Collapsing prices, the rise of mega farms in warmer states and fluctuations in demand have led to a spate of bankruptcies
The Goodman family has been milking cows in Wisconsin since 1889. Jim Goodman is the last of his line. The 66-year-old farmer has sold his herd and the land where they grazed. His children have chosen other careers.
“One of our old neighbors used to say that farmers who encourage their children to farm could be charged with child abuse. It’s condemning them to a future where there is no certainty that they could even make a living,” says Goodman, sitting in his old farmstead near the tiny village of Wonewoc in the center of the state.
Wisconsin still styles itself the dairy state. Car number plates come with the slogan “America’s Dairyland”. Last year it was also the state with the highest number of farming bankruptcies – 57, its highest total in a decade. The number of dairy farms across the state has fallen by 49% over the past 15 years.
The decline is fundamentally changing Wisconsin’s rural landscape as schools and small businesses collapse taking the rural communities that supported them with them. Wisconsin is an avatar of a wider problem in the dairy industry. America’s largest milk producer, Dean Foods, filed for bankruptcy last November. Borden, founded in 1857, filed for bankruptcy in January.
The milk industry’s woes have been a long time in the making and no single factor accounts for them. Collapsing prices, the rise of mega farms in warmer states such as Texas and Arizona, the increasingly international trade in dry milk products like whey protein, Trump’s tariffs, the fluctuations in international trade and shifting consumer habits have all played a part.
The irony is that as the number of farms in bankruptcy rises, milk sales and prices are also on the rise. Per-capita dairy consumption reached 646 pounds per person in 2018, the most popular year for dairy in the US since 1962.
America is not drinking as much milk as it once did but the popular narrative that milk alternatives are killing dairy doesn’t hold up. The percentage of milk sales lost to plant “milks” is small compared with other drinks – bottled water in particular – that have already taken a share and milk still outsells plant-based imitators by a margin of more than 11 to 1. And the US is still buying cheese, butter, yogurt, milk powders in infant formula and protein in bars and shakes.
For a state that has defined itself by dairy, the consequences of change are profound.
Goodman was born on the farm. Growing up, local towns would have their own grocery stores, a drugstore, car dealers, machine dealers, says Goodman. “Our little town down the road, had a movie theater, lumber yard. You know, they were all doing well.”
As those farms have gone so have the businesses. School districts don’t have enough children to stay open. “Now you can drive through any small town and if they don’t have a good share of their main street boarded up, they’re doing really well.”
The economics are tough. Milk prices have come back recently to about $17.55 per hundredweight in February 2020, but that is still way down from around $25 in 2014. Prices are expected to rise but in the meantime global forces have battered farmers. Feed prices rose as ethanol production took more crops, China bought more soy and tariffs increased equipment prices. For too many small farmers even as prices recover from a long slump, the cost of producing milk exceeds the prices they can sell it for.
“There was a period in 2013 when China panicked and started to buy every drop of milk on the planet,” says Peter Vitaliano, chief economist at the National Milk Producers Federation. “We had milk prices that dairy farmers would tell their children about.”
The buying spree followed the melamine crisis when Chinese producers had been adulterating milk, baby formula and other foods with melamine, a chemical that is toxic in large quantities, to increase their apparent protein content.
US milk producers started oversupplying milk. Smaller farms like those in Wisconsin produce more of their own feed than the huge players so for a while they were at an advantage. But when China got its milk industry back on track and feed prices came down, the advantage vanished and the collapse started in earnest. “It was particularly brutal on the smaller operations,” says Vitaliano. “That pressure is, unfortunately, likely to continue.”
Goodman made the shift to organic in 2014 and for a while it worked. Organic fits his values; the back of the car outside his home carries an old Occupy “We Are the 99%” sticker and one for Elizabeth Warren. But organic prices collapsed as vast industrial-style dairies in Texas and other warm states with 10,000 or more cows flooded the market with cheap milk. Competing with confinement dairies – “concentrated animal feeding operations” as they are curdlingly known – was impossible.
The huge farms were shipping organic milk from Texas into Wisconsin for a lower price than Goodman was getting paid. “You know, you can’t compete with that,” he says.
As prices collapsed a planned sale fell through. He sold the land and then the cows. “I guess for me, that may have been harder than actually selling land because here you tend to be pretty attached to your cattle.”
Each cow in his 50-strong herd had a name. Lara was his favorite. “When I would come in, she would always just turn around and kind of look at me, looking for someone to scratch her head,” he says. “It seemed like whenever she saw you, she just had to stop and look at you like she sort of was making that connection that you’re OK.”
In Elkhorn, some 130 miles south of Wonewoc, Dave Kyle is hopeful he has found a solution. Kyle, a youthful, trim 60-year-old with hands that look like they could snap a girder, raises brown cows, not the black and white Holsteins that are the most popular breed of dairy cattle in the US. His 150-strong herd produces “A2 milk” that mostly lacks a form of β-casein protein called A1 that proponents argue is easier for people with milk intolerance to digest.
He and his wife Laurie also run Perkup, a cosy cafe in Elkhorn, where you can get an A2 latte – but no nut milks.
Unusually in a rapidly ageing industry Kyle also has an heir. Hayden Kyle, 26, works with his dad and aims to one day take over the farm – in an industry where the average age of a farmer is 58, that is a big advantage.
Hayden Kyle wasn’t interested in farming when he was younger. After college he worked at a department store for a year then told his dad: “I think I want to farm.”
It’s not a popular choice among his peers. “There were 250 kids in my high school class and maybe one other kid is farming,” says Hayden Kyle.
For those less fortunate, life can look bleak. “I know of some farmers that have committed suicide,” says Kyle. “They were third or fourth generation and now the farm ends with them and they feel that terrible burden of, you know, it was on my watch that this fell apart,” he says. “I could see where it gets very overwhelming.”
Farm Aid, the farmers’ support group, started a crisis line during the farming crisis of the 1980s. Goodman says people at Farm Aid have told him the level of calls is now higher than back then. He says farmers should know that the forces ranged against them are beyond their control.
“You can’t just categorically say, well, it was my fault, I did something wrong, because you didn’t. You just happen to get caught up in a system that’s not working.”
• In the US, the suicide prevention lifeline is 1-800-273-8255. In the UK, Samaritans can be contacted on 116 123. In Australia, the crisis support service Lifeline is on 13 11 14. Other international helplines can be found at www.befrienders.org
According to the USDA’s latet milk production report, nearly nine percent of the nation’s dairy farms closed their doors in 2019. The report says there were slightly more than 34,000 licensed dairy farms at the end of the year, down more than 3,200 from 2018.
Leasing the was with the most lost dairy farms was Wisconsin, down 780 or nine percent. Other large losses reported were in Pennsylvania (-470), New York (- 310), Ohio (-260), Minnesota (-250), and Michigan (-190).
Seventeen states lost at least 10 percent of their licensed herds.
The average herd size last year dropped by 0.7 percent while overall milk production increased 0.4 percent.
The dairy industry is slowly being trampled by a wave of consumers who see it as one of many options, for a variety of reasons
There’s been a lot of talks recently about meat alternatives but dairy alternatives are also becoming more popular. And when it comes to dairy in Canada, given our quotas and high tariffs, the stakes are significantly higher.
Dairy alternatives can be seen everywhere from grocery stores to coffee shops. These products are no longer confined to the dusty shelves of specialty food and health stores or located in some obscure places in major grocery stores. They are now quite visible.
Rice milk, soy milk, and other substitutes like oat, almond, cashew, coconut, and even hemp milk are widespread. It’s happened fast and their emergence certainly spells trouble for the dairy industry.
For the last 50 years, supply management has allowed Canada’s dairy industry to produce the milk needed to meet demand. It means access to fresh, high-quality supplies and prices that are as constant as they can get.
But recent trade deals with Asia and Europe will allow more dairy products into the Canadian market tariff-free. This created a breach in Canada’s supply management system, which is why the federal government is throwing almost $2 billion at dairy farmers, spread over eight years.
But the real menace may be on the domestic front, with consumers clearly longing for choice.
Alternatives will likely chip away at some of the Canadian dairy industry’s market share. As domestic demand for milk and some other dairy products drops, so will the number of farms and processing plants.
Saputo recently announced the closure of two plants, in New Brunswick and Trenton, Ont. Agropur, the largest dairy co-operative in the country, faces major financial headwinds. Difficult decisions loom as the market flirts with plant-based alternatives.
According to Bloomberg Businessweek, retail sales of oat milk in the U.S. soared from US$4.4 million in 2017 to $29 million in 2019, surpassing almond milk as the fastest-growing dairy alternative. The same market reaction is being reported in Canada.
And Starbucks recently announced it will heavily promote dairy alternatives in its stores as part of its sustainability ambitions.
Even if milk scores well on nutrition, the alternatives are getting traction for two fundamental reasons.
The first is the environment. An increasing number of consumers see the planet in their glass or on their plate. A University of Oxford study published in 2018 suggested that dairy alternatives rate better than cow’s milk when it comes to carbon emissions, and how much land and water they use.
The study, however, didn’t consider the energy required to move products to points of sale. Almond milk, for example, can be very taxing on the environment if purchased in Canada, since we don’t produce almonds.
But the study is helping to convince consumers to consider alternatives.
The other hot-button issue is animal welfare.
Most Canadians don’t understand how dairy production works. And given that many people barely have the time to even cook, most city dwellers won’t invest the energy to visit farms and talk to farmers. So dairy farming is a mystery.
As soon as they catch a glimpse of dairy genetics and how cows are impregnated, for example, concerns are raised for uninformed consumers. In fact, 24 percent of Canadians under 39 questions the ethics of dairy farming practices. With those in their 20s, that number goes up to 30 percent, according to a study to be released soon by Dalhousie University.
Some of these younger Canadian adults probably believe dairy farming should be outlawed.
The dairy industry is slowly being trampled by a wave of consumers who see it as one of many options, for a variety of reasons.
To make things even more complicated for the sector, some lab-grown milk and dairy products are already being sold in the United States. Only 26 percent of Canadians would be willing to taste a product made in a laboratory, based on a recent survey. But with clear environmental benefits and no impact on animal rights, the case for lab-grown proteins is being built.
The Dairy Farmers of Canada seems oblivious to what’s happening. The group’s aggressive advertising campaign is trying to make the case that dairy farming is ethical and responsible.
But as consumer choice broadens, this campaign shows how dairy farmers have lost touch with what buyers want.
The inability of dairy farmers to engage in new media platforms to help shape the conversation is astoundingly short-sighted. The industry has rarely shown willingness to listen to consumers and it’s paying for it now.
International markets could use some Canadian dairy but for that, our dairy programs will need some serious rethinking.
Dairy farming is in trouble and the current supply management regime is not helping. The sector’s infatuation with farm gate price fairness needs to give more space to innovative solutions to keep milk viable. Food innovation is about finding the unknown while providing an intuitive, valuable solution to a changing marketplace.
So what else can we do with milk?
Dr. Sylvain Charlebois is the senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.
Forecasters have lowered the forecast for 2020 milk prices. Milk prices in 2019 improved considerably over 2018 with Class III averaging $16.96 compared to just $14.61 for 2018. Earlier forecasts had 2020 milk prices averaging as much as $1 or more higher than 2019. USDA is now forecasting 2020 milk prices to average about the same as 2019 with an average Class III of $16.95.
Since uncertainty of the impact of the coronavirus outbreak in China on dairy trade and the world economy Class III dairy futures took a big fall. About four weeks ago Class III futures were in the strong $17’s for the first half of the year and reaching the $18’s the second half. But now Class III is blow $17 until June and only reaches about $17.60 for a high August through November before falling back in December.
But I am still of the opinion that milk prices have a high probability of doing better than this. USDA’s lower price forecast is partially based on a relatively strong increase in milk production of 1.7%, continued decline in fluid milk sales and weaker growth in butter and cheese sales. This year is leap year with February having 29 days. The increase in milk production corrected for leap year is 1.4%. This is still a lot of milk considering milk production was more than adequate to meet needs last year. USDA has the average number of milk cows for 2020 just 3,000 head higher than 2019. This seems reasonable considering January 1st dairy replacements were 1% lower than a year ago with replacements per 100 cows the lowest since January 2014. The number of replacements expected calve during the next 12 months was also 1% lower. Dairy cattle slaughter has been running about 2% higher than a year ago. We can also expect with the financial impact of 4 and ½ years of low milk prices there will be a relatively high number of dairy farmers exiting this year. So, the increase in milk production is the result of more milk per cow. The increase in milk per cow leap year adjusted is 1.4%. This is a relatively high increase in milk per cow after a 1.1% increase last year. Rather mild winter weather has helped milk per cow. But lower quality forages being fed until a new crop is harvested this spring and early summer is impacting milk per cow. An increase in milk per cow of 1.0% to 1.2% seems more likely.
Domestic milk and dairy product sales may do better if the economy remains strong. Dairy exports improved for the last half of 2019 led by strong exports of nonfat dry milk/skim milk powder. Even cheese exports averaged higher for the year. Some positives for 2020 exports are an expected relatively small increase in world milk production and new trade agreements. A trade agreement with Japan has been finalized where Japan will phase out tariffs over 15 years. But Japan is a big imported of cheese and we can expect an increase in cheese exports in 2020. The Phase I China agreement has been finalized with expected increased exports in 2020. The USMCA has been signed by Mexico and the U.S. and is waiting for Canada’s approval.
Milk production in the months a head will be a major factor where milk prices end up. If there is a strong seasonal flush in production, that would put downward pressure on milk prices. As of now I don’t anticipate a strong flush. USDA’s milk production report estimates January milk production 0.9% higher than a year ago. Milk cow numbers increased by 5,000 head December to January but were 0.1% lower than a year ago. Milk per cow was just 1.0% higher.
January milk production compared to a year ago was up 0.7% in California, 3.7% in Idaho, 3.0% in New Mexico, 7.9% in Texas, 4.5% in Colorado, 5.6% in Kansas, 1.7% in Michigan, 2.2% in New York and 2.9% in South Dakota. But, decreases in production were 2.6% in Arizona, 0.8% in Pennsylvania, 1.5% in Iowa, and 1.0% Wisconsin with no change in Minnesota. Forage quality issues were evident in Iowa and Wisconsin where milk per cow was up just 0.7% in Iowa and 0.2% lower in Wisconsin.
Dairy product prices have weakened January and February. On the CME 40-pound cheddar blocks averaged $1.9142 per pound in January and are now $1.80. Cheddar barrels averaged $1.5721 per pound in January, were as low as $1.455 and are now $1.585. The spread between blocks and barrels was a much as 46 cents and narrowed to 20 cents as the price of barrels increased and blocks fell. We can expect further narrowing. Dry whey averaged $0.352 per pound and is now $0.37. Butter averaged $1.8813 per pound in January and is now $$1.7750. Nonfat dry milk averaged $1.2688 per pound in January and is now $1.1775.
The January Class III price was $17.05, more than $3 lower than the $20.45 Class III back in November. With weaker cheese prices it looks like the February Class III will drop below $17. But if the spring flush is not strong, I could still see cheese prices recovering by late spring with continued improvement through fourth quarter. Class III could still be in the mid 17” by second quarter, the higher $17’s third quarter and reaching $18’s fourth quarter and average near $18 or near a $1 higher than 2019. But, a lot of uncertainty exists, and a lot can happen between now and year’s end.
For generations, milk was a mainstay of the American diet. It was the beverage that could go with dinner or with a plate of chocolate chip cookies.
But in recent years, consumption has plummeted as shoppers are increasingly switching to other options like almond milk.
Since 2000, the amount of milk consumed by Americans has fallen by 26 percent.
The dairy industry took another hit at this year’s Academy Awards when Joaquin Phoenix used his acceptance speech for best actor to decry the treatment of cows.
Warren Shaw runs the Shaw Farm in Dracut, a farm has been in his family for more than 100 years.
Shaw says he’s felt the backlash against milk over the years.
“First it was fat and now it’s not fat anymore. Today it’s the fake products that are out there, calling themselves milk and occupying the same shelf as dairy,” said Shaw. “It makes it a struggle, it really does.”
The farm has diversified its products and still has two dozen employees, but the threat to the business keeps getting bigger.
Marisa Hastie, an exercise science and nutrition professor at Lasell University, said the consumption of plant-based milk has soared “upwards of 25 percent in the last four years.”
Hastie notes that the products may look alike but says they are very different. “When you’re making a choice of whether or not to include milk in a diet, milk and plant-based milks are two entirely different food groups.”
Hastie understands why the non-dairy alternatives like almond milk have caught on, noting they are lower in calories than whole milk, provide an option for those who are lactose intolerant or have milk allergies, while they also appeal to the growing number of vegans.
But for people who want more protein and less processed foods, Hastie says they should probably be pouring a glass of milk, preferably low-fat.
“Most plant-based alternatives are fortified with several vitamins and minerals, and they’re also laced with thickeners and emulsifiers, things to increase the palatability, sometimes also sugar to increase the sweetness or the taste of it,” added Hastie.
Shaw wants people to think of a New England tradition and what would happen if it goes away.
“It’s the fabric of a community,” said Shaw. “It’s the character in so many ways, so when you lose a dairy farm, you lose a piece of the soul of that community.”
Last month, a group of U.S. senators including three from New England, wrote a letter to the Food and Drug Administration. They’re asking the agency to issue a set of rules that would preclude plant-based products from using terms like milk, that have traditionally been associated with the dairy industry.
A new report presented to Vt. lawmakers concludes the state should take control of milk markets to keep the dairy industry from collapse.
“We are way under water and it’s a very difficult problematic situation that we are in,” said Dan Smith, the former director of the Northeast Dairy Compact.
Smith and former Vt. Agriculture Secretary Roger Allbee addressed the House and Senate Agriculture Committees Thursday with what would be a major transformation in the economics of dairy industry — have the state take control of milk pricing.
