FARMINGTON – The harsh economic times are beginning to hit closer and closer to home this month, as the agency in charge of setting the minimum dairy prices has announced that months of declining prices are likely.
Farmers across the state have expressed shock and disappointment with the Jan. 13 announcement, made at the 68th Maine Agriculture Trades Show. Franklin County, which still has several small dairy farms, has been no exception.
“All I can say,” said Konrad Bailey of Bailey Hill Farms in Farmington, whose family has farmed the same land for generations, “is that I would not continue to farm, if they do what they’ve said their going to do.”
The Maine Milk Commission, which sets the monthly minimum price for dairy products based off of the United States Department of Agriculture market administrator, has said that they expect raw milk prices could go as low as $8 per hundredweight this spring.
That’s down from $20.58 per hundredweight in November 2008.
February’s basic price, termed the “Class 1 Price,” has already been set at $13.97 per hundredweight by the Maine Milk Commission, a sharp drop from the current $18.99. Some people in the dairy industry fear that the low prices, along with the other aspects of the sluggish economy, will drive some farmers out of business.
“The problem is that milk prices are dramatically going down, just like everything else,” said Maine Milk Commission’s program coordinator, Tim Drake. “Farmers are looking at severe losses. It was a shock that it was going down this far this fast.”
Along with the Class 1 Price, the prices of butter, cheese and powdered milk are declining as well. Consumers won’t see much of a savings at market, as stores will likely maintain their prices at the current level to help absorb losses elsewhere in their industry. This throws the impact of the dairy price crash right back on the farmers.
Erik Johnson is a part-owner of the Sandy River Farms in Farmington. He echoed Drake’s comments, noting that farmers would have to make tough decisions.
“We’re going to have to look at ways to cut costs,” he said, “like labor, input feeds, the quality of the feed. We’ll look at what crops we’re planting. Everything that makes things work.”
Johnson noted that while consumers might assume farmers are doing well when they see $5 milk in the store, the farmer actually only collects about a third of that. The drop in prices won’t reduce the store price.
“Five dollars to 3 dollars doesn’t really change the store’s margin and the consumer pays about the same,” Johnson said, “but it hits the farmer.”
The Sandy River Farms won’t be as badly affected in the short term as other farms, Johnson said. Producing organic milk, the farm is able to contractually lock into a more favorable rate thanks to the niche it fills in the industry.
“It’s not as drastic,” Johnson said, “from month-to-month.”
In the long term, however, lower dairy prices will mean less favorable rates.
To make matters worse for dairy farmers, the state subsidy program for milk prices is currently $4.8 million short of its targeted budget. The state’s Dairy Stabilization Program enters into play when the price of milk drops below a target price per hundredweight. While the Agriculture, Conservation and Forestry legislative committee’s proposals to slash that program by a third have been put off until later this year, the shortfall remains an issue.
Facing an $830 million shortfall, the state may not be able or willing to fully fund the program.
Bailey said that he’s had about enough.
“Farmers are some of the only people in the country that love their jobs,” he said. “I’m about over loving-the-job deal. There’s just no way to be viable.”
Bailey worries that many farmers won’t be able to survive the price dive and will start selling off the only asset they still have: their land. Unlike other businesses, such as a store in the downtown, farmland rarely is used for farming after being sold. It’s oftentimes parceled out for development.
If farmers in the northeast, which typically has higher production costs, go out of business, milk will have to be trucked in from the major dairy-producing states; Pennsylvania, California, Wisconsin. A long-time local tradition will be gone.
“It’s sad, is what it is,” Bailey said.
