AUGUSTA, Maine — The crowd at Tuesday’s Maine Milk Commission meeting, part of the 68th Maine Agriculture Trades Show, was standing room only, with farmers spilling out in the hallway to hear the bad news: Maine’s milk market is crashing.
“I am here to tell you we are in unprecedented times,’’ Leon Graves of Dairy Marketing Services, which represents dairy cooperatives in the Northeast told farmers and processors. “We’re in for a rough ride.’’
Because of a lack of international demand, prices are expected to drop by as much as 50 percent and not rebound until at least September, going from an average of $16.25 per hundredweight, or cwt, last year to as low as $8 by March.
“This will put a lot of struggling farmers right over the edge,’’ Doug DiMento of the Agri-Mark Cooperative predicted.
Galen Cole, president of the Maine Dairy Industry Association, put it more succinctly: “$11 milk is the end, the end of milk in the Northeast.’’
According to the U.S. Dairy Export Council, exports dropped in 2008 from $4 billion to $3.1 billion and demand will continue to fall as other countries — particularly Brazil, New Zealand and Argentina — dramatically increase their production.
Graves predicted that the average Maine farm producing about 1.8 million pounds of milk a year will lose $65,000 in income, compared to 2008. “Farms, processing plants, jobs — they are all at risk,’’ he said. “If we thought 2006 was a difficult year, 2009 is going to be far, far worse.’’
The overall economic crisis in the country will complicate things, Graves said, since traditionally, dairy farmers would work with their lending institutions on short-term lending to get through the situation. “That will not be so now,’’ Graves said.
DiMento said the bottom will drop out at the worst possible time. “Farmers make their biggest investments in the spring. This will make for an incredible cash crunch.’’
Graves said the Northeast cooperatives are seeking help from Congress through the proposed stimulus package. He said they are seeking a floor under the minimum price of milk, a “tweaking” of the Milk Income Loss program — a farmer subsidy, access to credit, and a herd buyout program.
The buyout, which was used over the past several years to balance years of high milk production by removing herds from production through slaughter, would have to be dramatically increased, he said. “We would have to take a reduction of 250,000 to 300,000 cows to level off the supply and demand,’’ Graves said.
Julie Marie Bickford, executive director of the Maine Dairy Industry Association, said her industry is working hard to rectify the federal pricing system that does nothing to protect farmers from the roller-coaster price shifts.
She said MDIA has hired a legal team and will be lobbying Congress, as well as the Maine Department of Agriculture to continue funding Maine’s tier system, which puts a floor or minimum, on milk produced in Maine. “This tier program makes up for the failings in the federal system. It has been very, very successful.’’
Bickford said that although there is widespread support from Gov. John Baldacci through the Legislature for the program, because of the state’s current economic crisis, the program is “under a microscope.’’
She said the system will be vital to the overall economic health of the state, not just the dairy industry.
“This is not just about farms,’’ she said. “It is about … employment. It’s about feed dealers, equipment dealers. When the dairy farmers struggle, those sectors struggle as well.’’
On the national level, Bickford said the MDIA continues to press for changes to the federal milk pricing order, a complicated system that bases the price farmers are paid for milk on the commodity cheese prices in Chicago. Maine is hurt by this system because it does not take into consideration that the cost of production is higher in New England.
“We are going right to the U.S. Department of Agriculture,’’ she said. “It will be the ultimate David versus Goliath battle.’’ She said Maine farmers are reaching out to their congressional delegation.
“We’re telling them if they put Maine at the front and center, then we need to fix the federal system.’’
“Eleven dollar milk is not only unacceptable but unforgivable. The dairy industry is critically important to this state — 700,000 acres, 4,000 jobs, $570 million in receipts each year. No one here is throwing in the towel.’’