Right now, with a complicated federally-regulated pricing system, Smith says farmers face price volatility and month-to-month farmers are unsure of what they will be getting paid. In many months the price is below the cost of production.
“Your dealing with an antiquated state regulatory program and that’s not the starting point. The starting point is the new world, and the new world is manufactured milk — in state,” Smith said. . Smith and Allbee suggest the state step in with a task force from multiple agencies to work together to set regulations on the price and quality of milk. They say this is only possible because most of the milk produced here, stays here and is turned into locally produced milk, cheese and ice cream.
Asked whether this plan to raise prices for farmers, could drive dairy processors out of business, Smith said he didn’t think that would happen.”Why would Vermont, why would this board set a price at a level that is going to drive out of business. Hold a hearing and try to find a price that wouldn’t drive them out of business and if that price doesn’t exist, then you wouldn’t set a price cause you’re working against your own interest,” he said.
“Our situation is not good and this is a radical change in how milk will be priced,” said Committee Chair Sen. Bobby Star, D-Essex/Orleans County. He says the idea is worth exploring. “I mean, who else is putting anything else on the table. I mean you cant keep waiting.”
State agriculture officials say there are still a lot of questions about the proposal that need to be studied before reaching a conclusion and that Smith and Allbee’s are using some incorrect data on the amount of milk that stays in Vermont, which could effect the report’s conclusions.
Ben and Jerry’s officials agrees that removing volatility would help farmers but say price is only one consideration where they source their milk.
Starbucks recently stated on a global level that it will start steering away from dairy as the coffee company moves toward alternative choices due to environmental concerns. I have to wonder if that decision is as noble as it sounds or if it’s really a money grab for Starbucks.
Environmental responsibility has become a trendy topic over the last few years, as if it was a new concept. It certainly isn’t for dairy producers, who have historically honored our duty to our land and animals. It seems that major corporations have just caught on that being “green” is profitable; slapping an “I love the rain forest” sticker on a coffee cup increases its value.
If we, the dairy industry are going to survive, we must take action when companies take a public stance against dairy. Now is the time to stand up and testify and challenge Starbucks’ ”trendy” science with the cold, hard facts. Dairy has reduced its carbon “hoofprint” by 60 percent in this country over the last 75 years. Closer to home, the California dairy industry, the leading dairy state in the nation, is on track to reach its goal of a 40 percent methane reduction of 2013 totals by 2030. The dairy industry has proven that it is capable of operating within an environmentally responsible framework.
Starbucks’ decision was not entirely based on environmental responsibility. The choice to transition away from dairy and surcharge customers for plant-based beverages was likely made from a financial standpoint, possibly with pressure from its newly acquired stakeholder, PETA. PETA has made it that its objective in acquiring Starbucks stock is to leverage a change towards plant-based beverages. You have to admit that it was freaking brilliant on their part and well thought out.
Dairy, too, has the ability to plan ahead, yet we as an industry are failing to hit the target. The world keeps spinning around the sun, and although it feels like it may be picking up speed, we as an industry are not keeping up. The dairy industry needs to keep up and adapt to the changing marketplace just like every other industry. Today the world is fascinated by labels and often believe labels with little skepticism. It’s no secret that the common consumer responds to visually appealing labels that use buzzwords to inform their purchases. By no means do I condone these marketing techniques nor would I recommend them as an answer. I suggest the opposite.
We need to show how amazing our industry is in new and different ways. We need to intensely study and evaluate how we produce milk and the impacts that the industry has on the environment. We are doing a ton of great things for the environment, but the question must be asked: What can we do, or prove that we are doing, that will stop our industry from being scapegoated as an environmental detractor? If being “green” is what consumers want, then let’s prove to them that we are just that: green.
I truly believe that dairy has an everlasting place in our communities, our environment and at our tables. But if we do not take an active stance to improve our tactics and position in marketplace politics, we will constantly be fighting an uphill battle. It has been said that if you don’t take a seat at the table, don’t be surprised when you’re not on the menu. The choice is ours.
Tyler Ribeiro is a fourth-generation dairy farmer born and raised in California. He currently partners with his father at Rib-Arrow Dairy in Tulare, where they ship their milk to Land O’Lakes. Tyler has leadership roles in various dairy organizations locally and across the United States.
Dairy Farmers of America agreed to acquire assets from Dean Foods, the bankrupt milk processing company. But regulators must approve the deal first.
It’s a hard time to be a dairy farmer in America: The nationwide decline in milk consumption and the rippling effects of the trade war with China have pushed thousands of farms out of business.
Now the industry is a step closer to a major consolidation that some struggling farmers fear could cripple them even further.
In a deal that is likely to draw scrutiny from government antitrust regulators, Dairy Farmers of America, the country’s largest milk cooperative, announced on Monday that it had reached an agreement to purchase a “substantial portion” of the bankrupt milk company Dean Foods.
Under the agreement, Dairy Farmers of America, a farmer-owned co-op, would pay $425 million to acquire 44 of Dean Food’s facilities, as well as the real estate, inventory and equipment necessary to operate them. To move forward, the deal must be approved by the bankruptcy court overseeing Dean Foods as well as by regulators, who have been investigating the potential merger for months.
So far, much of the antitrust scrutiny has focused on the co-op’s evolving role in the American milk business. Two decades ago, Dairy Farmers of America was founded to help small farmers market their raw milk to dairy processing companies like Dean Foods, which prepare milk for distribution to retailers.
But over the years, the co-op, which now has more than 14,000 members, has also invested heavily in processing, meaning it buys some of the raw milk that its own marketing branch sells. Those investments have created a conflict of interest, some dairy farmers argue, because processors benefit from lower milk prices, while farmers benefit from higher ones.
Dean Foods, the largest milk processor in the United States with a little under 60 manufacturing facilities and a portfolio of well-known brands like TruMoo and Lehigh Valley, filed for bankruptcy protection in November, hurt by changing consumer habits and a growing market of milk alternatives.
Dairy Farmers of America’s plan to acquire a large portion of Dean Foods’ assets would significantly expand its processing operations, heightening the conflict of interest, critics of the merger say.
But not all dairy farmers are opposed. And executives who negotiated the deal argue that bringing together the two milk giants will keep the market stable.
“It is important to ensure continued secure markets for our members’ milk and minimal disruption to the U.S. dairy industry,” Rick Smith, the chief executive of Dairy Farmers of America, said in a statement on Monday.
The chief executive of Dean Foods, Eric Beringause, said in a statement that Dairy Farmers of America would “serve our customers with the same commitment to quality and service they have come to expect.”
The co-op has been discussing a possible acquisition of Dean Foods since shortly before the bankruptcy filing. At the same time, antitrust officials at the Justice Department have been investigating the potential merger, speaking with farmers and the lawyers who represent them about how a deal would affect milk pricing and competition.
In January, a department lawyer sent an email to farmers who sell raw milk to Dean Foods, asking to discuss the merger over the phone.
“We are investigating Dairy Farmers of America’s potential acquisition of Dean Foods and the potential loss of competition for selling raw milk,” the email said, according to a copy reviewed by The New York Times.
The bankruptcy court in Texas that has overseen the Dean Foods case is scheduled to hold a hearing on March 12 to review the possible acquisition.
The possible Dean Foods deal is not the only source of the antitrust scrutiny facing Dairy Farmers of America. Justice Department officials have also been speaking with the lawyers behind a lawsuit in Vermont that accuses Dairy Farmers of America of engaging in a wide range of anticompetitive practices, including striking deals with other co-ops to not poach one another’s members.
The co-op has denied those allegations. But in September, a judge allowed the case to move to trial, writing in her decision that the plaintiffs had presented evidence from which a “rational jury could conclude that the D.F.A. management favored growth of its commercial operations and empire building over the interests of its farmer-members.”
The upcoming visit of US President Donald Trump to India may see the contours of the Indo-US deal being finalised in specific sectors, which is also likely to include allowing for market access for US dairy products in India. This move is likely to have significant adverse consequences on the prospects of the fledgling Indian dairy industry. Let’s first set a brief context by highlighting the importance of the dairy sector in India’s overall economic schema.
The dairy sector not only provides employment to the rural workforce, but is also a significant contributor to the national economy. While the share of agriculture and allied (A&A) sector in the gross value added (GVA) has consistently declined from 18.2 per cent in 2014 to 17.2 per cent in 2017, the share of livestock to GVA has increased from 4.4 per cent to 4.9 per cent during the same period. Importantly, within the A&A sector, among the key livestock products, milk and milk products have the highest share, at around 67.2 per cent in 2017.
The dairy sector plays a pivotal role in aiding the reduction of rural poverty and inequity, in addition to ensuring the food security of millions of rural households. Notably, according to a report by the Agriculture Skill Council of India, while crop production generates employment for the rural workforce for an average of 90-120 days in a year; the dairy sector plays a major role in providing alternative employment opportunities throughout the year.
In fact, in the recent years, milk and milk products have become the largest agricultural commodity, with their output standing at more than 20.6 per cent of the combined output of paddy, wheat and pulses. Thus, there is no gainsaying the importance of the dairy sector as one of the important sectors of the Indian economy.
Coming to the dynamics of the dairy trade with focus on the US and India, the data shows that the US is a net exporter in dairy trading, with its share in global exports standing at 4.9 per cent as opposed to an import share of around 2.8 per cent in 2018. In contrast, the share of India is minuscule at 0.3 per cent and 0.06 per cent in global dairy exports and imports, respectively, in 2018.
However, bilateral trade in dairy products between the US and India reveals a very variant picture. While the dairy exports to US have increased by almost seven times from $2.1 million in 2015-16 to $14.9 million in 2018-19, the pace of imports from the US has shown a moderate uptick (see Chart). This translates into a sharp jump in trade surplus for India from $1.94 million to $14.41 million during the comparable time period against the US.
The underlying broad reasons behind India’s trade surplus with the US in dairy is elucidated as follows. First, a glance at the product-wise trade statistics from India reveals that ‘melted butter’ (ghee) has the largest share in exports to the US at 56 per cent, followed by ‘processed cheese’ (21 per cent), butter (10 per cent), ‘other cheese’ (3.9 per cent), and ‘other fats’ and ‘oils derived from milk’ (3.5 per cent) in 2018-19. India has a comparative advantage in the export of ‘melted butter’ and ‘processed cheese’ to the US because the cost of production of both these products is cheaper in India (The World Dairy Situation report, 2019).
Second, the lower average final bound duties on dairy products in the US help provide a boost to diary exports from India. According to the World Tariff Profiles, 2019, an average final bound duty on dairy products in the US is around 19 per cent, as against close to 64 per cent in India.
The third and most critical reason for India’s high trade surplus in dairy vis-à-vis US is attributable to ‘cultural and religious sentiments’. The latter implies that the Indian authorities’ mandatory certification from the concerned US agency which states that “the source animal should not have been fed animal-derived blood meal”, weeds out significant imports from the US. This mandatory certification has been stated by the Ministry of Commerce as non-negotiable, as it carries sensitive connotations for the religious sentiments of a majority of the Indian population.
If India goes ahead with the signing of the deal on allowing market access of US dairy products in the Indian market, then the former stands to lose out in a big manner. In 2017, India contributed 21 per cent of the world’s milk production, thus making it the largest milk producer in the world. This has been made possible by the almost 73 million marginal and landless farmers who directly work in the dairy sector and hold, on average, two milch animals per farmer.
In addition, Indian farmers enjoy favourable terms of trade in the dairy arena, with their share in the consumer price standing at around 60 per cent, which happens to be the highest in the world (as per the International Farm Comparison Network’s Dairy Report, 2018). However, in the US, there are around 0.04 million dairy farmers holding an average of 241 milch animals per farmer. Though these farmers are basically large dairy farmers who benefit from economies of scale, they only get around 43 per cent of what the consumer pays, which is 1.4 times lower than that of India.
Further, according to The World Dairy Situation,2019 report, milk yield per cow in the US is the highest in the world, standing at 10,500 kg per cow as against 1,715 kg per cow in India, which is the second-lowest in the world after Pakistan. Importantly, a dairy farmer in the US is able to sell milk at a price 16.6 per cent above the average world market price, as compared with the similar number standing at 15.6 per cent in India.
Thus, it is evident from the numbers that despite lower milk yield and dominance of small and marginal farmers in dairy activity, India is comfortably placed to produce milk at a cheaper rate. Thus, opening market access for the sector is likely to place these dairy farmers in a disadvantaged position in relation to the large-scale dairy farmers in US.
The US dairy industry claims that the proposed trade pact with India has the potential to increase dairy exports to India up to $100 million. As per our estimates, had the India-US trade deal in the dairy sector already been in force, India would have run up a dairy sector trade deficit of $85 million today, instead of the 2018-19 trade surplus of $14.71 million. This is not good news for the Indian dairy industry, as the trade deal will not only adversely affect the industry as a whole but also the socio-economic conditions of millions of small, landless and marginal farmers — especially women, who are active in this industry. It will affect the business activity of small dairies and dairy cooperative players. It is likely to temper the sentiments in the rural economy, which is already dealing with a gamut of problems at present.
Last but not the least, the deal could play spoil sport in fulfilling the Prime Minister’s clarion call of doubling our farmers income by 2022. Thus, it will be prudent on the part of Indian authorities to take adequate precautionary measures in proceeding ahead with the trade pact with the US on dairy products.
Parida is research fellow, Verghese Kurien Centre for Excellence, Institute of Rural Management, Anand. Bhardwaj is an independent researcher based in Delhi. Views are personal
The trade is clamouring for import of milk power. They say that production of milk has not been as much as had been expected this and shortages in milk supply could be felt within 2-3 months. They may be right. But only partly so.
They do not talk about how milk products were imported by India in 2012 which caused the domestic price of milk to crash. As a result, UP’s farmers came out on the streets, and poured their milk against the cripplingly low milk prices.
After that, no government dared import milk into India, till recent efforts by the commerce ministry to allow imports from New Zealand . Mercifully, those ill-thought plans were aborted. Nor do they talk of how the current drop in milk production was also due to the cattle slaughter ban and the crazed gau-rakshak vigilantes unleashed on meat traders.
Now it looks like the government is using other methods to break the back of an independent and self-reliant milk industry.
First the past
In 2010, industry clamoured for skimmed milk powder (SMP) imports and therefore NDDB made a request to the government to allow it to import, duty-free, 50,000 tonnes of skimmed milk powder (SMP).
It also wanted to import, duty free, 15,000 tonnes of butter oil too. The result: India was left with 1 lakh tonnes of surplus milk, plus 50,000 tonnes of SMP and 15,000 tonnes of butter oil. Market prices crashed.
Current crisis: Since 2014 India has been exporting surplus SMP. The industry exported 27554 tonnes in 2014-15, 13,838 tonnes in 2015-16, 14,698 tonnes in 2016-17, 11,308 tonnes in 2018-18 and 13,873 tonnes in 2018-19.
All along industry experts were urging the government to allow NDDB (National Dairy Development Board) to use this SMP as a buffer stock to aid India when milk supplies would flag. The government refused to listen. Instead, it even offered the industry export incentives to galvanise SMP export.
Now that there is a shortage, India is being urged to import SMP.
Whatever the causes, the result is the same. The government has done exactly what it did in 2011-12. It pushed the industry into demanding import of milk, then allowed prices to be depressed. Then showed farmers that it was only too keen to rescue them.
If the government has sense – more sense than it showed at the RCEP discussions – it should immediately mandate NDDB to import SMP but to release it only at market prices. It should not be given to traders who could use it to depress milk prices which in turn would help fatten the wallets of milk producers. Restore to NDDB the role of market maker – as envisaged by Dr. Verghese Kurien (of the Operation Flood fame) for milk and milk products (. Allow it to create a buffer stock, and do not resort to export incentives and subsidies for the milk industry (Stategic Advantage, Kurien Style).
Government subsidies could actually ring the death knell for this industry that has done India proud. Today, Karnataka offers a subsidy of Rs.6 per litre of milk produced so that farmers get Rs.24. In Maharashtra the government offers Rs.5 per litre to milk producers so that farmers get Rs.25.
In Gujarat, farmers get Rs.32-36 without subsidies. Clearly, milk producers (especially in Karnataka and Maharashtra) should be told to reduce their costs, without reducing procurement prices from farmers. If they cannot do this, take away their milk procurement and processing licences and let Gujarat’s cooperatives take them over. The way to have a healthy industry is to teach it to thrive (not just survive) without subsidies.
The government of India through its export subsidies and subsidies to cooperatives, and the state governments of Maharashtra and Karnataka through their subsidies to milk producers, are slowly killing the industry. They are teaching farmers to live on doles, not on efficiency.
The latter is what Kurien preached and practiced. That is why he did not want politicians (and wily bureaucrats) to come to his milk cooperatives. He knew that they brought with them the taint of death.
Today, Global Dairy Trade published its 2019 Annual Report in which we recap our achievements and provide key trading statistics for the year.
Highlights from the year include:
• During 2019, GDT Events achieved a milestone of exceeding US$25 billion since inception in total cumulative traded value to buyers from over 80 countries.
• The GDT Events Oversight Board adopted rule changes to enable sellers to better protect their data and to shift Global Dairy Trade’s focus toward regional average prices rather than individual seller winning prices. In making this change, we encourage more sellers to join the platform, increase liquidity and provide greater value to all participants.
• GDT Marketplace which is our 24/7 online platform for buying and selling any dairy products in any quantity, now has over 500 registered buyers and has offered more than 80 product specifications across 30 product groups.
• Market determined average prices by region was added to GDT Insight, enabling subscribers to analyse regional price trends as they change over time.
Our Annual Report also includes a comprehensive range of GDT statistics and historical GDT Events data, including:
Demand for dairy products in China hangs on what further steps the Chinese Government takes to stem the spread of coronavirus.
