Vt. dairy industry facing crisis
By PETER HIRSCHFELD Vermont Press Bureau | January 30,2009
Albert J. Marro / Rutland Herald
Robert Raiche of Thomas Dairy in Rutland Town makes a milk delivery Thursday at Price Chopper in West Rutland.
BARRE — Vermont's dairy industry is bracing for what could be an unprecedented financial crisis as milk prices, already down dramatically from their 2007 highs, head toward lows unseen since the late 1970s.
Forecasters project hundredweight prices, now in the $14 range, to dip below $11 in March and remain near that mark until at least the end of May. Prices already are down by about 30 percent from this time last year, and agriculture officials worry the plunging market could shutter barn doors around the state.
"The lows are much lower than normal," Fairfax farmer Ralph McNall said after the annual dairy lunch at the farm show in Barre on Thursday. "And at this point I'm afraid it's going to last longer than the usual lows do, so it's kind of a double whammy."
Economic malaise worldwide has eaten into demand for dairy products, according to Bob Wellington, economist for the milk cooperative Agri-Mark. The price problem, he said, is compounded by high costs. The price of feed, fuel and fertilizer, while down modestly from their record highs, remain significantly higher than in previous price troughs.
The cost-price formula translates miserably for conventional dairy farmers, who right now incur a $4- to $5-loss per hundredweight. Come March, the red ink will only deepen. The Agency of Agriculture now estimates that revenue for the average Vermont farm in 2009 will be off by close to $100,000 from last year. "People want to talk about Wall Street and Main Street, but in fact it's the back roads that are bearing the burden on this," Wellington said of the economic downturn.
The impacts are already rippling through the state's dairy industry. In the last month, 11 of the state's nearly 1,100 dairy farms went under. That's more than half the number of farm losses in all of 2008, according to Diane Bothfeld, dairy industry specialist for the Vermont Agency of Agriculture. The worst, she said, is yet to come.
"The first real oh-my-God moment will be in March, when farmers open those milk checks," Bothfeld said. "The price has been ratcheting down for a while now, but it'll be a pretty dramatic drop from what they're receiving right now."
Officials said Thursday there's little the state can do, in the short term at least, to resolve the mess. In 2006, when dairy farms were hemorrhaging money, healthy state budgets led to $11.6 million in emergency aid for Vermont farmers.
"'Send money now' would be the best thing, but there isn't any money to send, so we're trying to find ways to decrease the cost side for farmers and find a way for them to get through this," Bothfeld said.
Glenn Rogers, with the University of Vermont's Extension program, said the university has established an 800-hotline for struggling farmers.
"We've got people that can deal with stress issues or refer individuals to the appropriate people that can help folks out," Rogers said. "We've also got individuals who are financially savvy with the dairy industry and can help farmers crunch their numbers and find ways to make the numbers work."
Stress is no small issue for farmers. At a meeting of industry experts Thursday, Bothfeld recounted a recent California tragedy in which two dairy farm owners committed suicide "because they knew there was no way out for them financially."
"If you notice stress issues, if you notice hot tempers, if you notice total despair, give them these 800 numbers," Bothfeld said. "It's a very difficult time for farmers."
Secretary of Agriculture Roger Allbee said Vermont's greatest hope right now lies in the federal stimulus package. Vermont farms, he said, provide 15,000 jobs to the Vermont economy. He estimates that the industry's woes could cost the state $200 million in lost economic activity in 2009.
"It's a big impact and we're real concerned," Allbee said.
Wellington, who lobbies in Washington, D.C., said he and the Vermont congressional delegation are trying to find support for farms in the stimulus package. Subsidizing exports, supporting infrastructure and bolstering direct payments to farmers, he said, could mitigate the effects of the downturn.
"If you start losing these farms, which is going to happen at these price levels … you're losing the rural economy," he said.