery is likely until well into 2017, the USDA predicts.

A USDA spokesperson said the department was concerned about the financial pressures on dairy farmers but was bound by what Congress had mandated in the farm bill. The spokesperson notes that “many in the farm community are facing tight margins.”

In the meantime, the National Milk Producers Federation, in a follow-up letter, has asked the USDA to buy $100 million to $150 million worth of milk products to reduce the surplus.

Cindy Gallagher, a 54-year-old sixth-generation dairy farmer from Waterville, New York, said she and her husband relied on selling timber and on his part-time law business to make ends meet last year.

“Where we live nobody is even breaking even. Everyone’s losing a lot per cow, and the stress is huge,” Gallagher said. “They’re getting to the point where people are at the end of the availability of credit.”

Dylan Hapeman, a 20-year-old dairy farmer in Little Falls, New York, said that even though his cost of production was about $18 to $20 per 100 pounds of milk, he was making only about $13 when he sells. He and his fiancée rely on her job to support the farm.

Milk can still be produced by larger, corporate-owned dairies that can absorb market dips more easily, but Hapeman said family dairy farms supported their communities more than corporate dairies did.

He explained it this way: If a machine breaks on a corporate dairy, the owners have their own carpenters and welders. But as a small farm owner, he goes to his local hardware and auto stores to buy parts. Without this business, he said, mom and pop shops and economies in small towns would suffer.

When Congress reconvenes in September, farmers, activists and academics will be ready with a list of solutions to save small dairy farms. They range from the federal government buying more surplus milk and cheese to tax-free savings accounts. Sen. Robert Casey, D-Pa., has proposed legislation that would set production quotas to control prices.

In the meantime, dairy farmers like Seth Squires don’t know what they’ll do to keep their farms going without either federal help or a spike in milk prices. Squires, an 18-year-old dairy farmer in Munnsville, New York, said 19 small family dairy farms in his area had closed this year. He’s worried about the future of his family’s farm.

“I really have no idea, that’s the scary part,” said Squires. “This is my life. This is what I’ve done.”

CORRECTION: An earlier version of this story incorrectly attributed a request that the USDA buy $100 million to $150 million worth of surplus cheese and milk. The request came from the National Milk Producers Federation.

Danielle Prieur: 248-303-2859, @prieur2016.