Westpac market strategist Imre Speizer says there are risks to near-term demand which could be affected by coronavirus developments.
The steps that China has taken to contain the outbreak – such as extending the Lunar New Year holiday period, and limiting the movements of people – has kept many factories closed.
Speizer told Rural News has meant less demand for their inputs, including milk powder.
“These disruptions might prove to be short-lived, but that depends on what further steps the government might take to contain the spread of the virus.”
Last week, global prices tumbled; whole milk powder price dropped 6.2% to hover just above the US$3000/MT mark.
Speizer says the obvious explanation for last week’s decline is uncertainty regarding the coronavirus outbreak.
“Financial markets have been reacting to those developments for around two weeks, with global equities, interest rates, industrial commodities and risky currencies falling sharply,” he says.
“Moreover, whole milk powder futures prices had been falling since late January. It was unsurprising, then, that last week’s GDT auction followed suit.”
The forecast milk price also hinges on supply coming out of New Zealand: persistently dry conditions in the upper North Island and eastern South Island could see milk production fall short of what the market is expecting.
Fonterra figures show in December 2019, the co-op collected 184 million kgMS from farmer suppliers: 0.6% down for the same month in 2018, according to its monthly global dairy update.
Season to date collection was over 909m kgMS, 0.5% down on the previous season.
North Island milk collection in December was 106.4 million kgMS, down 2.5% on last December. Season to date collection was 564 million kgMS, down 0.4% on last season.
Fonterra says December weather had some impact on pasture quality in some northern regions, however grazing crops are doing well, and cow condition remain very good.
South Island milk collection in December was 77 million kgMS, up 2.2% on last December. Season to date collection was 345 million kgMS, down 0.6% on last season.
“Favourable weather conditions across Canterbury continued, allowing for excellent pasture growth rates,” it says.
Westpac is still maintaining its $7.40/kgMS forecast milk price for Fonterra suppliers.
In a recent press release, the California Milk Advisory Board is inviting people to “the wholesome new dispensary in town” that is “doling out the original edibles: California Based Dairy (CBD).” Yes, this is 100% real.
The California Dairy Dispensary popup event is happening on February 22 in Venice, California. The press release says that the “dispensary” will “highlight the natural, mood-enhancing properties of California dairy foods as represented by varieties of cheese, micro-dosed butters, flavor-infused yogurts and rolled ice cream—all the TLC with zero THC or cannabis.”
The popup is the next step in the California Milk Advisory Board’s campaign to make milk your drug of choice, following the release of this trippy, expensive-looking ad last October, which somehow has only 2,694 views. Eighty of those views were me immediately after discovering it. Please enjoy.
The fall in UK’s per capita consumption of milk is greater than in the US — it experienced a reduction of 40% of per capita liquid milk consumption since 1975.
The UK findings were reported within an analysis by the Agriculture and Horticulture Development Board (AHDB).
According to AHDB, despite 98.5% of UK households still buying milk to drink, the average per capita consumption has fallen from 140 litres per year (2.7 litres per week), to just 70 litres (1.4 litres per week).
But it’s not all doom and gloom — AHDB reports that value-added dairy products like cheese are experiencing growth.
AHDB says that the volume of milk going into UK cheese has increase by 1.09 billion litres in the past ten years.
In contrast, the volume of milk going into liquid manufacturing has dropped by 720 million litres in the same timeframe.
Despite the news that one of Canada’s major dairy producers is closing two facilities by this time next year, P.E.I.’s dairy industry remains strong, says Ron Maynard, president of the P.E.I. Federation of Agriculture.
“We continue to have another one-per-cent increase in our quota come Feb. 1 and a small price increase, also Feb. 1. The market continues to grow and we’re pleased to fill it,” said Maynard, also a dairy farmer in Tyne Valley and a former board member with Dairy Farmers of Canada.
Last week, the Montreal-based dairy company Saputo announced it was closing a facility in Timmons, Ont., in September and one in Saint John, N.B., in January 2021. The operations are going to be integrated into other facilities across Canada in order to improve efficiency, according to the Financial Post.
About 280 jobs are expected to be impacted by the closures.
A reason cited for the shake-up is the growing trend towards non-dairy alternatives. But Maynard sees it as another example of a business consolidating and modernizing.
Sylvain Charlebois, senior director of the Agri-Food Analytics Lab at Dalhousie University, is disappointed to see the closures but not surprised.
Given the choice between closing an older facility or retrofitting it, closing is the more economic decision. As well, Charlebois sees the market going in multiple directions, including the consumer trend towards non-dairy alternatives, especially with companies like Starbucks leading the way by encouraging consumers to consider non-dairy options.
“Saputo’s structure needs to change. It’s similar to Maple Leaf Foods in recent months. They completely changed the structure of the company in order to adapt to consumer trends,” he said.
P.E.I. isn’t immune from those global trends toward non-dairy alternatives, he added.
Maynard doesn’t see these moves by Saputo as a sign for concern because the majority of global consumers are still buying dairy.
“People’s diets shift. We’re seeing a decrease in the consumption (of) fluid milk, but we’re seeing increases in the consumption of cheese within the Canadian market and within the world market also. Dairy is still a very sound source of nutrients, proteins, fat and energy,” he said.
Darigold began producing lactose-free Fit milk in March 2019 in Portland. The milk has more protein and less sugar than regular milk. A $67 million expansion of the dairy cooperative’s Boise plant will allow it to be processed in Idaho.
Darigold began producing lactose-free Fit milk in March 2019 in Portland. The milk has more protein and less sugar than regular milk. A $67 million expansion of the dairy cooperative’s Boise plant will allow it to be processed in Idaho. By Darigold
The Pacific Northwest’s largest dairy says it will spend $67 million to expand its plant in Boise to produce a lactose-free milk with more protein than conventional milk and less sugar.
Darigold Inc., a farmer-owned cooperative based in Seattle, said Thursday that it will begin processing its Fit brand of milk at the Boise plant at 618 N. Allumbaugh St., south of the I-184 Connector near Emerald Street. Darigold hopes to open the new bottling line this fall.
“This is the largest investment we’ve made in our business in nearly 15 years,” Duane Naluai, senior vice president of Darigold’s consumer products, said in a phone interview with the Idaho Statesman. “This investment should indicate to the people of Idaho and in the community around Boise that we’re making an investment to stay for the long term.”
Construction will add 36,220 square feet to the existing two-story Boise dairy, built in 1930. The plant now has 99,182 square feet.
Darigold, which has 1,720 workers companywide, said it will add 15 new employees to operate the line. The Boise plant has 143 employees, not counting drivers. The other two Idaho plants have 232 employees.
Darigold is the brand of milk products from cows owned by the 429 farmer-members of the Northwest Dairy Association in Idaho, Washington, Oregon and Montana.
Washington has the most co-op farmers, 294. Oregon has 70, Idaho 48 and Montana 17.
The cooperative introduced Fit milk last March. Available in half-gallon cartons in whole milk and 2% and 2% chocolate, it is now produced at Darigold’s Portland plant.
It’s available in the Boise area at Albertsons, Fred Meyer, Winco and Walmart stores. The suggested retail is $3.99 per half-gallon. Albertsons had all three Fit products on sale this week for $2.99.
“It provides 75% more protein than your conventional variety of milk and it has 40% less sugar,” Naluai said. “But one of the things we’re really proud of is that it’s also great-tasting.”
The milk processed at the Boise plant will be packaged in 14-ounce plastic bottles that will be shelf-stable. They won’t require refrigeration until after the bottles are opened.
Naluai would not say how much Fit milk has been sold since it debuted. He said production has doubled in the past six months compared with the first six months.
He also declined to provide the company’s goals for Fit when it starts being produced in Boise. Darigold eventually hopes to market that brand of milk nationwide, he said.
Fit was developed in response to consumer desires for healthier products that taste good and are convenient, he said.
“Darigold Fit is a great example of the kind of new thinking that is revitalizing dairy, and we’re proud of the investment Darigold has chosen to make,” Karianne Fallow, CEO of Dairy West, said in a news release.
Dairy West, headquartered in Meridian, represents dairy farm families in Idaho and Utah.
Liquid milk consumption in the United States has dropped more than 40% since 1975, according to yearly figures from the U.S. Department of Agriculture. Back then, Americans drank 29 gallons of milk a year. By 2000, that was down to 23 gallons. In 2018, it was just 17.
Grocery store shelves are increasingly filled with alternative “milks” made from soybeans, almonds, coconuts, oats, rice and cashews. Flavored water, juices, hot and cold coffee and soda also compete for shoppers’ dollars.
Cereal in milk used to be a breakfast standby, but protein bars, yogurt and convenience foods have replaced it in many households.
Changing milk habits have devastated large segments of the industry.
Dean Foods, which owns Meadow Gold, reported a net loss of $79.4 million in the quarter ending Sept. 30. It’s the country’s largest milk processor by sales, selling $4.8 billion worth of milk in 2018, the Wall Street Journal reported.
Dean Foods’ largest customer is The Dairy Farmers of America, which markets nearly one-third of the milk sold in the U.S.
DFA is working to buy Dean Foods, but the deal is receiving scrutiny from federal antitrust regulators, the Journal reported.
In January, another dairy giant, Borden Dairy Co., declared bankruptcy.
Darigold continues to grow, Naluai said. The company reported net sales of $2.3 billion in its 2019 fiscal year, up nearly 8% from 2017.
Much of Darigold’s success, he said, is due to its focus on high-demand products such as bulk butter and cheese, whey powder and nonfat dry milk. It’s less dependent on liquid milk than some of the dairies that have struggled.
Forty percent of Darigold’s products are exported, providing another source of revenue. Projections call for that to rise to 50% before the end of this decade.
The company ships to 25 countries around the world. Powdered milk, for example, is in high demand overseas.
China’s dairy enterprises have resumed production amid the novel coronavirus outbreak to ensure the supply and quality of dairy products.
Chinese dairy giant Inner Mongolia Yili Industrial Group Co., Ltd. said to ensure the supply of dairy products, more than 10,000 employees have been working in the factories across the country since the Spring Festival.
The current yearly production capacity of Yili is nearly 12 million tonnes.
The group has also rolled out detailed epidemic prevention and control efforts, checking employees’ health and workshops, to ensure the safety of both workers and production.
Saishang Nestle Hulunbuir Ltd., located in the city of Ergun, said it is now operating at full capacity. At present, the enterprise receives about 120 tonnes of fresh milk every day and produces 12 tonnes of milk powder every day.
“After the company restored production, our workers worked overtime to produce more than 400,000 yuan (about 57,307 U.S. dollars) worth of adult milk powder and donated them to workers on the frontline of the anti-virus fight,” said Wang Hai, an official of the company.
The agriculture and animal husbandry department of the city of Ergun recently vaccinated the cows in the city, distributed disinfection supplies to all dairy farms and required them to conduct disinfection every day. Meanwhile, the local disease control center has strengthened the publicity and guidance of epidemic prevention and control among dairy enterprise employees.
A peak dairy farmer group has slammed a Victorian Government inquiry into the impact of animal rights activism on the State’s agriculture industry.
A peak dairy farmer group has slammed a Victorian Government inquiry into the impact of animal rights activism on the State’s agriculture industry arguing it failed to look at strengthening penalties for farm trespass offences.
Australian Dairy Farmers said the the inquiry’s report was a “missed opportunity to deal with a very serious problem and to show that the Victorian Government has farmers’ backs”.
ADF president Terry Richardson said the inquiry failed to give farmers peace of mind that they would be protected against criminal activity from extreme activists.
“Farmers are suffering from increased stress and fear of being attacked by activists sometime in the future, just for doing their jobs,” he said.
ADF, in its submission to the inquiry, argued for police to be given the authority to dole out on the spot fines of up to $12,000 for farm trespass offences.
Mr Richardson said animal activists trespassing onto farms or committing other crimes should be held to account by the criminal justice system.
“No-one is above the law and farmers have a right to farm without the threat of invasion, sabotage or biosecurity outbreak posed by animal activists,” he said.
The report instead recommends the installation of CCTV cameras in abattoirs to remove the need for activists to trespass on processing facilities, but Mr Richardson said he doubted this would deter extremists from protesting dairy farms.
“The best way to prevent their reckless behaviour is to fix a penalty that matches the crime.
“Regardless of what this report says, the Victorian Government must strengthen criminal penalties for trespass, or it will send a message to all farmers across the State that their safety is not as important as vegan ideology.”
Other recommendations made by the inquiry included:
Modernising the Prevention of Cruelty to Animals Act 1986 to incorporate industry standards and provide appropriate penalties for non-compliance;
Requiring Agriculture Victoria to increase its public communication of animal welfare compliance and practices to help increase community understanding of the dairy industry’s strong animal welfare practices and contribute to its social licence to operate; and
Promoting the completion of biosecurity plans and creating a new biosecurity offence like New South Wales for farm trespassers to provide an enhanced level of biosecurity protection for dairy farmers.
ADF will formally respond to the inquiry’s report.
Western Australia is facing an exodus of dairy farmers less than a year after the widely-celebrated end of $1-a-litre milk.
Dairy farmers in WA say they have lost trust in processors
Producers are struggling to break even despite the abolition of $1-a-litre milk
An industry group says the price increase has not been passed on
Farmers say rising production costs and “unsustainable” farmgate prices are forcing more of them to sell their cows to butchers and exporters.
The ABC has spoken to industry analysts and stock agents who say a dozen herds of dairy cows are awaiting sale in Western Australia, which could represent up to 10 per cent of the state’s herd.
The ABC has also spoken directly to half a dozen farmers who say they want to leave the industry.
David Payne has decided to stop milking after 25 years at Scott River in the dairy heartland of WA’s South West, saying he had few options but to send a portion of his herd to the abattoir.
“I don’t want to be on the farm so my father and another mate of mine can load them on the truck, because I don’t want to see them go,” he said.
“It’s obviously very upsetting, but there comes a time when you feel like you’re banging your head against a wall and have to move on to greener grasses.”
Mr Payne is not alone as the industry’s long-running issues come to a head, with many farmers seeing little hope in sight after the abolition of $1-a-litre milk failed to make a difference.
One major processor has lifted the price of its milk for its customers, but suppliers say none of it is reaching the farmgate.
‘Selling our future’
Consumers are paying about 20 cents more for a litre of homebrand milk at the supermarket checkout, but WA Farmers Federation’s (WAFarmers) dairy section president Michael Partridge said as little as 1-3 cents of that had been passed on to farmers through the supply chain.
Both Coles and Woolworths said the matter was best directed to milk processors, who negotiate farmgate prices with dairy farmers.
In addition to a drought levy, a Woolworths spokesperson said the supermarket had also agreed to “significant wholesale cost increases” from WA processors across the dairy cabinet.
The amount of money WA farmers were paid for their milk last year averaged at 50.2 cents per litre, a fraction below the five-year average of 50.4 cents per litre.
Meanwhile, production costs have risen by just less than 10 cents per litre in recent years because the drought elsewhere in Australia has lifted WA grain and hay prices significantly.
Mr Partridge said the average milk price was on par or failing to meet the cost of production for a lot of dairy farmers.
He said they were stuck in the middle of price squeeze driven by major processors and the retail duopoly of Coles and Woolworths.
“I’ve spoken to a number of farm advisors recently and they’ve got good clients that are borrowing money to feed cows,” Mr Partridge said.
Second-generation dairy farmer Michael Angi is one of less than 150 milk suppliers left in WA.
“You just tighten your belt where ever you can, but we’re running out of holes in the belt,” he said.
Mr Angi has maintained cashflow by live exporting dozens of his young heifers, which are future milking cows, to China.
“We’re selling our future,” he said.
“I had the opportunity, and I’d like to give it to my kids — it’s a great lifestyle, but it gets to the point where you’ve got to put food on the table.”
Farm gate disparity
Australian Dairy Farmers (ADF) president, Terry Richardson, said WA farmers were being paid up to 20 cents per litre less than farmers in parts of New South Wales and Queensland, who currently receive an average farmgate price of 64 cents and 70 cents, respectively.
“The difference is that the WA market doesn’t have the flexibility like other dairy regions,” Mr Richardson said.
WA’s dairy industry lacks a significant dairy manufacturing sector and has just three major, foreign-owned processors in Brownes, Lion Drink & Dairy, and Harvey Fresh, which rely heavily on major supermarkets.
WA-based industry analyst Andrew Weinert said that market dynamic subdued farmgate prices.
“The dairy farmer is a weak seller with few choices, the processors are a strong buyer with many suppliers,” he said.
“But the processors are also a weak seller when dealing with the major retailers and food services industry.”
WAFarmers has written to WA’s major processors to urge them to provide a price increase of 5 cents per litre of milk, or risk pushing more farmers out of the industry.
The ABC asked each processor if they planned to meet that request — none provided a direct response.
Lion Dairy & Drinks, which is now owned by China Mengniu Dairy Company, said market conditions varied across Australia’s dairy regions, and this influenced farmgate milk prices.
“An example of this is the ongoing drought and increasing cost of feed in the eastern states that has influenced farmgate prices in those areas recently,” Lion’s national farms services manager, Paul Rees, said in a statement.
“However, Western Australia has not been in drought during this time.
“Our strong farmgate price in Western Australia has been market leading for some time.”
Multinational French company, Lactalis, which owns Harvey Fresh, declined to comment.
Brownes, owned by Chinese dairy giant Shanghai Ground Food Tech, did not respond to the ABC’s request for comment.
The ABC has obtained a letter sent from Brownes which notified customers of a 4.9 per cent increase of the price of its white and flavoured milk, effective from November 2019.
“With further increases in farmgate prices imperative to protect the sustainability for the future of the dairy industry, we’re having to act at the farmgate to mitigate further production falls to the extent we can to ensure our suppliers remain viable during these difficult times,” Brownes managing director Tony Girgis wrote.
