In what's being called an "industry crisis," Vermont dairy farmers have experienced record lows in the per hundredweight price, which is expected to fall below $12 this winter.
Waitsfield dairy farmer Elwin Neill Jr. and his family have 80 registered Holsteins in their milking herd, 160 head in total. Neill said falling milk prices is not the only reason they've started to diversify with poultry and timber operations, but "the milk price isn't good at all," he said.
Neill said the current per hundredweight price is $10 less than it was a year ago, and in order to maintain production he has "cut back on every non-essential thing" including labor and commercial fertilizers.
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Grazing has also become increasingly important, Neill said, in an effort to make feed last and cut costs.
"More roughage is the key to survival; you can affect huge savings by that," he said.
Doug Turner, who operates the Simplicity Farm in Waitsfield, is organically certified which means his 48 Holsteins are required to graze at least 120 days per year. Turner said his herd typically grazes 170 days per year and said, "If farmers can find a way to graze, it cuts your costs."
Neill said his farm is maintaining production successfully because they're not carrying the debt load that many farmers are carrying. He said the depressed milk prices are the result of the world economy, overproduction and decreased domestic demand.
There are 300,000 to 400,000 more cattle in production in the U.S. than the market can handle, according to Neill, even following the removal of 100,000 cows that were taken out of national production a year ago.
Large farms will be hit harder than smaller farms, Neill said, because large farms have expanded to larger herds that cost more to maintain. Borrowing, he said, is "only good if the return is in."
"I'm not going to go into debt to keep on keeping on," Neill continued. Currently there is a six-month lag on federal programs designed to offset milk prices and sustain farmers through the market downturn.
The Milk Income Loss Contract (MILC) is the USDA's current effort to support the dairy industry by making counter-cyclical payments to producers on a monthly basis when the price for fluid milk dips below $16 per hundredweight.
The organic milk market has also gotten tighter, according to Turner. Their farm was organically certified before transitioning standards changed, requiring longer periods of organic feeding beforehand and regulations about proximity to pesticides and fertilizers.
"There was a rush to go organic a few years back," Turner said. At that time, several Vermont farms signed up to transition to organic, and the number of organic dairy farms in the state doubled.
"Organic Valley, Hood, Horizon, they all tried to sign up as many farmers as they could, and the result is there is more milk than there is market," he continued.
Turner said he recently received a note from Horizon (the company that picks up their milk every other day) that asked their customers to reduce their milk production by 5 percent in order to reduce the amount of milk on the market.
"Every few years it goes down, and I can tell you it stays down longer than it stays up," Turner added.
Turner said that significant droughts in major exporting markets also explain the dairy crisis.
"The market is gone, and there is more inventory stocked and stored all over the country, and that depresses the price," he said.
The dairy crisis is expected to continue until such time as the world economy rebounds, large farms shut down, or the dollar becomes cheap, according to Neill.
"Supply management is the only way to cure this problem," Neill said.
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