Dairy farms weather long stretch of low milk prices
By CASEY FABRIS
Jul. 14, 2018
CALLAWAY, Va. (AP) — Despite stubbornly low milk prices forcing some dairy farmers to pinch pennies just to scrape by and others to call it quits and sell off their cattle, Bryan Matthews tries to remain optimistic.
"At my age I have to be," says the 35-year-old dairy farmer.
Across the country, dairy farmers are struggling to make ends meet. The main culprit: a prolonged period of low milk prices. The last time they were strong was four years ago, in 2014. Experts attribute the problem in large part to an imbalance between supply and demand. There's simply too much fluid milk out there, driving prices down. That hurts farmers, because the milk isn't any cheaper to produce.
There are other factors, too. Consumers are drinking less milk, particularly with alternatives like soy and almond milks flooding the market. And with talk of tariffs, dairy farmers face another potential stressor on the industry.
"It's kind of a waiting game," said Cynthia Martel, a cooperative extension agent in Franklin County who specializes in dairy. "Can they wait it out a year? Do they have enough money to cash flow until milk prices come back up?"
Franklin County is among the top dairy producers in the state, but farmers there face the same hardships. The county hasn't been spared from closures, losing some farms this year. Martel said there are 40-some surviving dairy farms in the county today.
Matthews, who helps to run his father's farm in Callaway, hopes to ride it out. The farm has been in the family since 1919. His great-grandfather died three years after buying it. If Matthews' great-grandmother, then a widowed single mother, managed to hang on to it during the Depression, he should be able to get through this.
"People before you had the same amount of hard times, and they worked through it," Matthews said.
The dairy farmer said he can't imagine doing anything else. Matthews studied agriculture economics at Clemson University but realized he wasn't meant to crunch numbers in a cubicle. He was meant to be out on the farm.
"Dairy farming's in my blood," Matthews said.
A farmer's income is dependent on the price of milk, which they have no role in setting. There are complex systems in place at the federal and state levels to set the price of milk.
"Farmers don't control what they get paid for their milk, by any means," Martel said. "They can't go in and say hey I'm going to charge you X number of dollars, do you want my milk? That's not really how it works."
Elaine Lidholm, director of communications for the Virginia Department of Agriculture and Consumer Services, described dairy pricing as "probably one of the most complicated procedures in all of agriculture."
Fluctuation in milk prices is not unusual; the fact that prices have been depressed for so long is the unusual part. Historically, Martel said, prices would have bounced back by now.
In recent years, milk prices have become extremely volatile, said Eric Paulson, executive director of the Virginia State Dairymen's Association. That's proven true in 2018.
"Obviously what we're seeing a lot in 2018 is very depressed milk prices," Paulson said.
Most people in the workforce know what they'll be paid in a given year; they have a set salary, Paulson noted. Not so for dairy farmers. The milk leaves the farm, and the farmer finds out how much he earned for it the next month when the milk check arrives, Paulson said.
Because milk is a perishable product, he said, farmers can't just store it and wait for prices to turn around like they might with some other crops.
Though farms are going out of business, Lidholm said, the state's milk production remains relatively unchanged. That's because often, when a dairy goes out of business, their cows are purchased by a larger operation.
Milk prices have dropped to about what they were in the 1980s, Matthews said, yet the input costs are in 2018 dollars.
"To make ends meet, the American farmer — this goes for beef farmer, grain farmer, dairy — we have to produce more," he said. "And the laws of economics say when you produce more you're going to put more product on that market, when you put more product on the market that's going to decrease the demand, so therefore prices drop."
In the 1970s, Matthews said his family's farm milked between 90 to 100 cows. Now, they're up to 155. Though the herd has increased drastically, the number of employees has not. It's only Matthews, his father and two others. Everyone just has to do more.
"It's stressful when you work all day and you go home and you start to pay your bills and there's not enough money to do it," Matthews said. "No matter how much you work, how much time you put into it you're not going to get paid any more."
Meanwhile Cline Brubaker, another Callaway dairy farmer, is allowing his herd to gradually shrink. He's had as many as 90 cows in the past but is now down to 30. He tried to sell his remaining cows a few years ago but was unsuccessful.
At 74, Brubaker is looking toward retirement. And he isn't encouraging the next generation to go into dairy farming. There's no need for a large herd.
Brubaker said low milk prices are hitting farmers hard. Right now, he earns less for 100 pounds of milk than he did in the 1980s. But it's more expensive to produce today.
"It's causing farmers like myself to say hey, it's time to quit," he said.
Brubaker said his veterinarian was recently lamenting how many clients he'd lost. The dairy farmer said his records easily explain why. His payments to the vet have steadily gone up since 2006. But his milk check — which shows what Brubaker's milk has earned him — today is down compared to a dozen years ago. He told the veterinarian to expect to lose more clients.
But even those who choose to leave dairy farming face challenges. Because milk prices are so low, few can afford to buy the cattle up for sale. As a result, Brubaker said, many good cows are headed for slaughter.
Asked how long he's been dairy farming, Brubaker has a simple answer: "All my life." He bought the Blackwater Valley Farm from his parents in 1967. Blackwater Valley is on the state's century farm list, recognizing farms that have been in operation for a minimum of 100 years. It saddens him to think one day that streak might come to an end.
"You do get emotionally attached to it," Brubaker said.
It's been more than two years since Debbie and Mike Brubaker decided to give up on dairy farming. But Debbie Brubaker still gets emotional talking about it.
For years the lives of Debbie Brubaker and her husband, a third-generation dairy farmer, revolved around dairy. Mike ran the operation, and Debbie handled the books. Both served on industry boards. When they closed shop in January 2016, they also left behind that community. Debbie Brubaker said it was harder than just losing a job; they lost a way of life.