Mr Payne, a Brownes supplier, said he had not seen any recent increase his milk price.
“There just seems to be a lot of smoke and mirrors, because they tell you one thing and do another,” he said.
“So I have no trust in the processors.”
A way forward
WA Agriculture Minister Alannah MacTiernan said the State Government was supporting farmers by funding Western Dairy and its efforts to reduce production costs.
“There are people out whose cost of production is 10-20 per cent less than other producers, and it doesn’t depend on scale or whether you’re irrigated or not,” she said.
Ms MacTiernan said it was also time for dairy farmers to come together and collectively bargain with processors or form a cooperative and get a better deal.
Mr Partridge said collective bargaining was not the answer and pointed to failures of the past, such as the collapse of WA’s dairy cooperative, Challenge Australia Dairy in 2011.
He thinks the State Government should do more.
“Call out the buck passing between retailers and processors and create a forum where everyone can get together and speak about the situation, and look at alternatives and structural changes,” Mr Partridge said.
ADF’s Mr Richardson is urging all parties to come together to find a “market-based solution”.
U.S. dairy farmers again are adding cows to their herds after years of overproduction that kept milk prices low and pushed thousands of farms out of business.
As of January, 9,334,600 milk cows were recorded in the United States, up by more than 17,000 from the average herd size in August, according to U.S. Department of Agriculture figures.
“Last August, the monthly average herd size reached its low point, and then it started climbing again,” said Peter Vitaliano, vice president of economic policy and market research at the National Milk Producers Federation. “Hopefully, the herd expansion won’t go faster than the increase in demand.”
The herd expansion comes at a time when milk prices finally are increasing, Vitaliano said.
Prices plummeted at the end of 2014 and remained low until late 2019. During that time, many small to midsize farms lost money every year and, across the country, farms went under. Wisconsin alone lost more than 2,600 — nearly 30 percent of its dairies.
The issue was oversupply. In 2014, the price of milk hit an all-time high, driven largely by a sudden spike in international demand, Vitaliano said.
American farms rushed to increase their production. But by the end of 2014, those international markets lost their appetite for American milk. Demand dropped, and so did price. Production, however, kept increasing.
“During the low, as margins got tighter, we kept increasing our volume,” said Luke Minich, a dairy farmer in Indiana. “So we were part of the problem. But you have to be. Our expenses don’t change. We’re all in the same boat. We all need gross income, and we get that by adding cows.”
Minich said it is normal for milk prices to cycle up and down over multi-year periods, as high prices encourage farmers to increase production, and low prices push farms out of business.
And that is exactly what happened. In early 2018, the trend of low prices finally reversed as rapidly increasing dairy closures removed cows from the herd faster than remaining farmers could add them.
Between July 2018 and July 2019, the number of cows dropped by about 100,000, and prices recovered.
“The high price from the start of the year is already starting to go down,” Vitaliano said. “That could be from the fact that the herd is expanding.”
After hovering around $15 per 100 pounds of milk during 2018, the price climbed to nearly $19 in January. The futures price opened Friday at $17.23.
What happens to milk prices in 2020 will depend on whether demand keeps pace with increased production, Vitaliano said. And some factors are going in dairy farmers’ favor.
China has promised to majorly increase its purchases of U.S. agricultural goods over the next two years under the phase one trade deal — and dairy industry experts believe that one of the ways it will accomplish that is by increasing dairy imports.
In addition, it’s possible that the cows in places hit with major flooding in 2019 will produce less milk this year, said Darin Von Ruden, a Wisconsin dairy farmer and president of the Wisconsin Farmers Union.
Farmers in those regions had trouble growing cattle feed, so the quality of this year’s feed will be lower, he said. Lower quality feed means cows will produce less milk.
“We’re kind of in a wait-and-see period now,” Von Ruden said. “If production is up from last year, the forecast will be low prices again. But if production doesn’t go up, we might be in for a good year.”
There’s one local real estate company that has sold 18 dairy farms in the last six months or so and only four of them have stayed as dairy – the others have gone to sheep or beef,” Mr Childs said.
FAMILY: Gaylene Childs snuggles with one of her favourite cows on the farm. Pictures: Anthony Brady
Gaylene and Kerry Childs have been through more than most in their bid to remain in the dairy industry.
They left their home state of Queensland in search of greener pastures, have endured four droughts, survived the global financial crisis and operated on a shoestring for months on end due to the low milk price.
“We moved down here because regulations were pushing out a lot of farmers up there,” Mrs Childs said.
“We came down with 18 milkers and 45 head all up. We transported them down.”
Over several years they were able to purchase more stock, to take their herd to about 240.
But now the couple is facing one of their greatest challenges ever.
The farm they lease in Cooriemungle has been sold and they have until the end of the month to leave.
They are desperate to remain in the industry but have not been able to find another farm to house two of their sons, 240 head of cattle, chooks, cats, peacock and dog Daisy.
Mrs Childs, 55, said the frustrating thing was that with the price of milk increasing, they finally had a chance to get ahead.
SOLD: The Cooriemungle farm has been sold, leaving the family with nowhere to go. The couple has been looking for another property for months.
“The past spring we’ve been working really hard and we’ve cut down our debts but we can’t find anywhere to go and that’s so feeble,” she said.
The couple isn’t afraid of hard work, deciding to do it all themselves instead of hiring someone to help out.
Mr Childs, 51, who has been milking cows since he was a young boy, said it would break his heart if he had to exit the industry.
He said he believed the future of the dairy industry in Australia was uncertain, with banks tightening restrictions on lending after the royal commission and many farms being converted to beef or lamb operations.
“There’s one local real estate company that has sold 18 dairy farms in the last six months or so and only four of them have stayed as dairy – the others have gone to sheep or beef,” Mr Childs said.
He said the couple had tried to loan funds to buy a dairy farm, but had been knocked back.
“Most of them tell us we’re just short on equity,” Mr Childs said.
LEFT: Cody Childs loves playing netball for the Warrnambool Springers. He doesn’t want to leave the south-west.
“They tell us we will have no problem making the repayments, but we’re just slightly short on equity.”
Mr Childs said he feared the country’s milk supply would dwindle and corporations would buy up dairy farms, giving them a monopoly and making it near impossible for young people to enter the industry.
“There are a lot of people just like us.
“Friends of ours sold their herd 18 months ago because they couldn’t find a farm.
“I’ve heard one milk company has 16 people looking for farms to lease or share-farm.”
Mr Childs said he believed the issue would eventually result in milk having to be imported into Australia.
“The milk supply will dwindle and there will be no family farms left,” he said.
“It will just be corporates.”
Mrs Childs said the couple faced the prospect of being homeless when the last day of the month rolled around.
They have a sale scheduled for February 24 – one they hope they can cancel.
Mrs Childs said it would break her heart to have to part with their beloved stock.
“We’re not the kind of farmers who treat our cattle like numbers – they’re our family,” she said.
“It’s so stressful.
“We look at our beautiful cows and wonder how long we will have them.”
Mrs Childs said a stock agent had advised them some of their cattle would probably be sent to an abattoir due to their age.
ABOVE: Kerry Childs has worked on dairy farms all his life and doesn’t want to leave the industry. He says the couple has worked hard to get to the position they are in.
She said this was a prospect that breaks their heart.
“They’re paying their way, they’re not costing us money,” Mrs Childs said.
Mr Childs said he had not given up hope of finding a property, but he knows time is running out.
He is sad he may never get the chance to hand over the reins of a dairy farm operation to his son Matthew, 25.
The stress of the prospect that their hard work to put them in a good position to enjoy a successful future is almost too much for Mrs Childs to bear. It’s another cruel blow and one that leaves her asking why.
The couple are parents to twins David and Matthew, who are 25, Cody, 20, and Michael, 14.
Tragically their two-year-old daughter Danielle died in 2003.
She was born with down syndrome and suffered from chronic lung and heart conditions.
Danielle was the apple of her parents’ eyes and her death is something that haunts them each and every day.
When Mrs Childs found out some months after Danielle’s death she was pregnant with twins, the couple again had a reason to smile.
However, tragedy would again strike, with Mrs Childs going into early labour and the twins dying shortly afterwards.
In addition to that, David, Cody and Michael all suffer from autism and Matthew has Crohn’s disease.
This is another reason Mrs Childs is desperate to stay in the south-west.
David lives in Cobden and works at the town’s IGA, while Cody and Michael live with the couple at the Cooriemungle home.
Cody loves playing netball and is in the A grade competition for the Warrnambool Stingers.
He has represented the team at state level, winning a silver medal.
Michael attends the Hampden Specialist School and is flourishing, according to his mother.
He is a talented artist, with his drawing skills wowing all at his school.
Michael and David also play netball with the Stingers.
“I want to stay in the south-west for them,” Mrs Childs said.
BELOW: The couple is devastated they may have to sell their beloved cows. They say they are part of the family.
“I want to be close to David to support him and they all love playing netball. They finally feel like they are a part of something and they belong.”
If the couple don’t find a property before the end of the month, they will be forced to sell their stock and other pets and rent a home.
“We’ll just have to rent a house for the short term and figure out where we’re going to end up,” she said.
Over the years the couple has taken out a number of awards for their cows and the quality of their milk.
Mrs Childs said she was hoping for a miracle in the next few weeks.
Despite growing up in Melbourne, a career in agriculture was always on the cards for Harriet Bawden, Shepparton, Vic, who hopes to inspire others to follow her footsteps.
Despite growing up in Melbourne, a career in agriculture was always on the cards for Harriet Bawden, Shepparton, Vic, who hopes to inspire others to follow her footsteps.
Ms Bawden’s parents had a hobby farm near Colac, Vic, her uncle was a farmer and university study took her to an agricultural region. “Historically my family were farmers so I’ve come full circle,” she said.
Now co-ordinator of Murray Dairy’s Young Dairy Network (YDN) and a member of the Goulburn Valley Young Professionals, Ms Bawden is helping a new generation to appreciate the challenges and joys of working in the country.
She’s also the Shepparton Chamber of Commerce and Industry Awards 2019 Young Professional of the Year.
Ms Bawden, 29, says a Gardiner Dairy Foundation sponsored place in the Fairley Community Leadership Program is helping her to achieve her goals and harness the enthusiasm of other young people.
“I saw it as a great development opportunity in terms of leadership in a traditional sense but also with the emphasis on community leadership,” she said.
“The YDN and Young Professionals groups share common goals in aiming to attract, retain and support young people in the community.
“There are lots of common challenges and opportunities across both and they’re all about strengthening our regional communities and making them inviting for young people to live and work,” Ms Bawden said.
“The lovely thing about regional communities is that they are all interlinked. Dairy is such a heart of our region and being a part of the dairy industry connects you to the community.
“I loved how the program presented leadership in all its forms and encouraged us to identify leaders we admire and the qualities we want to emulate.
“I learnt a lot about recognising the different values of people and listening and engaging in different ways and leading through demonstration.”
Ms Bawden is now committed to agriculture and with her partner, Chase, is investigating options to get into farming.
From a career perspective, she would like to continue to focus on agriculture, with options to expand into community development or policy development.
Ms Bawden encourages other young people to take on leadership programs and seek out Gardiner Dairy Foundation support.
“The best thing about it is that it gets you out of your own circle,” she said. “It challenges you and shows you new ways of operating and new ways of thinking.”
Despite its challenges, Ms Bawden said there was growing enthusiasm for the dairy industry among young people.
“The Young Dairy Network is really strong with people who genuinely want to form connections and learn from others,” she said.
“They’re positive about the industry because they’re open to changing the way they operate. They know it’s a difficult and volatile environment but they’re building their businesses around that.
“The challenge is to retain people. We don’t want to lose young people out of our communities so we need to offer them the same opportunities as in the city, if not better.”
The words “GOT MILK?” adorn a big red barn on the side of Interstate 93, though the campaign the American dairy industry used to promote its product for years alongside pictures of celebrities with milk mustaches was replaced by “Milk Life” several years back. In Northern Vermont, the slogan survives in big white letters on the Gingue Farm. The highway ends soon after passing the barn—you either turn around and head south or continue north into Canada. There are small towns and pastoral church steeples along the road. The mountains rise with valleys of farmland settled between. Postcard Vermont.
The Gingue family settled here in Lower Waterford in the 1950s. Their dairy farm was passed down from one generation to the next, ever since Shawn Gingue’s great-grandfather crossed the Canadian border with his brother. Now, Shawn, 38, runs the farm with his father Paul. But it’s no longer a dairy farm.
Shawn saw the hard truths of dairying firsthand on his own farm, which he started with his brother in 2008. When they went into business, it was the end of a boom turn for milk prices. They barely survived the bust years that came with the crash of the economy, enduring until 2015, when the breaking point hit. They could either continue fighting, try to grow and take on more debt, or get out. They got out. Shawn took a job in excavation, but he missed farming. He’d spend time whenever he could helping his dad.
“I didn’t feel the purpose. I’ve always been growing an animal or producing a product for somebody that really enjoys it. Whether it was milk that didn’t pay well or anything, I was still producing a product versus putting in a septic,” he said during a visit in September. “I just didn’t feel as important or something.”
Shawn went back to the family farm with a new perspective and ideas, which included bringing the milking operation to the 21st century. But continually low milk prices and the costs of upgrades the farm needed to join the future were too much. After more than 50 years of dairying, the family ended the legacy during a meeting at the kitchen table. Today it’s not about livelihood. It’s if you aren’t growing, you’re dying.
Sonny Perdue, U.S. Agriculture Secretary, said as much at the World Dairy Expo in Madison, Wisconsin in early October. Wisconsin, like Vermont, is in the midst of a dairy crisis: The state has lost 1,654 farms since 2017. “In America, the big get bigger and the small go out,” he said. “I don’t think in America we, for any small business, have any guaranteed income or guaranteed profitability.”
Today, the Gingue farm raises calves, houses heifers, and turns them into milkers by breeding them for a nearby farm. They charge a price per day to harbor animals. The farm has also diversified its crops, growing barley and winter wheat for a local malthouse. They seed for other farms and grow sweet corn to sell at their farmstead. Hemp, though, is the new thing in Vermont farming. The plants look like little Christmas trees from afar and have popped up on farms across the state, and the Gingue family has jumped at the opportunity to catch onto the CBD boom.
Vermont once had a vast number of family dairy farms like the Gingue’s: In 1947 there were 11,206 in the state. It was never easy, but, as Paul told me when I visited, “you could make money doing dairy back in those days.”
From 1970 to 2006, 573,000 dairy farms closed in the United States, according to Milk Money: Cash, Cows, and the Death of the American Dairy Farm, a 2012 book by Kirk Kardashian. New England alone lost at least two-thirds of its dairy farms. Vermont had 1,015 farms left in 2010, and that number continues to dwindle. As of the third quarter of 2019, the Vermont Agency of Agriculture Food and Markets had accounted for only 675 dairy farms in the state.
At the same time, the average size of farms has grown. The number of large farms (those that have more than 700 milking cows) has nearly doubled since 2011, while the number of cows has dropped by 11,0000, though the amount of milk made has stayed steady and even gone up in some years, due to a combination of breeding, feed, health and nutrition plans, air quality and pumping practices. The only way to compete is to get bigger and make more milk, and for Vermont farmers, that’s difficult. It also goes against the idealistic image the state has created for itself—one of small, family-run farms hearkening back to a simpler time. Farms like the Gingue’s, which by Vermont standards was pretty big, are forced to look elsewhere.
“It is not an exaggeration to say that right now, dairy farmers are in crisis. We are talking about hard-working dairy farmers losing their livelihoods, homes and their way of life,” Vermont senator and current hopeful future president Bernie Sanders said in a statement to VICE. “This is something happening all across rural America—small farmers of all backgrounds are finding it harder and harder to get by.”
When Shawn took over more responsibility in his family operation, he decided it was farming that he loved. In his excavator, he’d drift off thinking about the farm. He wants to raise his kids there. One of his younger brothers wants to get married in the old milking barn next summer. Now, for him and for his state, it’s about who is going to keep those daydreams alive.
A flood of milk
This ideal of Vermont might be highly salable, but maintaining it is an entirely different thing. Vermont land is great for raising cows, but less so for farming and feeding the mega-herds that thrive in the Midwest and California. The mountains, rocky soil, and a short crop-growing season means it’s generally more difficult and costly to farm in the Northeast. The land isn’t as forgiving or malleable, and the seasons have no regard for what anyone needs or wants.
The state’s fall into dairy farming happened in part because its proximity to New York City, Boston, and Philadelphia made it ideal for commerce. St. Albans, on the other side of the state from the Gingue farm, was once considered the butter capital of the world—in 1899 the creamery there produced 35 million pounds. But because of its small size, small population, and comparatively small output, Vermont has never had any power when it comes to negotiating the worth of its main commodity. As railroads arrived from the West, it lost even more of that bargaining power, and that, coupled with the advent of refrigerated cars, put Vermont farmers at more of a disadvantage.
Some dairy farmers persisted, however, and now, the small-town farm in analready small state is part of the state’s marketing campaign to keep tourists coming. The state sells its rural landscape and down-to-earth approach as a break from the helter-skelter life of living in the city and suburbs in modern America. In Brattleboro in June, there is an event called the Strolling of the Heifers where local farms parade their cows through downtown. In Woodstock in July there’s a Cow Appreciation Day. In Southwest Vermont, the Deerfield Valley Transit Authority painted its community buses to look like cows—it’s nicknamed the MOOver. Then there’s Ben & Jerry’s, the iconic ice cream maker in Waterbury, which has become synonymous with not only rich and creamy ice cream but also ethical and local food practices that included buying milk from local farms and donating seven percent of its profits to charities. When the company was bought by Unilever in 2000, it made sure the deal kept its factory in Vermont and kept using Vermont milk to make its premium ice cream, securing its identity.
