Inside the barn at the Groth family farm, the stalls are empty. The bedding is still there, but the cows are gone. Glen Groth’s family has been milking cows south of Ridgeway for 50 years. After earning a degree in dairy science, he became the third generation of dairy farmers in his family and the local Farm Bureau president in one of Minnesota’s top milk-producing counties. “That was my dream — to build a big dairy farm,” he said.
Sometimes life has other plans. This February, Groth and his wife made the difficult decision to sell their 62-cow herd, stop milking, and focus on crop farming. “It was emotionally wrenching, and it took place over the course of three years,” Groth said of the decision. “It was like putting your dog down. You know your dog is suffering, but still, you don’t want to take your dog to the vet,” he explained. Groth feels fortunate nonetheless. He didn’t have to search for a job in town, and he managed to sell his herd for a decent price. Groth and his family are now in a position to be more successful and have more free time. “We didn’t stop farming, and our farm financial situation is more stable for [the decision],” he stated. “It doesn’t mean I don’t feel bad about it a few times a day.”
Groth is not alone. Across Winona County and across the Midwest, years of persistently low prices have pushed dairy farmers to the point where many are leaving the industry and way of life. Between 2012 and 2017, the U.S. lost one-fifth of its dairy farms, according to the U.S. Department of Agriculture’s (USDA) Census of Agriculture.
Wisconsin alone lost 2,736 dairy farms, while the number of Minnesota dairies fell by 1,211. In percentage terms, the decline was even more drastic in Winona County, where the number of dairies fell by a third, from 205 to 136 farms. Some of those former dairy farmers are now crop farming, raising beef, working off-farm jobs, or some combination.
Why are farmers leaving the dairy industry? “The margins haven’t been there,” Riverland Community College Farm Management Instructor Tom Anderson said. As some dairy farms continue to increase in size in order to achieve economies of scale, overall milk production is going up, he noted. However, that increased supply combined with tariffs, which limit the marketing of U.S. milk abroad, have created oversupply that depresses prices, Anderson explained. On top of that, many dairy farms — not just the largest ones — face major regulatory hurdles in expanding and modernizing their facilities, he stated.
Minnesota milk prices fell from over $26 per hundredweight in 2014 to under $13.50 last year. Ups and downs are normal in agriculture, but the recent slump in dairy profitability just won’t go away. “We’re in the fifth year of a three-year downturn,” Minnesota Department of Agriculture (MDA) Commissioner Thom Petersen said.
Since 2015, prices have rarely topped $18, according to the USDA. The Minnesota State Farm Business Management Program reported that the average cost of production on Minnesota dairies is $17.29 per hundredweight of milk. That means that, for four and a half years, Minnesota dairy farmers have rarely been able to make a profit on all their hard work. The Minnesota State Farm Business Management Program report found that the average dairy farm brought in a grand total of $14,729 in net income in 2018. Some categories of farms lost several thousand dollars on average.
“It’s been quite challenging for the last couple years when you can’t cover your costs and payments and labor,” Lewiston-area dairy farmer Duane Wirt stated. “It’s not easy mentally — getting up in the morning and knowing that each cow you milk is going to lose you money. And how long do you want to bleed red ink?” he added.
Wirt is an established dairy farmer, and despite the challenges, he said he is not getting out of the business anytime soon. “If you’ve got most of your bills paid and you’re not buying a farm or anything, you’re going to lose some equity, but your bills are paid, so you can keep plugging forward,” Wirt stated.
Groth is a younger farmer, and he said the investment needed to expand and modernize his milking operation proved to be a major challenge. “The problem when you’re trying to grow in the dairy industry is almost all of your investments are in infrastructure,” he stated. The tractors and equipment needed for crop farming can be re-sold at decent prices, but a $1-million barn is another story. “You can get pennies on the dollar when you try to sell it,” Groth stated. It is hard to finance capital improvements like a new barn in the first place when profit margins are so thin. “The principal and interest would eat up much of our income,” Groth said.
The loss of dairy farms has a ripple effect on the rural economy. When farmers switch from milking to raising crops, Anderson explained, “You don’t need a vet, you don’t the livestock supply places, you don’t need the equipment repair shops.”
Groth employed a part-time farm hand to help with milking and other livestock chores, but when he sold the herd to focus on crop farming, he no longer had work for his employee. “We normally have a full-time person for every 50 cows on a dairy farm. When you go to a crop farm, you maybe have a full-time person for every 1,500 acres,” Anderson stated.
“If we don’t have livestock in Southeast Minnesota, we’ll become a Southwestern Minnesota community,” Anderson stated. “A lot of those communities don’t have a gas station anymore. They don’t have a grocery store. And what happened? Well, they didn’t have livestock anymore.”
The federal and state governments are trying to offer some help to dairy farmers. The 2018 federal Farm Bill established a new dairy insurance program called Dairy Margin Coverage (DMC), which offers farmers insurance against drops in profitability. If profit margins drop below a certain level, the program will compensate milk producers. Catastrophic coverage against very, very low — and very unlikely — dips in profit margins is available for just $100 per year, and farmers can buy various levels of higher coverage. DMC replaces a similar program in the old Farm Bill, but federal officials say the new program will be more responsive to farmers’ needs and offer them better protection than the old one.
To encourage farmers to participate in the federal margin insurance program and to provide some immediate financial relief, the MDA rolled out its new Dairy Assistance, Investment, and Relief Initiative (DAIRI) last month. That program will offer a 10-cent-per-hundredweight payment to small- and mid-sized dairies — those with up to 60 million pounds of milk per year or around 775 cows — that enroll in the DMC for five years. The legislature appropriated $8 million to the program, most of which state officials expect will be spent making the first 10-cent-per-hundredweight payments. After that first payment, any remaining money will be divided between participating farms and the program will end. Farmers can apply for both DAIRI and DMC at local Farm Service Agency offices.
“This program is really focused on making sure medium and small dairy farms can stay in business when prices dip,” Assistant MDA Commissioner Whitney Place said. “The intent for this program was to incentive medium- and small-sized dairy farms to sign up for the [DMC] program for five years, and the additional goal is that they’ll be receiving a payment from the state that’ll help them hold on until federal payments come.”
Why spend money trying to save dairy farms? “In 2018, we lost about 300 dairy farms in Minnesota,” Place answered. “That’s just a number, but that loss is very real. It takes an emotional toll on farmers. We know we’re dealing with a lot of stress and mental health issues in our rural communities. That affects those rural communities, it affects the businesses on Main Street, and we think it’s worth investing in these small- and medium-sized dairy farms.” While the market is currently favoring larger dairy farms, smaller farms are not doomed, Place said. “Once prices come back up, some of these farms could make it. They just need to get through this dip,” she stated.
Back on the farm outside Ridgeway, Groth joked that he had become a spokesperson for selling one’s herd. It was an extremely difficult decision, but ultimately the right one, he said. “I thought in the back of my mind, ‘There are all of these people I admire and look up to that went through these dramatic career changes. They didn’t just stick with it no matter what. They made a change, and they’re better off for it,’” Groth said.
The declining number of dairies is not just a new phenomenon. Many of Groth’s neighbors have stories about when they sold their herd, he said. It may have happened 20 or 30 years ago, but all throughout the neighborhood there are people who went through the same experience, he stated.
Source: Winona Post