Sinking in a sea of milk
The California Milk Advisory Board continues to ply its “Happy Cows” advertising campaign, but there are few happy dairy farmers right now.
Frustrated with low milk prices, dairy farmers are selling cows for hamburger meat and threatening to dump milk into sewers. Many are burning through their life savings hoping to survive the slump, and others are exiting the business.
Two farmers have killed themselves.
The pain is being felt throughout the U.S. industry, but it’s especially keen in California, the No. 1 dairy state. The Golden State’s 1,800 dairies produce $7 billion worth of milk annually, more than one-fifth of the nation’s supply. Slumping international demand combined with an American public ordering fewer cheese pizzas has turned the milk market sour.
Current prices are about half of what it costs California producers to feed and milk their herds; every carton sold in the supermarket represents a loss on the farm. Farmers are staying afloat by getting loans secured by every cow, tractor and acre they own. But experts say that if milk prices don’t rise in the coming months, many farmers will burn through their cash and go out of business.
“This is an unbelievable career wreck. The amount of wealth being destroyed in this industry every week is just mind-boggling,” said Geoffrey Vanden Heuvel, who owns dairies in Chino and Corona. “The emotional toll this is taking is just amazing.”
Two California dairy farmers killed themselves in the last six months out of despair over finances, according to associates. Farm groups report a jump in stress-related health issues among dairy farmers.
“We are getting more phone calls and concerns about suicides than ever,” said Michael Rosmann, executive director of AgriWellness Inc., a Harlan, Iowa, nonprofit operating mental-health hotlines for farmers in seven Midwestern states.
Through much of last year, the average milk price hovered around $17 per 100 pounds -- although consumers purchase milk by the gallon, the industry measures by pounds. The bottom fell out of the market when the economy tanked last fall. Prices now hover around $10, according to the California Department of Food and Agriculture. Farmers generally need at least $16, and often more, per 100 pounds to break even, depending on their debt, feed requirements and other factors.
It’s good for shoppers. A gallon of milk at Stater Bros. is just $2.02, down 28% from $2.79 a year ago. But it has created havoc in dairyland.
“It is a mess. The market just disappeared with the global economic crisis, and unfortunately for dairy producers, they can’t simply turn the cows off to reduce the supply of milk,” said Michael Marsh, chief executive of Western United Dairymen in Modesto.
“It’s particularly tragic because these family farms are multi-generational operations, several of which will have a foreclosure or a bankruptcy as the last of their legacy to California agriculture,” Marsh said.
Tom Marchy remembers learning how to milk cows from his grandfather on the family’s spread in Stanislaus County. Now 48, he saw disaster looming in the industry last fall and called it quits.
His biggest customer had just canceled his milk contract, and “it was hard to find anyone else to ship to so I just got out.”
He sold his herd, about 1,100 black-and-white Holsteins, to a farmer starting a dairy in Oklahoma. Marchy received $1,950 a cow, about $800 more than he would get if he were trying to sell now. Marchy then planted 140 acres of corn on his property in the rural town of Waterford east of Modesto. He continues to tend some heifers, waiting for those young females to mature to milk cows.
Those cows too will be shipped to Oklahoma. Marchy doesn’t plan to resume the life of a dairyman.
“This is a young man’s game. Unless you are big enough to hire people to do the work for you, it’s a hard life,” he said.
Collectively, U.S. farmers need to slash milk production by about 5% to bring supplies in balance with current demand, “but we have no good mechanism to do that,” dairy owner Vanden Heuvel said.
One initiative will send about 103,000 milk cows to slaughter over the next several months, a move that will reduce the milk supply by about 1%. It is operated by Cooperative Working Together, a voluntary organization in Arlington, Va., that assesses members 10 cents per 100 pounds of milk to use for periodic herd retirement.
The current reduction is the largest ever by the group and buys out 388 farms.
The National Family Farm Coalition is calling for more emergency action to protect the nation’s 57,000 dairy farmers. The NFFC is one of several farm groups urging Congress and the U.S. Department of Agriculture to set an emergency floor price of $18 per 100 pounds of milk.
So far, the main government action has been to buy up 238 million pounds of nonfat dry milk powder and 4.6 million pounds of butter since prices started to fall in October. Last week, the USDA said it would provide subsidies to export up to an additional 150 million pounds of nonfat dry milk, 46 million pounds of butterfat and 6 million pounds of cheese to help dry up the surplus. Cumulatively, these USDA actions will support milk prices by about 70 cents per 100 pounds of milk, said Roger Cryan, a National Milk Producers Federation economist.
Longer term, some farm groups want to change milk price regulations to better account for the cost of production in the system.
The price California farmers get for their milk is tied to sales of butter and cheddar cheese on the Chicago Mercantile Exchange combined with prices for dry whey and dry milk. Federal regulators and other states use similar formulas.
Farmers have faced low prices before, but what’s different this time around is that their cost for feed and other expenses is high compared with what the milk sells for, said Bill Schiek, an economist with the Dairy Institute of California in Sacramento.
“They are just bleeding cash,” Schiek said.
Some farmers now are thinking of doing the unthinkable -- dumping their milk as part of a national protest next week. “If they are not going to allow us to make a living, we will just dump it down the drain,” said Arie DeJong, who owns several dairies and 20,000 cows in California and Arizona. “We just can’t keep losing money like this.”
Luis Bettencourt, an Idaho farmer who owns one of the biggest dairy companies in the nation, is considering dumping two days’ worth of milk production -- about 8 million pounds.
“Why not?” he said. “We ain’t getting any money for it anyway.”