Vermont equals milk, and its cows produce more milk than ever, so much so that they’re flooding an already overflowing market—all at a time when Americans are drinking less. According to a 2017 U.S. Department of Agriculture report, Americans are drinking 18 gallons of milk a year, which is 12 gallons less than people drank in 1970. Back then, people routinely drank two to three glasses of milk a day thanks to marketing campaigns that touted its nutritional value. As alternative “milks”—like almond, soy, coconut, cashew and now oat—have grown in popularity and eating habits have changed, the desire to drink milk has waned. But as the adage in dairy farming goes: When prices are high make more milk; when prices are low, make more milk.
When I call Bill Rowell and tell him I’m close to his farm, he asks me if I’ve ever ridden in an 18-wheeler. Upon arrival, I’m greeted by Rowell, dressed in khaki pants, loafers, and a pair of plaid button-up shirts on top of one another. We hop in his truck and drive to the back of the farm, where an idling tractor-trailer awaits. He has to pick up some feed he bought at auction from an old farm that went bust a few towns away. It’s a 45 minute drive along winding Vermont roads, the truck roaring and rattling up each hill, the wind howling outside the windows; on the way, we pass a house with a large middle finger statue in its front yard. The feed needs to be moved that day and Rowell, who has also owned a trucking company for 30 years, will do it himself.
Rowell grew up on a dairy farm in Albany, Vermont . He started helping clean up the barn when he was four or five years old, and by the time he was six or seven he’d graduated to helping milk cows. His father, though, decided he wasn’t going to leave the farm to any of his six children.
“My dad said, ‘If any of you guys want the farm you have to put yourself on the farm. I am not going to be responsible for putting someone on the farm,’” Rowell recalled.
It’s difficult work, and for Rowell’s family, that meant his father had to leave the farm for stretches when prices dropped, to work on gas or oil pipelines in New England and the Midwest. His mother would run the farm and raise their six children. Rowell entered the Navy after high school and worked as an air traffic controller on an aircraft carrier. He and his younger brother Brian opened the dairy farm in Sheldon in 1985. The farm has 1,500 animals, including 932 milkers when I visited—small compared to the 2,000 plus cow farms out west.
Rowell has become a voice of resistance for dairy farmers in Vermont. He’s worked with both the state and federal legislature in fighting for farmers’ rights in Vermont, and been a vocal leader of his local co-op. Co-ops work with dairy farmers to get their milk to market, whether it be as fluid milk or cheese, ice cream, yogurt, sour cream, or as dried milk. Co-ops control the market in many ways. They decide how much milk to pick up and sell and work with farmers to (supposedly) get them a fair price for their milk. They were created in the early 1900s as a way to give farmers a streamlined way to get milk into consumers’ hands while preventing farms from competing against one another.
As a long-time member of St. Albans Co-Op, which purchases milk from Vermont farmers and moves it through processors, packaging, and into stores, Rowell spoke up when Dairy Farmers of America, the biggest dairy co-op in America, took control. Rowell wanted to know what DFA’s plan would look like for milk production and pricing. DFA controls one-third of the dairy farms in America. The St. Albans co-op has been a member cooperative of DFA since 2003, but in June its board voted to be taken over by DFA, and not try to battle with the weight DFA has across the United States and on the global market. Rowell wanted to know what DFA was going to do to help farmers in Vermont compete, as well as prevent milk prices from cratering again.
One way to do that is to control the amount of milk pumped at each farm, which is called a management tool—basically controlling the supply and forcing the demand to go up and the price to follow. Rowell wanted to see if DFA would implement such a plan in Vermont because he believes it will help keep farms from going bust while stabilizing milk prices.
“I got up and asked DFA about a management tool during the merger,” Rowell said. “I said, ‘You guys have a management tool going on in two of your regions and there is no reason that you should come to us, the farmer, and say we don’t have enough market for your milk, we have to dump milk. At whose expense does that come? It comes at the farmer’s expense. So if you’re actual leaders you’re going to run this co-op the way it is supposed to be run. You’re not going to put your members out of business, are you?”
According to Brad Keating, the senior vice president and COO for DFA’s Northeast Area, DFA will implement a pricing tool starting in March 2020 that monitors the growth and fluid milk output of farms.
“All this does is basically say to the farmers, ‘If you’re going to grow in this period and you’re going to make more milk and there is a cost to dealing with that surplus milk, then you should take that cost rather than have the pool of co-op farmers pay it,’” Keating said.
Milk pricing is a long and convoluted process. I’ve spent months reporting on the dairy industry and I’m still confused as to how and why it’s done the way it is. There’s no easy answer or explanation. Current pricing systems date back to the Great Depression and the creation of the federal milk marketing order, which went through two iterations before being settled in 1937 as part of the Agricultural Marketing Agreement Act. In Milk Money, Kardashian takes an entire chapter of his book to explain it, but the gist is that milk prices are set by the market and generally go by supply-and-demand but through a circumventive route that has little regard for the costs of doing business in a region or the demand by a specific area, and because of that, the price is almost always lower than it could or should be.
In addition to this, there is also the Agricultural Act of 1949, which set up a program to buy surplus milk, giving farmers a guaranteed price for said milk. The government holds onto that milk until the price rises again. Essentially, someone is sitting at the Chicago Mercantile Exchange and seeing how much milk moves for on the market. Then, a price is set and someone with a calculator somewhere else uses a complex equation that only makes sense to a few people on how much money farmers will get for fluid milk. That price is what processors and bottlers pay cooperatives, which then distribute the money to their members.
This is where DFA gets into trouble. DFA is responsible for a third of the milk produced in America, and it’s supposed to do well by its huge membership and get the best prices for their hard work. DFA, though, has invested heavily in Dean Foods, which was purchased by Suiza Foods in 2001. Suiza had become a giant milk processing company in America when, according to Milk Money, Gregg Engels, the former chairman and CEO of Dean Foods, bought the Suiza processing plant in Puerto Rico. Suiza proceeded to buy up more plants and other processors, and Dean Foods quickly became the second biggest milk processor in America. DFA wanted that business, so it purchased a portion of Suiza and in the process became its only milk supplier. In short, DFA became intrinsically linked to the success of Dean Foods. While farmers only got paid for their commodity, shareholders at Dean and DFA got paid for the final milk products, which came from the processing plants, as well as for the milk that farmers brought to the co-op.
(“If there is profitability at the end of the year, the board of directors will look at that profitability and make decisions to allocate some back to the farmers or to make another acquisition to continue to find markets for the milk,” Keating said. “But the profits end up back in the hands of the members that own the cooperative.”)
On November 13, Dean Foods filed for bankruptcy; reports suggest DFA could be in line to purchase Dean, a move that has caught the attention of antitrust regulators. Both Dean and DFA acknowledged an interest in DFA acquiring some, if not all of Dean’s assets. Dean described any claim that they and DFA collude to keep milk prices low as “factually inaccurate, unsubstantiated, and nonsensical.”
In 2016, DFA was sued for its actions in Vermont by some local farmers. A $50 million settlement was reached, but 115 farmers in the Northeast rejected the settlement and allege that DFA and its marketing arm, Dairy Marketing Services, violated the Sherman Antitrust Act and conspired to monopolize the fluid milk market by having agreements with other co-ops to keep milk prices low. The battle is going to a jury trial in July 2020 at a U.S. District Court. Senator Sanders wants Congress to get involved to try and break the hold that consolidation has created over the market.
“Dairy farmers, like all farmers, are also dealing with increasing corporate consolidation. Washington has to get serious about attacking the agricultural monopolies that are destroying rural economies, harming our rivers and drinking water, and ripping off consumers,” he said. “We need aggressive trust-busting to break up the corporate concentration of the dairy industry, and stop new mergers of agribusiness corporations.”
Gary Genske, a dairy farmer as well as a dairy farm Certified Personal Accountant, is also in the process of suing DFA. He alleges what others have before: that it’s using its subsidiary companies—the producers—to make a profit off of the low milk prices that it keeps in place even though they can raise prices through intervention if they wanted to. Lower milk prices means that the processors and marketers pay the farmer less for more of the work and risk while processing and marketing take the remaining chunk of cash without having to raise, milk or take care of cows, Genske claims.
“They say the farmer is the last one to get paid,” Rowell said. “The farmer gets what’s left. If there isn’t anything left, that’s what the farmer gets.”
America is supposed to be the land of endless bounty. But in truth, its story is about the market and consumers taking what they perceive is rightfully theirs, while farmers are left with scraps. As settlers stretched west, they acquired larger swaths of land and planted more and more crops. With that, an economy was built around inexpensive food. Consumers had endless options and prices reflected that, as farmers got less and less of the share, unless they got so big they controlled the market themselves. Pretty soon, as Rowell sees it, this will keep happening and then, at some point, farmers will stand up, or the corporations that own all the farms will command pricing. Farmers hold more power over the prices and the market than they know, though. It’s about using it. Someday, there will be a reckoning where there will only be a few farms left and we will only have a few choices or the farmers will decide to get what is theirs and put the rest of us, so dependent on their labor, out to pay what is due or put us out pasture to fend for ourselves. It’s a dangerous prospect, but it’s not that different from what we see in the tech sector.
Rowell and his brother aren’t putting any pressure on anyone to take over the farm they built. And although he’s 66, Rowell isn’t looking to retire, yet. He likes the work of keeping the farm up and advocating for farmers in Vermont. He’s been part of committees and boards and elected into the Vermont Agriculture Hall of Fame. For now, it looks like his niece and nephew are in line to take over, but they’re still young and need the seasoning that comes with working on a farm.
“It will be their choice as to whether or not they want to work on the farm, be a farmer,” Rowell said. “The question is: Is there something to look forward to? The way of life in itself is something to look forward to, but to be profitable doing it makes it more enticing, doesn’t it?”
The Northeast Kingdom
Mateo Kehler looks like he fell out of the grunge age and settled in Vermont. He has long, windswept hair, a flannel shirt unbuttoned a bit to expose his t-shirt, boots and a chiseled face that looks like a rugged version of Fabio. Kehler has agreed to meet me in Greensboro and introduce me to the past and future of dairy farming in the Northeast Kingdom. He is, along with his brother, one of the owners of the world renowned Cellars at Jasper Hill. He sees the struggles of commercial dairy farmers across Vermont, but as one of the people behind Jasper Hill, he’s set out to change the market for local farmers. He sees opportunity and beauty in the dairy farms of Vermont, but understands they need tending and help to keep them alive. They need their own form of “disruption,” which Jasper Hill has done by looking to the past instead of the future by making cheese using traditional methods.
The pair started Jasper Hill in 2003 after buying a small, beaten-down farm in Greensboro, and have since gained recognition as one of the world’s finest cheesemakers. They focus on raw milk and cave-aged cheeses that look back to old world ways. In the process, the brothers have created a network of farms in the Northeast Kingdom that supply Jasper Hill with the quality milk their cheese needs. Jasper Hill owns and milks its own herds, but Kehler would rather not be farming. Instead, he spends his time focused on working with local dairy farmers. The only reason Jasper Hill owns any farms is because they can’t get enough of the specific milk they desire to make the kinds of cheese they make.
For raw-milk cheese, Jasper Hill requires farmers to only feed their cows dry hay. No feed. No corn. No silage or haylage, the dried and fermented feed that most farmers rely on. The practice is more expensive and takes more time, but to make raw-milk cheese, the milk needs to hit certain standards, and the only way to meet those lofty goals is to feed cows a strict diet. Jasper Hill owns a hay-drying facility and employs Ellie Searles, whom we met on a dirt road in-between farms. She was organizing a day of mowing and driving between fields. When we passed her, Kehler stopped the car and backed up to meet her on the side of the road.
Searles grew up in Lowell, Vermont and studied diversified agriculture in college. It’s her job to tell the farmers when to cut and bail hay and how to do it. She sees the issues and the closing farms, but she’s not as doom and gloom about the situation as I am. Vermont, for all of its history, has been about finding a way to live in the mountains, to survive cold and harsh winters, and to work as a community.
“I think there’s opportunities to continue that tradition. Grazing animals or feeding them for just that we can grow here and then adding value to milk on farm or in a hyperlocal community, and then making a living,” Searles says. “So I don’t think it’s totally dismal.”
Back with Kehler we drove to meet Nathan Hunnewell, a 29-year-old farmer Kehler thinks is the future of dairying in Vermont. When we arrive, Hunnewell is moving feed in one of the concrete bunkers that are now used to house forages for cows instead of the large metal silos that came into prominence in the 1980s. Hunnewell started working on dairy farms while attending to Keane State in New Hampshire and he has never left. He opened his own farm after college but experienced the struggles of running a small dairy operation in Vermont against the world and left it. After that, Hunnewell briefly worked for Jasper Hill before going on sojourn across America, working on every type and size of farm imaginable.
He’s since returned, and runs this dairy operation for Kehler with no regrets. His hair wild in tangled curls that sit high on his head, a light goatee marks his face and sparkles when some water from his gallon jug lands on it. Kehler wants Hunnewell to take over the farm that he runs and become a partner, but Hunnewell is worried. He’s run his own farm before and it was trying. He enjoys the farm work. He enjoys the company of the cows and the feeling it gives him. But he isn’t sure about owning one of his own. There’s too much liability in that kind of proposition. He’s seen the megafarms out west and decided he wanted to live here, in one of the most beautiful places in the world, making just enough money to enjoy his life, his work, and his cows.
“I think to be good at it, or the people who are good at it, have a lot of empathy,” Hunnewell says. “I’ve worked on some successful farms and I’ve been around some not so successful farms, and all the good ones—you know, dairy doesn’t always have a great reputation—but all the good ones the cows are really well taken care of.
Our next stop is a big farm, one that isn’t part of Jasper Hill’s network, but one that he’s helping to help grow into its next stage. We drive to West Glover to meet the “downtown cows” at Merle Young’s farm. It’s located across the street from the town’s important general store and pizza shop, Parker Pie. Young’s family has owned this farm for “some 80 odd years.” It was started by his great-grandfather, and now has 780 cows but no real room or plans to expand the herd.
Young sells his fluid milk to St. Albans, but with the help of Kehler, instead of adding more cows and building more barns or buying more pasture land, he built a brand-new cheesemaking facility. The decision was made to get off the treadmill of having to get bigger, take on more debt and then get bigger again to pay off that debt and meet the demands of the market.
“I think, ultimately, this is what the future of dairying, in this part of Vermont anyway, is gonna look like,” Kehler says. “There isn’t the land base to support a 2000-cow dairy.”
Young wants to see his family farm continue by bringing what people keep telling me is a “value added” product. Instead of dealing only in fluid milk, which is volatile, he hopes starting a cheese operation that uses 25 percent of his milk to make cheese can stabilize the business, insulating it from market pressures. It makes sense, but it’s also difficult in a global market. Cheese moves around the globe and it can be difficult to stand out. But, with the help of Kehler and Jasper Hill, the plan has a solid beginning and backbone. Jasper Hill found its niche and created its market. Young wants to try and do the same thing, because the thing that has often made Vermont products special—besides craftsmanship, attention to detail and personal feel—is that Vermont looks like the kind of place you want to get your food from. It’s made itself synonymous with quality, and created an idyllic image that sells.
“When you picture where you want your food to come from—and more people have more access to information like this these days—and when you take in this area, this is where I’d want my food to come from. I mean, it’s beautiful,” Young says. “The fields, there is the perfect diversity. When you put a drone over this site, it’s not a mega farm; there’s a lake right next door, there’s houses all around. That’s a role model for what people think Vermont looks like.”
Kehler and his family were enchanted by this place, too. He started coming to Greensboro as a child, visiting his grandparents at the family lake house, returning for good as an adult, once he and his brother had saved enough money to buy the farm at Jasper Hill. It was dilapidated and run down. They rebuilt it and built a cheese cave, with Kehler learning cheesemaking in Europe and his brother raising the first cows. This is the only place they wanted to do it. The dream was to create a new economic support system here, “in the geographic middle of nowhere.”
“The way we think about our businesses is that we built a pipeline to parts of the country and the world where there is disposable income. Cash. We put high value products into that pipeline, and we suck cash out and redistribute it in a way that commodity markets can’t, won’t, don’t. Right? So this is part of the redistribution markets,” Kehler tells me.
When the current generation, the boomers and Gen-X’ers, decide it’s time to retire, there will be no one to carry on the tradition. People like Hunnewell are the perfect candidates to keep running the traditional farms—they have the desire and skills to run a farm—but are either uneasy about the debt and struggles or can’t find the funding and land to do it. There’s just not a consistent enough flow of cash to make this all worth it anymore. If the family farms of the past can’t find someone to take over or to pass it on to debt free, then the land will most likely be sold to another farm or broken up as plots of land for something else.
On our last stop, Kehler introduced me to Tom Hill, who was out bailing hay with Alex Armstrong. Hill’s family founded Greensboro and he’s only known dairy farming. Hill stood against his red truck in a cut sleeve tank top watching Armstrong operate the hay bailer and I asked him what makes Vermont farmers different. I wanted to know why they wanted to stay here and fight for their livelihood and way of life when so much of it has changed across the world.
“I think Vermont farmers aren’t like most. We’re just happy with what we got,” Hill says. He points to the mountains and lush fields, the sky above us is a radiant blue with warm rays of sun beating down. “We have this. Who else has this? Seriously. No one bothering us. People come up here from the city and they can’t believe they can walk on this land. ‘This isn’t my land.’ They can walk on this land. You can walk up there, of course you can walk up there. No one cares where you go up here. That’s the biggest difference.”
“Gentle handling makes better milk.”
Amy Huyffer and her husband Earl own Strafford Organic Creamery, an organic dairy farm in Strafford, Vermont. The mailbox at the end of the long dirt driveway says “Rock Bottom Farm.” There’s a small orchard at the end of the driveway. There’s chickens running around, dogs out and about, teenage boys driving tractors. The cows, guernseys, roam in the pasture, munching and looking happy. The farm is uneven, built into the rolling hills, divided into sections by small electric fences that look like a toddler could knock it over. Down the road, it’s the perfect postcard New England town.
