Dairy farmers wary of calls to cut production

By Sharon Kiley Mack, BDN Staff
Posted March 02, 2009, at 9:46 a.m.

CLINTON, Maine – The dairy industry in Maine is a house of cards, eight of the state’s 22 organic milk producers that ship to Hood said Saturday as they gathered in farmer Richard Lary’s kitchen.

If dairy farms go under, the effects will be felt by veterinarians, grain dealers, seed companies, equipment and fuel dealers, and processors, which in turn will affect conventional farmers’ ability to access these services.

“Whether we are organic or conventional, whether big or small, we all need each other to support the entire agricultural industry,” Mark McKusick of Dexter said. The recent news that HP Hood is dropping eight organic dairy farms and asking its remaining suppliers to cut their production by up to 15 percent further strains the tenuous milk industry.

Michael Lane of New Vineyard is a cattle dealer. “I’ve got seven herds for sale right now and nobody is buying. Cows that are bred and milking and should sell for $2,000 are selling for $800 to $1,000, and still nobody wants them.”

In just the past 18 months, 11 of 33 organic milk farms in Maine that shipped to Hood either went out of business or switched over to conventional. The lure of higher prices for organic milk has soured; new contracts offered lower prices that made staying organic too costly for some.

“Last year, the retailers made more on the sale of every jug of milk than the farmer,” McKusick said.

In the past 18 months, McKusick said, the state has gone from producing 66,000 pounds of organic milk a day to 26,000. “Now we are losing 13,000 pounds a day from Aroostook and Washington counties. How long do you think it will be before the processors say it isn’t worth their while to service the rest of us?” McKusick said.

All eight farmers said Saturday they will not voluntarily cut back their production, as the letter they received Friday from Hood directed them.

“No way. No way,” said Lary. “I’m just where I want to be. Is Hood going to call up my creditors and tell them they are going to get 10 to 15 percent less than I owe them?”

Lary said a 10 percent cut in production would mean a monthly loss of $10,000 in income on his Clinton farm.

“And it is not just here. Farmers in Vermont, New Hampshire, Connecticut, all were told to cut production,” he said. “I’ve talked to the farmers in New York. They’re not volunteering to cut either.”

The Hood letter, sent to all but those organic farmers belonging to the Agri-Mark cooperative, blamed a downturn in the economy and a lack of demand for the cutbacks.

Lary said someone is being untruthful with the farmers.

Two letters arrived in organic milk producers’ mailboxes this past week. One, from Hood, told them demand for organic milk was dropping and asked producers to voluntarily cut back production. The letter hinted that without a voluntary cutback, their contracts could be in jeopardy.

The second letter, from Dairy Marketing Services, the Massachusetts-based marketing agent for more than 50 percent of the organic milk in the Northeast, predicted a 10 percent growth in organic milk sales in 2009. In October 2008, DMS wrote, ” organic whole milk sales increased 24.7 percent and reduced fat sales were up 22.2 percent, compared to the same period in 2007.”

Those statistics are backed up by the January 2009 Market Administrator Bulletin, by Eric Rasmussen of USDA. “Sales of organic [milk] products had the largest growth of all [milk] products in the Northeast,” Rasmussen reported. Overall, organic dairy sales were 3.1 percent of all dairy sales, up from 2.6 percent in 2007.

“What is going on here?” Lary asked. “Both of these letters came the same day, in the same envelopes … and what they are saying is completely the opposite of each other.”

Kip Griffin of Perham attended the meeting by telephone. “I have 28 new cows coming in,” he said. “We bought a combine, started growing grain. It is very expensive to transition to organic. Now Hood is quitting on me and I still have five years of payments.”

“The consumer needs to know how serious this is,” Martin Lane of New Vineyard said.

“The consumer needs to know they will lose freshness and they’ll be getting milk from the other side of the country,” Andrew Sevey of Ripley added.

In the farmers’ notification letter, DMS pledged help. “DMS will continue to seek new markets … and try to find homes for its members’ milk before their current contracts expire,” the letter said.

Maine’s Agriculture Commissioner Seth Bradstreet said Saturday he is very concerned about the situation.

“We are working hard to find a solution and we have identified some possible options,” he said. “Right now, though, we need to keep them under our hat. But I understand that every day that goes by gets tougher and tougher for these farmers.”

http://bangordailynews.com/2009/03/02/business/dairy-farmers-wary-of-calls-to-cut-production/ printed on September 18, 2014