"Your passion and everything doesn't go away," she said.
When examining their finances, Debbie Brubaker came to the conclusion they had to do one of two things to keep the farm afloat: increase its herd size, or cut back on expenses. Neither was a real option. The farm had already reduced its herd size after losing its one paid employee, and there were no expenses left to cut.
So the couple worked with an auction company and sold their remaining cattle. Debbie Brubaker said they managed to get a decent rate for the cows, though less than they would have just a few years prior.
She said it was difficult for her husband to part with the cows.
"He knew each one of them," she said. Owners of large farms probably don't have that same connection, Debbie Brubaker said.
The family kept its Rocky Mount farm, where it now grows crops like soybeans and corn. They switched from dairy to beef cattle, though they have only 28 head of cattle, Debbie Brubaker said.
The couple's son, who was a teenager when they shut down their dairy operation, had expressed some interest in keeping the family tradition alive. But his parents weren't sure they could advise it.
"With the dairy industry and the struggle that we had, I hate to say it but we didn't encourage him to do it," Debbie Brubaker said.
She doesn't know how dairy farmers are managing to survive now, years into the downturn.
"Our heart is still going out to the dairy farmers who are struggling right now," Debbie Brubaker said.
The Virginia State Dairymen's Association advocates on behalf of their dairy farmer members, primarily at the state level.
One of their current initiatives is increasing donations of milk to food banks, said Paulson, the executive director. It's a commonly requested product, but difficult to transport. Food banks could perhaps provide another "home" for milk. As a perishable product, milk needs to find a home quickly. Paulson said the effort is in early stages.
The association is also working to diversify dairy processing in the state. In 2017, 86 percent of Virginia's milk was used and consumed as fluid milk. In other parts of the state, that figure is as low as 25 percent, Paulson said. New York has yogurt, Wisconsin does cheese, but in Virginia it's all about fluid milk. But maybe that could change. Paulson would like to see Virginia get into dairy products for which the demand is growing.
"We have a great product, we have the milk here," he said. "We're just trying to figure out how do we get those processors to come to Virginia."
Lidholm, with Virginia Department of Agriculture and Consumer Services, also said diversifying could help dairy farmers survive; she cited a farm that added a drive-in ice cream shop as an example. Farms can also add efficiency through robotics. However, such adjustments would require significant investments.
"There are ways to address the problem, but it is a problem and we are losing farms," Lidholm said. "There's no question about it."
The Maryland & Virginia Milk Producers Cooperative Association has seen a decrease in membership numbers this year, said director of corporate communications Amber Sheridan. Through May, it was down 98 farms. The cooperative represents the area stretching from Pennsylvania to Georgia, and west to Kentucky and Tennessee.
"We're in a painful period of attrition right now," she said.
Like other industry experts, Sheridan said the problem is clear: too much milk in the marketplace. The Maryland & Virginia association shared data illustrating as much.
Milk production, which includes fluid milk and other dairy products, in the United States has been steadily rising for 20 years. It has increased by 38 percent between 1997 and 2017, looking in the shorter-term, by 13.4 percent since 2008. Dairy farmers tend to increase production year over year, Sheridan said, and over time that adds up.
"As you can imagine, domestic consumption of milk and dairy products is not keeping pace with that," Sheridan said.
The export market helps to serve as a "release valve," she said. In 1997, 4.6 percent of dairy produced in the country was exported. In 2017, it was up to 14.7 percent. But discussions of tariffs and trade negotiations that could affect U.S. dairy products have created more uncertainty.
Though milk production is on the rise, milk consumption has actually been on the decline. Since 2008, fluid milk sales are down by 13.4 percent. And, Sheridan noted, the Southeast is "a very fluid-focused marketplace."
Laird Bowman, 64, is a sixth-generation dairy farmer. And he works alongside the seventh, running Bowmont Dairy Farm in Boones Mill with his daughter. His family has been in dairy since 1839 — or, as Bowman says, "a good while."
Bowman also serves on the board of directors for Maryland & Virginia, the dairy cooperative through which Bowmont sells its milk.
Bowman's farm has about 250 head of cattle. But he said dairy farms of all sizes are struggling with low milk prices.
In the month of May, Bowman said, his farm received $1.49 a gallon for the milk it produced. Just to break even, he needs to earn $1.72 a gallon. So basically, he said, Bowmon lost 23 cents on each of the 39,000 gallons of milk it produced that month. That's a loss of nearly $9,000.
"That's pretty much been the scenario all of this year," Bowman said. "It doesn't take long for it to start adding up into a lot of money very quickly. It's a difficult situation."
Farmers are left with three choices, Bowman said: use savings to pay their bills, borrow money to pay their bills or don't pay their bills.
"There are people in all of those situations," he said.
Bowman was actually planning to make improvements to his farm, bettering it for the next generation. He hoped to make facilities more efficient and modernize the operation, perhaps acquiring robotic milkers. But that's on hold, he said, "until we understand what the future will be."
In his years on the farm, Bowman has seen ups and downs in milk prices. But today, the shifts are much more drastic. Farmers might have seen a 50-cent variance per 100 pounds of milk in a year 15 to 20 years ago. These days, he said, prices can fluctuate between $3 and $4 in just a few months' time.
"That creates huge swings and just makes it much more difficult to manage," Bowman said. "And we don't have enough margin, or profit, to absorb those huge swings."
But this dairy farmer hasn't given up hope. Farmers are optimistic by nature, Bowman said — they're always looking to the next spring, the next year, the next crop, the next birth of a calf. They just have to hold on to that feeling.
"We're a little stubborn," he said. "We've been milking cows a long time. We hope we can continue to do that."
Information from: The Roanoke Times, http://www.roanoke.com