Strafford Organic doesn’t sell its milk to a creamery. Instead, it packages and sells its milk directly to stores and customers. They make ice cream as well. It’s not easier to sell milk this way, but, if a farmer can solve the logistical issues of getting milk to the market and not get pushed out by bigger competitors, it’s one way to insulate the farm from milk price fluctuations. Of course, this isn’t easy. There’s more equipment, more employees, more regulations that need to be followed and still only pennies on the dollar to be made. The creamery is built into the hillside so the fresh milk travels from the pumping room to the processing tanks via gravity instead of pumps. It’s beautifully simple.
“There’s only a couple pumps in the whole place, which is one of the reasons why our milk is so good,” Huyffer says. “It gets really gentle handling and gentle handling makes better milk.”
The space is tight and ramshackle. In its previous life this was a farming commune. Earl grew up here, and it became a dairy farm when he was six. After college he returned to start his own farm. He started with beef and bought a dairy herd in 1996, and met Huyffer two years later while she was in law school at a “local watering hole.” After graduating, she decided the farming life was for her, and the couple have raised three boys here.
“Earl and I talk about this all the time, but we could do plenty of other things. Now, anything we did would make more money,” Huyffer says. “I mean, I have a law degree. I’ve been managing a business for 20 years. We would be just fine. But we have a lot of identity wrapped up in this. This is what I want to do. It’s how I want to raise my kids. I don’t always want to get out of bed at four in the morning. I’m always happy when I’m here.”
Comparatively, Strafford is a young farm. Up the road, a family farm that had been in operation since 1801, when the town was incorporated, recently sold its cows and stopped dairying. When Huyffer moved here, there were eight dairies in town. Sometimes it feels like it would be easier to give up and do something else.
“If Earl and I split shifts at a convenience store, we’d be doing better than all of this,” Huyffer says. “At the end of the day, if we made minimum wage, that would be awesome.”
We walked out in the pasture to meet the cows. Guernseys came from the isle of Guernsey in the English Channel and are known for their docile personalities and golden-hued milk that makes the brightest butter. The cows are enjoying some final warmth before the long winter comes. As we find a spot to talk, they start to encroach on us. Huyffer knows their names and their personalities. As they get closer, they start to lick my arm and my camera bag. The flies swarm around their eyes and tails. Soon the bugs will be gone and the cows will move into to barn. For now, they want to enjoy the freedom and the fresh grass. As we stand there, I ask Huyffer what the future of Vermont dairy farming looks like.
“Wake up at four and milk the cows,” she says. “Same as it’s ever been.”
That’s the only way to look at the crisis in front of her. The struggles are real and immediate. The cows need to be milked. They don’t stop producing because the economy has gone to shit. They don’t stop eating because the budget has gotten a little tighter. Vermont, like America and the world, continues to change. A rural state built on small family farms has begun to shift towards fewer but bigger farms. The once staunchly conservative state has become associated with the bastion of socialism in the modern age. Some have left the Sisyphean cycle, yes, but often not because they chose to. Vermont and dairy farming are intertwined in both its inward and outward facing identities.
Vermonters have had to battle their entire lives. The state was once largely empty of humans and then clear cut to make room for struggling settlers who searched for something new, but that grew back into something both old and new—the green forests returned. The state has always been small and been about survival. It’s always struggled with its identity since French fur traders and British colonists moved in—it’s name is a bastardization of Green Mountains in French. And that survival attitude has kept it alive.
The dairy farms have never been successful, but about identity and a way of life. It’s about living in the Green Mountains and not on or with them. While the world and the industry may collapse around them, Vermont will keep fighting until it can’t anymore. While most people would give in and give up, it’s the likes of Huyffer and other farmers who can’t dream of doing anything else, even if it means endless struggles.
I think back to what Tom Hill said about his family not noticing the Great Depression. It’s a mindset: The outside world may be crumbling and the industry may be collapsing, but it’s always been that way. It’s always been about going against the odds.
But someday, that attitude will have to change because the world itself continues to change. Farmers will inevitably be left behind if the system doesn’t protect them and their livelihood. I don’t know if there are any other answers than to keep pushing forward. To keep the tradition alive by welcoming in the next generation, finally standing up to the likes of DFA and bigger farms pushing milk prices to untenable lows. To educate the public on the value of milk and good cheese and getting those with disposable income to spend it on something of value, like milk from the Green Mountains sourced in an ethical and honest way.
Before I leave, Huyffer gives me a small glass jar of chocolate milk. The milk is deep, rich and creamy. It’s better than anything I’ve ever had from the grocery store. It’s earthy and golden tasting with a beautiful and rich chocolate from cocoa powder and sugar. It’s gone before I start my car.
This may offer a chance for American dairy farmers to help meet the need in other parts of the world. One of those farmers is third-generation dairy farmer Marty Costello, who has 130 cows out on his Long Grove property.
Milk prices have fallen nearly 40% over the past five years. Dairy farmers say this is because of a combination of rising power costs and sweeping tariffs that have put the industry into crisis mode.
A growing need from the rest of the world, however, may turn Marty’s slump around.
Nearly 9,000 miles away, the Australian bush fires are piling on more pain for the country’s dairy industry. Australia is China and Japan’s biggest milk supplier, and with Australia being unable to fill the need, Asia is left screaming for milk.
Dairy farmers are taking another hit as milk production prices will soon drop from the coronavirus outbreak.
The U.S. is one of several countries that exports milk and other dairy products to China.
But the coronavirus outbreak is slowing down that process, as production prices for milk will take a tumble.
This is leaving farmers in a tougher spot that they have been.
“It’s certainly a day of everyday stress,” organic dairy farmer Darin Von Ruden said. “So, just not knowing what the future’s gonna bring.”
Things were looking better for Von Ruden towards the end of last year, as milk production prices continued to rise.
But the new coronavirus has not been kind to him and other farmers.
“It’s gonna be a real struggle because we’ve really only had a few months of positive income coming in the last three months here coming off of a six-year downturn in prices,” Von Ruden said.
The rapidly spreading virus is making it more difficult for China to import dairy products, and not just milk.
“We certainly do sell some cheese to China,” UW-Madison Director of Dairy Policy Analysis Mark Stephenson said. “We sell quite a bit to Southeast Asia. And if those markets are disrupted, that’s a concern. China is the world’s largest buyer of dairy products as an importer.”
As a result, local farmers will start seeing milk production prices fall.
“Going from that 19 to 20 (dollar range) to 17 (dollars) is probably where we’re going to be at,” Von Ruden said.
Stephenson says if China continues to shut down their imports, it might really hurt other countries.
“Then you have to worry about whether it’s the whole world that tailspins into a poor economy,” Stephenson said.
Not all hope is lost for Von Ruden.
“If we can rebound in a three to four-month period, back up to the current pay prices, that’ll certainly help farmers,” Von Ruden said.
But he realizes the near future revolves around a world of uncertainty.
“Two months of recovery is not enough to get through the hard times again,” Von Ruden said.
Von Ruden says milk prices in stores will most likely see a drop.
Twenty-three states in the country have major production in the dairy industry.
Wisconsin is the second-highest ranked state in dairy production.
A new independent report has analysed the interlinked challenges and opportunities across the value chain of the European dairy sector. The report, which has been commissioned by Arla Foods, points to concrete action that can be taken to ensure a sustainable future of the sector.
The new report conducted by the Institute for European Environmental Policy (IEEP) finds that there is a need for the dairy industry, politicians, governments and interest groups to work even more closely together going forward if the European dairy sector is to continue to evolve into a sustainable business and production model.
The report also points to the necessity to strike a fair balance between the economic, environmental and social aspects of the sector, as these are intrinsic to securing its sustainable future.
The report states that there are examples where the European dairy sector is already operating within this central space, with many viable farm businesses delivering quality nutrition to consumers, which is produced sustainably.
Yet moving the whole of the dairy sector in this direction will require partnerships and those affected within the sector will need to be supported throughout the transition and incentivised to be part of the change.
The report was commissioned by the European dairy cooperative Arla Foods to clarify the challenges and opportunities that face the sector in Europe in the future.
Peter Tuborgh, CEO at Arla Foods, said: “We wanted an honest and realistic appraisal of the European dairy industry and it was important that an independent third party did this research. The report clearly sets out the challenges.
“But it is also clear how much the dairy sector gives back to Europe. We need to take all these elements of dairy’s impact into account when we identify the right path to maintain and develop an economic stable European dairy sector that is actively taking part in creating a sustainable future.
“We hope that the report will be appreciated as a contribution to the ongoing discussions about how Europe and its food sector should transition into a sustainable continent in terms of economy, environment, health and quality of life as outlined in the European Green Deal.”
Recommendations in the report
Over six months, the IEEP interviewed a number of stakeholders across the value chain, from dairy farmers, to machinery manufacturers, trade unions, environmental and animal welfare NGOs and consumer groups. The results have been peer reviewed by a panel of international academics representing interests across the value chain.
Among the recommendations in the report are:
A need for the dairy industry to continue on the accelerated path towards carbon net zero production while driving up standards for animal welfare and production transparency.
A need for the CAP reform to support farmers in the transition towards greater sustainability whilst increasing the quality and value of the products delivered, preferably by incentivizing positive change rather than penalizing.
A need for a level playing field across the EU on animal welfare standards, food labelling and a clear definition of what a sustainable diet is to help consumers make more informed decisions and comparisons about the foods they buy.
A need to develop pathways to enable young farmers to enter the industry to bring new skills, ideas and approaches to the sector.
“The report recommends that we come together as an industry and work closely with governments, interest groups and consumers. I am confident that this can be achieved, and I know that Arla Foods will play its part. As a farmer cooperative we have a great sense of responsibility to lead the dairy sector and to establish the necessary partnerships,” said Mr Tuborgh.
Together with its 9,900 farmer owners, Arla has accelerated its journey towards carbon net zero dairy and will continue its focus on providing nutritious, affordable and sustainable dairy products to more people.
Dairy products are found in the majority of fridges across Europe and, according to the European Dairy Association, there are 700,000 dairy farms across Europe and 300,000 people working in dairy processing, all contributing to the economic, social and environmental fabric of Europe as we know it.
The report and its recommendation will be presented today by IEEP at an event in Brussels hosted by Arla.
“Despite significant disruptions in trade throughout 2019, U.S. dairy exports surged to $5.93 billion last year—a level unseen since the high-water mark of 2014, proving that American dairy continues to be the bright spot among an otherwise sluggish agricultural export market.
“This growth is a testament to America’s dairy industry, which continues to innovate, build new customer bases around the world, and deliver a high-quality product known for consistency, safety, and deliciousness. Two decades ago, U.S. dairy was almost completely a domestic market. But the past 20 years have been transformational. During that time, U.S. dairy exports increased 5X, and the United States became the world’s third-largest dairy product exporter. Now, more than two-thirds of U.S. milk production growth goes to exports.
“With this good news in hand, our task now is to grow markets for the future. In five years, we need to be exporting 20-25 percent of our overall production to consumers everywhere—consumers who, by the way, love American dairy products.
“Achieving export growth in dairy requires rules based, market-oriented trade deals. Deals with Canada, Mexico, Japan, and China are just the beginning. Our competitors—like the EU—are snapping up trade agreements around the world. We need to act with urgency. Therefore, IDFA will continue to advocate, on behalf of the dairy industry to the White House, Congress, and our trading partners to end retaliatory tariffs, restore our reputation for reliability, and level the playing field for our dairy companies and producers.
“With more than 95 percent of potential customers living outside the United States, expanding access to international markets is essential for the future America’s dairy industry. We cannot achieve this growth alone—we need the Administration’s support and the support of our elected officials to continue growth in U.S. dairy exports.”
Additional Background on USDA’s Export Data Release
USDA today released U.S. agricultural export data for December 2019, completing the full picture for exports in 2019. In total, dairy exports were $5,930,850,462, up 8% from 2018. Here are the top five markets and products:
Top 5 markets (value):
Mexico: $1,545,490,296 – up 11% from 2018
Canada: $666,285,371 – up 4% from 2018
China: $373,586,256 – down 25% from 2018
S. Korea: $332,157,767 – up 14% from 2018
Japan: $282,649,972 – up 5% from 2018
Top 5 products (value):
Milk concentrated (powders): $1,795,072,208 – up 20% from 2018
Cheese and curd: $1,545,478,160 – up 6% from 2018
Whey – unchanged from 2018
Milk not concentrated (fluid, cream, etc.): $122,219,346 – up 14% from 2018
Adding insult to injury, organic processor Trickling Springs shuttered amid a financial scandal in September, leaving farmers with one less outlet for their milk. And the biggest milk company in the U.S., Dean Foods, filed for bankruptcy in November; its attempted merger with the country’s biggest co-op, Dairy Farmers of America, is currently facing an antitrust probe.
But in a move that surprised some industry analysts, the American Farm Bureau Federation (AFBF)—an insurance company and lobbying group that has often been closely aligned with Big Ag—voted to “support the creation of a farmer- and industry-led milk management system” at its annual convention late last month.
Dairy supply management—matching milk supply and demand in order to stabilize prices for farmers—is an approach some U.S. ag interests considered too radical as recently as last year, when AFBF voted against it at its 2019 convention.
“AFBF has [actually] supported supply management since the 2014 Farm Bill,” says Travis Klinkner, a sixth generation dairy farmer who sits on the dairy committee of the Wisconsin Farm Bureau (WFB). Although, that portion of the bill “was ditched at the last minute before voting.”
But wording in AFBF’s policy lumped supply management with mandatory per-state quotas, a prong of the more than 50-year-old Canadian system that AFBF opposes. Decoupling these two concepts this past January allowed AFBF to vote in favor of the former while continuing to dismiss the latter, according to AFBF chief economist John Newton. “It was really just a matter of semantics,” he says.
Still, Austin Frerick, deputy director of the Thurman Arnold Project at Yale University, describes the shift as “a very big moment for the Farm Bureau. They’re at a fork in the road where they have to decide: Are they on the side of farmers, or are they on the side of industry?”
Without quotas to stanch the tide of cheap milk flooding the market from large-scale dairy operations exploding in Arizona and elsewhere, Frerick—a lifelong Iowan and ag-industry observer who has been critical of the Iowa Farm Bureau—says he isn’t sure how a supply management program would prevent further farm losses. A concentrated animal feeding operation (CAFO) that supplies a $1.30 gallon of milk to Walmart, he says, “has an unfair advantage in cutting corners to get to a lower price that drives family farms out of business.”
AFBF is in favor of “free and fair trade,” in Newton’s words. But constantly changing export markets for American milkhave also helped drive oversupply, which is directly linked to low milk prices. When those markets have proven “fickle,” says Lynne McBride, executive director of pro-supply-management California Dairy Campaign (CDC), “it’s caused unprecedented stress in the industry.”
A Way Forward
Nevertheless, McBride says there is a way forward. She sees the first step as instituting an incentive program whereby “if [farmers] increase production beyond profitable demand, they’re not going to get paid the same for that milk.” McBride says that without such incentives, some dairy farms will continue to overproduce. “[That’s] why you see surges in production now, to take advantage of that,” she says. A farmer might overproduce when prices are low, to boost revenue, or when prices are high, to make as much money as possible while they’re able.
Milk co-ops such as Massachusetts-based Agri-Mark and Prairie Farms in Illinois already function like this, with base excess plans that do not reward overproduction. Some would like to take this a step further, with a “market access fee plan” that would also charge farmers who overproduce a fee to be distributed to other co-op members who’ve stayed within agreed-upon production limits, says Klinkner. He and the rest of WFB’s dairy committee has been working with the Vermont Farm Bureau to develop a supply management model—they call it “growth management”—that could garner broad support.
“You can have growth management and not have a monetary quota like Canada … which in some cases created unnecessary headaches by creating artificial values” for cattle and other dairy farm investments, Klinkner explained by email.
The industry also needs other strategies to cut back on production. “Milk productivity of cows has gone up over the years, but you can change [their] nutrition to limit that,” CDC’s McBride says. (The diet cows are fed can either increase or decrease the amount of milk they produce.)
Additionally, McBride says, “excess milk doesn’t make sense with the environmental challenges we’re facing”—why spend money on water and fertilizer for milk that could get dumped?—“and it hurts milk prices.” It doesn’t take much curtailing to see an improvement, though. McBride explains that a tiny decrease in production of .1 percent last March is what led to 2019’s price rise—which had a significantly positive affect on struggling farmers. But the fact that this drop “just happened” due to a variety of triggers, rather than being purposefully implemented by the dairy industry, “just points to the problem we’re facing,” says McBride.
CDC and the Wisconsin and Vermont Farm Bureaus support “manag[ing] supply at a level nationally [to] generate a stable and profitable pay price,” which benefits consumers, too, says Klinkner. He says that a $5 increase per hundredweight of milk would increase the price of a gallon by only 43 cents, while providing meaningful stability for farmers.
Yet another strategy: building a market for local whole milk within the National School Lunch Program. “Imagine if in Wisconsin schools all the milk they served was coming from Wisconsin family farms. That procurement [change] would be so powerful for the climate, and for rural development,” says Frerick.
And the support such a policy could engender for local farmers, says McBride, “is really important to those economies, because they have a ripple effect. Dairies generate a lot of jobs that lead to a thriving rural economy.”
The Route to the Farm Bill
The overarching benefit of these strategies is that they can be implemented now, by farmers and processors, “to help ease the stress in the short term,” says Klinkner. Larger, systemic change has to wait for the next renegotiation of the farm bill, which isn’t scheduled for an update until at least 2023.
Nevertheless, “We’re on track to get [supply management] into the next farm bill if we can come up with a unified plan among industry organizations,” says Klinkner. “More farmers and processors are tired of the system we are in and fighting to survive.”
Which leads to the question on many people’s minds: What would an AFBF-supported milk management program look like? CDC and the Wisconsin and Vermont Farm Bureaus endorse a three-tiered plan that includes managing supply on a national level, negotiating fair prices, and establishing a more effective trade policy. Getting this into the next farm bill means that all the various industry-related organizations will have to agree on it. “We need a nationwide, coordinated approach to change the direction and fix the system,” says McBride.
“We haven’t endorsed a specific proposal at this point,” says AFBF’s Newton. “If the industry comes forward with a concept, our members can look at it and evaluate it to see if it’s something we want to consider.”
Frerick calls AFBF’s January vote in support of supply management largely “symbolic.” But what it does, says Klinkner, is “open doors. It puts AFBF and all the state Farm Bureaus in a position to work with other organizations … toward a common plan.”
Says McBride, “We think for the Farm Bureau to even have supply management in its policy [now] is a big deal, and I’m hopeful this will improve our outlook. It couldn’t happen too soon.”
Lawmakers say a bill proposing to narrow the definition of milk will help Kentucky’s struggling dairy industry.
The bill, sponsored by Republican Senator Matt Castlen, defines milk as “lacteal secretion” from hooved mammalsincluding cows, horses, goats and reindeer. It bans labeling products as milk that do not meet the new definition. Castlen said the bill will help both the industry and consumers.
“It’s so important that we do everything we can to help [dairy farms], because it doesn’t matter if you’re rich or poor, Democrat or Republican, we all come to the table and we eat,” Castlen said. “But this bill, more importantly than even that, is letting the consumer know what’s in the product that they’re consuming.”
The bill would effectively ban any soy milk marketed by that name. Kentucky Soybean Board and AssociationSpokesperson Rae Wagoner said state soybean farmers are fully supportive of the dairy industry and animal agriculture.
“We are also glad that non-dairy alternatives (such as those made from soy) are available as an alternative for those who may be lactose intolerant and cannot enjoy milk,” Wagoner said in a statement.
Dairy farmer Carl Chaney said times are hard, but he is unsure if lawmakers can fix things. Chaney’s family owns Chaney’s Dairy Barn in Bowling Green, Kentucky; he said they avoided financial disaster by opening an ice cream store 16 years ago and charging for tours. Chaney said he has high hopes for the industry and that milk prices are starting to rebound, but his fellow farmers still struggle.
“It’s hard. We’re selling milk today for the same price we sold milk 30 years ago,” Chaney said. “I’d like to see automobile manufacturers build cars today and sell those cars for what they were selling them for 30 years ago … how long would they stay in business?”
At the International Dairy Foods Association (IDFA) Forum last week, the growing and volatile Chinese market was a hot topic among leaders of the industry. Following the new phase one deal between China and the US, dairy is examining what’s ahead for 2020.
According to Mary Ledman, global dairy sector strategist at Rabobank, 2019 was a strong year in China for dairy consumption. She estimates that Chinese milk production grew between 2%-3% last year, while imports of whole milk powder and skim milk powder are consistently growing.
Ledman projected for 2020 that there will be large carry over stocks for US dairy. This will slow exports to China, alongside other ‘disruptions’–the deadly coronavirus that originated in China is impacting the country’s economy on many levels.
Isolation rules in many parts of China have people confined at home, with restricted flights and other transport, and disrupted work schedules. Before the coronavirus outbreak, Ledman and Rabobank made predictions about the phase one trade deal bringing some stability to the Chinese economy.
There was a general economic slowdown in China during the trade war uncertainty, but the phase one deal was expected to revive things. In the agreement, China committed to purchasing $200bn worth of American agriculture products, which may be difficult while the coronavirus is spreading.
But Mekala Krishnan, a senior fellow at McKinsey Global Institute, believes that global trade struggles go a bit deeper. She said the main rhetoric has been about US and China trade tension, and Brexit. But what’s being overlooked is “longer structural shifts that are taking place in the world of trade and globalization.”
Krishnan noted that from the mid-1990s to the mid-2000s, there was a general increase in global trade. But since the mid-2000s, McKinsey found that this has reversed, and less of what the average country is producing is being traded.
China is a big reason for that reversal, Krishnan said. More of what China is producing is not being sent across borders, but consumed domestically, leading to ‘the rise of the Chinese consumer.’ For dairy, Krishnan said that means the Chinese consumer is becoming more important and causing US dairy to compete with local producers.
“As a result, we’ve seen companies across industries fundamentally think about consumers in different ways. There is a wave of global companies thinking about how to localize their offerings – how to maintain a global footprint, but also sufficiently tailor products for local audiences,” Krishnan said.
More consumers are demanding products that are specific to them, and it’s difficult to strike a good balance and deliver on that in dairy. Domestic supply chains are also improving in China, sourcing for end products and building up value rather than importing ingredients like dairy from other countries.
Even though China’s GDP nearly equals that of the US, it’s growing much faster and has the resources to sustain the success rate. Young people ages 20-35 are driving the growth.
China’s Gen Z population was born during the country’s economic boom, and they increasingly want ‘intangibles’ associated with a product when making purchasing decisions. Their consumer landscape speaks to the notion of potentially segmenting consumers more carefully today than ever done in the past.
Today, Dairy Farmers of Canada (DFC) launched the latest evolution of its powerful Dairy Farming Forward campaign, which breaks down myths and misconceptions around dairy farming by highlighting the industry’s commitments to innovation, sustainability and animal care in producing high-quality Canadian milk.
Created with agency of record DDB Canada as part of DFC’s 2020 marketing strategy, Dairy Farming Forward targets a broad range of Canadians with a focus on millennials and generation-Z consumers. It leverages the same creative approach as the original version of the campaign which aired in July 2019, using snapshots of real dairy farmers to showcase the hard work, dedication and entrepreneurial spirit their work demands.
In so doing, the campaign illustrates the industry’s commitment to environmental stewardship and socially-responsible practices in producing quality Canadian milk.
“Like its predecessor, the latest edition of Dairy Farming Forward emphasizes the forward-thinking values and practices embodied by farmers in producing high-quality Canadian milk,” said Pamela Nalewajek, vice-president, marketing, DFC. “It breaks down misconceptions by showcasing farmers’ commitments around the key pillars of innovation, sustainability and animal care, and reminds consumers that these are the same core values reflected in high-quality milk and dairy products marked with our Blue Cow logo.”
Long before they became part of the collective consciousness, environmental protection and animal welfare were fundamental to Canadian dairy farmers’ values, something DFC wanted to highlight on this campaign. These commitments are backed by proAction®, the industry’s robust quality assurance program, which provides the proof points to that effect.
Dairy Farming Forward includes campaign placements across Canada on TV and in cinema, on digital platforms, Spotify ads, outdoor signage, and in-store signage. Campaign ads will run from January 27 to March 8, 2020, with signage in-store continuing through March 23, 2020. Media buying for the campaign was conducted by Initiative.
ABOUT DDB CANADA
DDB Canada is the most creatively acclaimed, internationally recognized marketing communications agency in Canada. Known for advertising that generates significant results for clients, DDB Canada is a “total communications company” whose fundamental belief is that creativity is the most powerful force in business. DDB Canada has offices in Vancouver, Edmonton, Toronto and Montreal. The agency’s integrated marketing disciplines include: brand design, decision science and analytics, content marketing, mobile, social, technology, user experience, public relations, shopper marketing, CRM, strategy, transcreation, digital marketing and creative advertising.
New Zealand dairy giant Fonterra said on Friday milk production in its Australian operations dropped 3.4% in November, while milk collection in the region fell 13% in the last month of 2019.
Adds details on results, background on Australia weather conditions
Jan 31 (Reuters) – New Zealand dairy giant Fonterra FCG.NZ said on Friday milk production in its Australian operations dropped 3.4% in November, while milk collection in the region fell 13% in the last month of 2019.
The world’s largest dairy exporter cited poor seasonal conditions, high farm input costs, fewer cows and “intense competition” for milk for the declines in Australia.
Bushfires started earlier than usual in September in Australia, destroying more than 11.7 million hectares (117,000 sq km) and killing at least 33 people and about 1 billion animals.
Further reductions in Australia’s herd were predicted, Fonterra said.
Meanwhile, the company said production on a milk solid basis in December rose slightly in New Zealand, helped by favorable weather conditions in the South Island.
Milk solids are the amount of fat and protein contained in the milk supplied to Fonterra.
Dairy import volumes in China, one of Fonterra’s key markets, jumped 12.4% in November, the company said.
Global dairy companies have been benefiting from strong Chinese demand, as buyers in the mainland prefer internationally made whole milk powder and infant formula to their local counterparts.
Another day, another story about the sad state of the dairy industry. Milk consumption has plummeted 40% since 1975. In the past three months, the nation’s two biggest milk processors, Dean Foods (est. 1925) and Borden Dairy (est. 1856) have declared bankruptcy. The public has grown concerned about the connection between cows and climate change, alternative nutjuices are stealing market share, and when it comes to PR, milk’s public image becomes lamer by the day. As the dairy industry grapples with an uncertain future, many of those affected are beginning to develop solutions of their own. For some small dairy farmers, this means eschewing the advice of the FDA and (literally) betting the farm on the controversial—and, in some places, illegal—niche industry of raw milk.
Raw milk is unpasteurized, making it susceptible to bacteria that can cause things like typhoid, tuberculosis, diphtheria, and cholera. One of the reasons people don’t die from those things as often as they did back in the 19th century is because the dairy industry began using commercial milk pasteurizers upon their invention in 1882. But now, according to KSTU, a Salt Lake City Fox affiliate, there’s a growing movement of those switching to raw milk for its supposed health benefits. Farmers like Debra Kremer-Smith, fifth-generation owner of S&D Smith Dairy in Ohio, is hoping that appealing to this niche market with a product called “safe raw milk” could save the century-old family farm.
“We do pasteurization for about one fourth of our milk and then three-fourths is all raw,” said Kremer-Smith. “Our heart lies in raw milk because it’s just easier [and] there’s less processing steps. It’s better, it’s healthier, it tastes great.”
Though the FDA discourages drinking raw milk, Kremer-Smith doesn’t believe it’s dangerous. “Pasteurization is using heat to kill bacteria that’s in the milk. And so that is a good. But, the bad thing about it is it kills all the good things that are in milk,” she said.
While the federal government believes that raw milk is dangerous and a public threat—their website mentions that “raw milk puts all consumers at risk, the elderly, immune-compromised people, children and pregnant women are especially vulnerable to the hazards of raw milk consumption”—it’s not actually illegal on a federal level. A law was passed in 1987 prohibiting the sale of raw milk across state lines, but outside of that, the legality of raw milk is left up to the states. Though they might have to jump through hoops and wrangle their way through loopholes, Kremer-Smith and other small farmers plan to stay the course with their raw milk plans, not only to appease a growing market within a shrinking industry, but also because raw milk can be sold for three to four times the cost of the pasteurized kind. I suppose this is yet another conundrum for our complicated times: to save our farms, are we willing to contract dysentery?
Now, federal investigators are examining those concerns. Since at least December, antitrust officials at the Justice Department have been scrutinizing the potential Dean Foods merger, speaking with farmers and the lawyers who represent them about how a deal would affect milk pricing and competition, according to emails reviewed by The New York Times and interviews with people familiar with the inquiry.
The Justice Department declined to comment on the investigation. But this month, a department lawyer sent an email to farmers who sell raw milk to Dean Foods, asking to discuss the possible merger over the phone.
“We are investigating Dairy Farmers of America’s potential acquisition of Dean Foods and the potential loss of competition for selling raw milk,” the email said, according to a copy reviewed by The Times.
The lawyer, Nate Harris, planned to ask the dairy farmers how they came to work with Dean Foods and whether they would have options to sell their milk elsewhere if Dairy Farmers of America acquired the company, according to Dana A. Zakarian, a lawyer representing a group of dairy farmers in a lawsuit against the cooperative in Vermont. Mr. Zakarian said he had discussed the email with Mr. Harris after one of his clients received it.
Dairy Farmers of America, the largest dairy co-op in the United States, was founded to help small farmers market their raw milk to dairy processing companies like Dean Foods, which prepare milk for distribution to retailers.
Over the years, however, the co-op has also invested heavily in processing, meaning it buys some of the raw milk that its marketing branch sells. Those investments have created a conflict of interest, some dairy farmers argue, because processors benefit from lower milk prices, while farmers benefit from higher ones. A deal to acquire Dean Foods would significantly expand the co-op’s processing operations, heightening that conflict of interest, critics of the potential merger say.
Monica Massey, the executive vice president at Dairy Farmers of America, said the co-op had spoken with the Justice Department to “keep them apprised” of its thinking. A takeover deal with Dean Foods would require approval from the bankruptcy court as well as federal regulators.
“We have not reached an agreement with Dean Foods for its assets, so it may be premature, but the Justice Department has a job to do,” Ms. Massey said. “If we reach a deal, we would fully cooperate with D.O.J. officials as we have with past transactions.”
The Justice Department appears to have been monitoring the situation since the early stages of the Dean Foods bankruptcy proceeding, when department lawyers filed notices of appearance in the case, effectively declaring that the government had an interest in the outcome. A spokeswoman for Dean Foods declined to comment.
On Dec. 20, an antitrust official at the Justice Department, Karl Knutsen, called Mr. Zakarian and Joel G. Beckman, another lawyer working on the Dairy Farmers of America lawsuit in Vermont, asking them to waive a confidentiality provision to allow investigators to read depositions and other documents in the case.
The Vermont suit alleges that Dairy Farmers of America has engaged in a wide range of anticompetitive practices over the years, striking deals with other co-ops not to poach one another’s members and sharing milk-pricing information to suppress payments to farmers.
Dairy Farmers of America has denied those allegations. But in September, the judge overseeing the case allowed it to move to a trial, writing in her decision that the plaintiffs had presented evidence from which a “rational jury could conclude that the D.F.A. management favored growth of its commercial operations and empire building over the interests of its farmer-members.”
The Justice Department’s apparent interest in the Vermont case might indicate that government lawyers are weighing a broader investigation into Dairy Farmers of America’s practices that would go beyond the possible merger with Dean Foods, said Peter Carstensen, a former antitrust lawyer at the Justice Department.
“They’re really focusing in on the impact on farmers and how this kind of transaction could greatly increase the capacity of D.F.A. to engage in anticompetitive practices,” Mr. Carstensen said. And that line of inquiry could lead government investigators to “take a much more critical look at the way D.F.A. is using its existing market positions and think about whether there are workable remedies for that conduct.”
Not all dairy farmers oppose the potential merger. Some argue that it would help farmers because it would guarantee a stable market for their milk at a time when milk consumption is declining nationwide.
“If markets are in trouble, any deal would be beneficial to our dairy farmers,” said Ms. Massey, the co-op’s vice president.
For now, however, there is still no official proposal for a deal. Dean Foods has said it would consider other buyers. And after the company’s bankruptcy filing, bondholders raised concerns about a sale to Dairy Farmers of America, citing the possibility of a lengthy antitrust investigation.
Milk production remains uninterrupted as more and more farmers are going out of business in Michigan.
Some dairy farmers are forced to leave the industry because it is no longer financially beneficial, but nonetheless, dairy production is increasing, keeping the No. 1 sector of the agricultural industry thriving.
As of Jan. 21, there are 1,254 permitted dairy farms in the state, according to the Michigan Department of Agriculture and Rural Development. That is a decline from five years ago when there were 1,927 permitted farms.
Barbara Koeltzow, dairy section manager for MDARD, said the root cause of the issue is a worldwide oversupply of dairy products. She said the European Union typically has subsidies to provide its dairy farmers, but the U.S. government usually does not subsidize its dairy farmers.
“Much like the rest of the nation, 2019 really saw a larger-than-usual percentage of farms going out of business,” she said. “Michigan is basically mimicking what is going on in the rest of the nation because the prices paid for milk compared to the cost of inputs like feed, electricity, fertilizers and replacing equipment have been so depressed that it is causing farms to go out of business.”
Despite farms closing, Koeltzow said Michigan leads the country in the amount of milk produced per herd, which is around 26,600 pounds annually.
Koeltzow said nationally, Michigan’s dairy industry is ranked sixth in total milk produced per year. The state’s dairy farmers produce about 11.4 billion pounds of milk per year.
“While the number of dairy farm permits has dropped, the state of Michigan didn’t see a reduction in total cow numbers, what they call Michigan’s overall dairy herd,” said Allison Miller, communication manager for the Michigan Milk Producers Association. “There aren’t more individual herds in Michigan. What happened is that Michigan’s overall herd, divided up between all farms in the state, has more cows than the year prior.
“When a dairy farm makes the difficult decision to close, they may sell their cows to a neighboring farm still in operation. In addition to this shuffling of cows, the increase in the overall herd size could be due to some farms in the state increasing their individual herd size. Dairy farming is still very much a family business, as around 97% of all dairy farms are family owned, often by many generations of the same family.”
According to Ty Kalaus, deputy regional director for the U.S. Department of Agriculture’s National Agricultural Statistics Service Michigan Field Office, as of Jan. 1, 2019, the dairy herd was 422,000 heads in the state. The USDA NASS reported there were 385,500 heads in 2014.
Some larger size dairy farms can take on more cows after some farmers have decided to leave the industry because of the economy of scale. Koeltzow said because of the size of farms, farmers are able to influence their vendors and get price breaks for the products they need to operate their business.
“They get the benefit of the economy of scale because they can say, ‘I have this large amount of milk, what can you do for me to secure my business?’” she said. “These vendors are the equipment dealers, feed companies, milk haulers and truckers, anyone they do business with. They can negotiate a reduced price because of the size of their operation.”
In its new report, Land Use: Policies for a Net Zero UK, the CCC, whose purpose is to advise the UK Government and Devolved Administrations on emissions targets and report to Parliament on progress made in reducing greenhouse gas emissions and preparing for climate change, says it is necessary to reduce the 13.6m tonnes of food waste produced annually by 20%, and the consumption of beef, lamb and dairy by at least 20% per person.
It says this reduction is well within current healthy eating guidelines, and would reduce on-farm emissions of seven megatonnes of CO2 by 2050.
The group, which consists of dozens of experts and organizations, said it considered an extensive evidence base to support its findings, which also include increased tree planting, low-carbon farming practices, restoration of peatlands, and encouraging the growth of bioenergy crops.
The CCC estimates the changes in land use would require funding of at least £1.4bn per year, which can be partly provided by the private sector and partly through public funding. However, this would be outweighed by generating a net social benefit of £3.3bn per year.
The report says that implementation of low-cost, low-regret actions to incentivize a shift in diets away from red meat and dairy should begin this year. It points to figures that the consumption of dairy products has decreased by 16% between 2000 and 2018, largely due to reduced consumption of milk and milk products, although cheese consumption increased by 14% over the period.
Connected to this, it says that UK retailer Sainsbury’s reported year-on-year increase in customers searching for vegan products online (+82%) and in sales of plant-based products (+65%).
Other observations in the report are that plant-based proteins and dairy replacements or analogues have an important role to play in shifting to sustainable diets. Similarly, plant-based milk alternatives can be used much like dairy milk, and costs are expected to reduce further due to economies of scale and moving along learning curves.
Plant-based protein sources have significantly less GHG emissions than animal-sourced proteins when compared on a like-for-like basis, the report noted, adding that the most GHG-intensive production methods for plant-based proteins generally have less emissions than even the most GHG-efficient sources of animal-based protein.
It also states that, currently, around 30% of global GHG emissions come from the food system, of which around 50% are accounted for by livestock.
Clean Air Strategy
The government’s Clean Air Strategy targets the reduction of ammonia alongside other damaging air pollutants to improve air quality. Agriculture accounts for 88% of ammonia emissions, which comes from three main sources: livestock manure and urine and the use of nitrogen fertilizer.
The three main proposals will require the adoption of low-emissions farming equipment and measures. While these proposals are targeting a reduction in ammonia, the associated benefits for non-CO2 emissions will be variable, with the proposal to extend environmental permitting to the dairy and intensive beef sectors offering the largest opportunity to reduce non-CO2 emissions.
The report proposes extending environmental permitting to the dairy and intensive beef sectors from 2025, which would go beyond the Industrial Emissions Directive, which only requires the regulation of intensive pig and poultry sectors.
The CCC document also notes the need for low-carbon farm practices to reduce soil, livestock and manure management emissions, including innovative measures such as methane inhibitors for cattle and low-carbon fertilizers.
Arla Foods is mentioned in the report for its efforts to be carbon neutral by 2050.
Dairy UK challenges report
Dairy UK chief executive, Dr Judith Bryans, said she disagreed with reducing dairy consumption.
“Dairy forms and important part of UK diets, beyond the mere provision of protein. It provides a range of vitamins and minerals which could not be easily substituted, leaving many consumers struggling to replace the valuable package of nutrients they get from dairy,” Bryans said.
She said the scale of change being requested by the Committee could result in the unintended consequence of micronutrient deficiencies resulting in negative health outcomes.
“We don’t want to see British consumers moving away from naturally nutrient rich foods towards taking supplements. It would also be inappropriate to encourage consumers to move away from dairy products towards alternatives, when the unintended consequences of doing so are not yet fully understood. This could see consumers having to navigate incredibly complex areas such as nutrition and sustainability when trying to complete their weekly shopping, without the sufficient knowledge to do so.”
Bryans said over the last decade the industry has achieved a reduction of 24% in greenhouse gas emissions, and made strides forward on water efficiency, biodiversity and food waste, as well as taking other measures to improve the overall footprint of dairy.
She added the dairy sector takes its commitment to continuous improvement in the area of environmental sustainability very seriously and firmly believes that agriculture can move to net zero.
“We fully agree with the need to reduce food waste and its impact on the environment, and happy to see the Committee’s report recognise the need to create a supportive environment for farmers to help them in making changes going forward. It is key that any changes asked for are based on consistent and strong scientific data.
“We are ready to work with the Committee on Climate Change to help ensure our industry plays its part in addressing climate change, and can be a part of a sustainable food system in the UK.”
Today, the global business environment demands that we, as a dairy community, work harder than ever to adapt to changing consumer preferences, marketplace dynamics and climate urgencies, while remaining focused on providing the nutrient-rich, great tasting dairy products the world wants and needs.
Our work over the past decade — growth-oriented partnerships, social and environmental responsibility, investments in scientific research and integrated marketing – has well-positioned us to meet the challenges of this new environment.
2020-2023 Unified Marketing Plan Priorities
The dairy checkoff’s 2020 unified marketing plan is the first step in a multi-year journey focused on three business priorities that build further trust and relevance with consumers and youth while positioning U.S. dairy and dairy farmers as leaders in providing sustainable nutrition to the world.
Like farmers, we must bridge our longstanding history and expertise to a new set of challenges. Checkoff staff, nationally and locally, have developed a four-year strategic framework that not only evolves how we work but where checkoff dollars are invested to contemporize our approach and ensure relevance with consumers here and around the world.
Accelerate Incremental Sales Growth
Years ago, our board directed us to work with and through industry and commercial market partners to make fundamental consumer-driven changes in how dairy is offered on menus and in retail. Today, we’re helping move billions of incremental pounds of dairy through global leaders such as McDonald’s, Taco Bell, Domino’s, Pizza Hut, KFC, Kroger, fairlife and others, offering consumers new and innovative dairy choices.
Our partnership model works. In the year ahead, we will continue to build upon this success in foodservice and in retail while we identify emerging growth and product innovation opportunities with new and non-traditional players.
In addition to menu and dairy product innovation, our partners will use their marketing channels to share dairy’s sustainable nutrition story.
Position U.S. Dairy in a Global Food System
And sharing that story has never been more important given increasing customer and consumer expectations tied to sustainability and food production practices. In addition, climate considerations are dominating global nutrition and sustainability policy discussions.
As our reach becomes more global, we must continue to invest in the science that deepens the nutrition and broader wellness benefits of dairy, reinforces U.S. dairy’s leadership and progress in reducing environmental impacts and showcases the positive contributions we are making to local communities. And we must equip more voices from the U.S. dairy community – farmers, processors, customers and others – to engage in the right conversations with thought leaders, media and other key decision makers.
Build Trust in Youth and the “Conflicted Health Seeker”
In the past year, we have seen a growing number of youths express their concerns about the environment, becoming influential voices with business leaders and decision makers. Similarly, the “conflicted health seeker” consumer continues to question where their food comes from, including the sustainable production practices from the farm through retail.
Youth and conflicted health seekers are keys to dairy’s future. And both have the power to influence others. That is why strategic investments are being made to ensure that we continue to share U.S. dairy’s story with these critical audiences through the Undeniably Dairy campaign.
National and Global Checkoff Unity
As checkoff staff, we take great pride in serving some of the hardest-working people in our country, who put food on our families’ tables and take care of our land. In developing a framework for our 2020-2023 Unified Marketing Plan, our mandate was to focus not only on what we need to do to grow trust and drive sales, but on how we do it to have the greatest impact.
Over the past 18 months, national, state and regional and international staff have worked as one team, tapping into talent from every corner of the country to create a unified framework and plan that builds from a strong foundation. This is not about a revolutionary new plan but rather, an evolved focus on where we prioritize strategic investments in research, domestic and international partnerships and marketing to reinforce and showcase U.S. dairy’s commitment to sustainable nutrition.
The collaborative effort undertaken to create the plan sets the tone for how we’ll go forward: a unified and action-oriented approach that maximizes the checkoff investment and will secure and grow U.S. dairy’s position here and around the world in the years to come.
Australian Army officer Lieutenant Aiden Frost with dairy farmer Tim Salway and his wife Leanne. Photo: Sergeant Max Bree
Tim Salway’s father, Robert, and brother, Patrick, died trying to defend their properties in a New South Wales bushfire, but Tim’s daily chores at the dairy farm could not be ignored.
A raging inferno killed Tim Salway’s brother and father when bushfires tore through the family dairy farm near Cobargo, NSW, on New Year’s Eve.
As Mr Salway returned to their ravaged 600-acre property, milking came first.
“I knew my old man and brother were lying there just over the hill, but we had to get the cows in,” Mr Salway said.
“You can’t afford to miss because they start getting udder issues.
“That was the hardest milking I’ve ever had to do, but you couldn’t just stop and say ‘that was a bad fire’.”
About 170 of the Salways’ 350 cows were lost in the blaze.
Help arrived in the fires’ wake, including an Army strike team to clear and pile up fallen trees from the paddocks, saving the family an estimated month’s work.
“They ripped in with chainsaws, they smashed through, their bosses kept asking me ‘what next?’,” Mr Salway said.
“We’re able to get back in these paddocks, we’re able to work the land again. In time we’ll be able to burn these heaps [of wood].
“They cleared our driveway and just driving in makes you feel better. Things like this keep you going, as tough as it is for our family.”
Lieutenant Aiden Frost, of the 2nd/17th Battalion, Royal New South Wales Regiment, commanded the strike team that arrived for two days of work on January 14.
They also brought water and an Army chaplain to counsel the Salways.
“The intensity of the fire basically ripped all of the trees out of the ground and created huge amounts of debris which rendered the paddocks sort of unusable,” Lieutenant Frost said.
“The farmers have been overwhelmed. We can’t solve the whole problem, but in a couple of days our guys have been able to clear significant amounts of the property, which will eventually allow their cattle numbers to recover.”
Strike teams, such as those commanded by Lieutenant Frost, are working to assist communities in south-east NSW in the wake of the bushfires.
His team has 26 soldiers from Army’s 5th Brigade, mostly infantrymen and combat engineers supported by a medic and signaller.
Four of the infantrymen completed an Army chainsaw course while the team was staging at Holsworthy.
“One minute we’re helping fix fences to stop cattle getting on the road and the next minute we’re out doing engineer tasks like inspecting culverts and bridges, or felling and cutting up trees” Lieutenant Frost said.
“Even if it is just basic, manual labour, the team is really glad to be able to help.”
The Salways’ farm provides milk to Bega Cheese, the same company that makes canned cheese for Australian Army ration packs.
The company couldn’t process the Salways’ milk for 10 days after the fires, meaning it had to be dumped, but Bega Cheese still paid for it. The company also provided the family with generators, to keep things running until power was restored.
“We take for granted where everything comes from,” Lieutenant Frost said.
“Guys like these farmers provide milk to make cheese for ration packs or the supermarket; everyone knows the struggles they’ve had.
“Then to have a fire devastate your farm and lose family members is the last thing any of these people needed. At least we can show that the people of Australia and the Army cares about them.”
When the team finished at the Salways’ property, Tim’s family had worked for 15 days straight to recover, with no end in sight.
“It wasn’t a fire, it was a monster, like a tornado; it’s something I don’t want to see again,” he said.
“The family down the road lost five houses. Up the road, out of about seven houses, there’s only one left.
“I’ve been trying to say it’s not that bad, but when the Army turns up to help you it must be pretty bad.”
For fifth-generation dairyman Jeremy Visser, 2014 was a record-breaker. Amid soaring global demand for U.S. milk products, Visser made about $500 on each of the 4,000 cows he was running in Stanwood and four other Western Washington dairy operations.
But a year later, as those sweet trade conditions began to sour, Visser’s fortunes also turned. In both 2016 and 2017, milk prices fell so low that Visser lost $100 on each cow. By 2018, the per-cow losses topped $300.
Visser pulled through, in part by mortgaging “everything I owned.” But at least 50 dairy farmers he knows have left the business. The last few years “have been tremendously difficult on us,” says the 42-year-old father of three.
Visser could be speaking for most of the roughly 350 dairy farmers still in business in Washington, which as recently as 2007 boasted more than 800 dairy farms, according to the U.S. Department of Agriculture.
Fourth-generation dairy farmer Jeremy Visser, seen here in 2017, says he mortgaged “everything he owned” to stay in business. (Dan Bates / Herald file)
With a steady stream of new technologies — including ones that focus on milking, breeding, nutrition and genetics — dairy farmers have seen impressive gains in output. From 1993 to 2018, milk yields from the average Washington dairy cow climbed 25 percent, to more than 12 tons, according to the USDA. And unlike many other businesses, where output often can be adjusted for changing demand, a dairy farm cannot simply idle a herd if prices fall.
“It’s very hard to turn a cow off,” Visser jokes.
But all that new milk has put downward pressure on milk prices — and on dairy farm incomes.
For years, many dairy farmers — especially those at smaller operations — have taken off-farm jobs to help their businesses survive and “keep doing what they love doing,” says Dan Wood, executive director of the Washington State Dairy Federation.
Some dairy farmers have adopted new business models that rely less on maximizing volume.
At the Twin Brook Creamery in Lynden, just south of the Canadian border, Larry Stap, a former Darigold member — and Visser’s distant cousin — has refashioned his dairy business around smaller batches of high-end “craft” milk.
While most commercial dairies use the high-output Holstein breed, Stap’s 200 Jerseys produce less milk, but it contains more butterfat and other solids — and, Stap says, more flavor. That’s a key selling point for his products, which include whole and other milks, fresh cream, and sweetened milks.
Yet even with Stap’s niche, he hasn’t ignored big industry changes.
To control costs in the Northwest’s tight labor market, Stap began switching to robotic milkers in 2015. The machines, which let cows give milk as often as they like, have reduced his labor costs and personnel headaches.
“They’re never late to work and they’re never hung over,” Stap jokes.
But they’re not cheap: each milker costs $200,000, and Stap’s herd needs four.
Much of the innovation in the dairy industry has focused on scaling up, not down. Visser’s dairy enterprise, for example, has roughly doubled since 2014 as many of his friends, neighbors, and others have sold their operations to him on their way out of the business.
That greater size has advantages. A larger operation lets farmers spread costs over more cattle. And a bigger revenue stream makes it easier to pay for those robotic milkers and other technologies — including systems to manage the dairy industry’s other big “output”: each Holstein cow generates 115 pounds of manure every 24 hours.
But going large has downsides, too. Greater output and falling milk prices — they dropped 32 percent between 2014 and 2018 — puts more pressure on dairy farmers to find new ways and places to sell their milk. In some cases, that has meant developing new consumer products. Darigold, for example, has introduced a higher protein, lower-sugar milk, called Fit, which CEO Stan Ryan says is “moving people from things like almond milk back into dairy milk.”
Increasingly, however, Northwest dairies have looked abroad to offload their extra output. From 2000 to 2014, Washington’s dairy exports jumped from $32 million to $232 million. In 2018, the most recent year for which data is available, Washington exported more than a seventh of its total dairy output by dollar value, according to the USDA. The share is even higher at Darigold, which exports 40 percent of its output and hopes to top 50 percent in the near future.
Washington state’s proximity to Asian trading partners gives state dairy producers a key advantage over Midwestern competitors. “We can get products to China or Singapore cheaper than we can get them to Chicago,” Ryan says.
Darigold has invested heavily in boosting its exports — for example, by producing more powdered milk, which is in high demand overseas — and is counting on exports for three quarters of future sales growth.
But relying more on foreign buyers can be risky. From 2014 to 2018, the dollar value of Washington dairy exports plummeted 24 percent as trade disputes cut overseas sales, according to the USDA. Federal relief payments to farmers hurt by the disputes — projected to be around $9.7 million for 2019 — will cover only a fraction of the losses.
The trade disputes also appear to have extended the milk price slump. Though milk prices rose through much of 2019, they’re still 8 percent below the 2014 peak.
The recent rapprochement on trade between the U.S. and China, and the U.S. Senate’s ratification of the American trade pact with Canada and Mexico, have raised industry hopes for a boost in U.S. dairy exports. But trade tensions could easily resurface.
And some of America’s dairy trade partners aim to rely less on U.S. imports. “Russia and China are building their own internal dairy supply,” Neibergs says.
Visser expects more turmoil for the industry. By 2021, he thinks the milk market will likely shift back to its typical 3-year price cycle, where dairy farmers “make money for a year, break even for a year, then lose a lot of money.”
Although 2020 will be a good year, Visser says, “I’m positive that’s about all we’ll get.”
More than 25 dairy farmers left the industry north of the border in 2019, according to the Scottish Dairy Cattle Association (SDCA).
Figures from the association reveal 879 dairy herds were in operation at the start of this year, which is down from 5,735 herds when records began back in 1903.
Although the industry lost 27 herds, 15 new ones appeared through either new set-ups or farms being bought and dairying restarting, which meant there was a net loss of 12 herds last year.
SDCA secretary, Janette Mathie, said: “In 2019 we saw a lot of uncertainty for some dairy farmers within Scotland, but many others have made the commitment to make dairying their future and for the generations that follow.”
She said Aberdeenshire lost two herds, while Lanarkshire and Wigtownshire showed a net loss of three and four herds respectively. Ayrshire showed a net increase of three herds over the year.
SDCA figures also reveal the total number of dairy cow numbers decreased by 1,048 to 178,490, however the average herd size was up by two to 203.
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NFU Scotland’s milk committee chairman, John Smith, said it was the first time in many years when dairy herd and dairy cow numbers both fell.
He said: “The reduction in herds has been a long-term trend but to see cow numbers falling is more of a concern.
“On a positive note, new herds continue to be established which underlines our belief that there is a great future for dairy production in Scotland.”
Regional herd numbers and average herd size included: Aberdeenshire 25, 199; Angus, seven, 213; Argyllshire, 10, 173; Caithness, two, 61; Inverness, one, 128; Moray, five, 358; Orkney, 17, 114; Ross and Cromarty, one, 120; and Shetland, four, 54.