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Hardy stock
How NH dairy farmers are staying afloat in a deluge of underpriced milk

07/14/16
By Ryan Lessard news@hippopress.com



 No need to cry over spilled milk these days; on the contrary, dairy farmers are literally dumping massive surpluses of unsold milk into holes in the ground since it can’t get to market before it expires. But despite the lack of demand, dairy producers in New Hampshire are largely adapting to the hard times by jumping on the local-foods movement.

 
Dumping milk
Agri-Mark, one of the two largest dairy cooperatives in New England, to which nearly half of New Hampshire’s milk is sold, started dumping milk last summer. The Massachusetts-based co-op, which owns Cabot Creamery in Vermont, hasn’t had to do this in about 50 years. Usually, it can find other buyers who will take the milk at a reduced price.
But everyone has too much and for the dairy producers that’s creating low commodity prices across the board. Farmers are not making much money, if any, from milk sales.
“We’re tightening our belts and not doing any unnecessary repair work,” said Deb Erb, co-owner of Springvale Farms in Landaff.
Earlier this year milk dropped to a low of about $13 per hundredweight (112 pounds), and it is hovering around $15 right now. Those prices are bad for most farmers, who need around $16 to $17 to break even. This is the lowest prices have been since the drop below $10 in 2009.
This is a big deal in New Hampshire because nearly 30 percent — the plurality — of revenue from the state’s agriculture products is from selling milk from local dairy farms, according to USDA data from the 2012 National Agricultural Census.
Of the 127 licensed dairy producers in the Granite State, 102 sell their milk through co-ops into the global commodity market, according to Lorraine Merrill, the commissioner of the New Hampshire Department of Agriculture, Markets and Food. Those are the ones most affected by the low prices.  
 
Cold war
So, how did we get here? There are several reasons for the oversupply and subsequent rapid drop in milk prices. Merrill says the first thing to note is that prices were high in 2014.
“Farmers responded by producing more, in some cases expanding their operations,” Merrill said. 
And they are still producing a lot. In fact, the domestic output for milk is set to reach its fifth straight record year, with more than 208 billion pounds nationwide.
In Europe, dairy production started increasing recently after long-held regulations that tamped down production were lifted. But just as all this extra supply was being created, the global demand trend suddenly shifted.
Merrill says that Chinese and Russian markets stopped buying Western-produced milk for different reasons. China, which had been a huge importer of dairy products, saw its economy start to cool down and began more domestic production to keep pace with demand. 
Meanwhile, in Russia, the government banned dairy imports from the West as retaliation for sanctions that were placed on Russia for invading Ukraine.
And Merrill says the slightest surplus or shortage can cause prices to fluctuate rapidly.
But as wholesale prices vascillate, consumers don’t see much change.
“It’s challenging because the price goes up and down and it doesn’t get transferred through to the consumer in the marketplace,” Erb said. 
That disconnect in supply and demand, according to Erb, creates a lag in the market and fails to warn producers quickly enough of shifting global markets. She says the prices aren’t getting passed to consumers because of a growing consolidation of retail stores and processors.
 
Adapting
Some farms have already gone out of business this year, partly because of the poor market but also partly from retirements. Merrill says New Hampshire lost 10 dairy farms this year, the first time the number has decreased in about eight years.
“Dairy farmers at this point, they’re a very hardy lot,” Merrill said.
So far, surviving farmers are finding ways to adapt, but the stakes are high if things don’t improve soon. 
“The ramifications of losing our dairy farms here in New Hampshire are pretty significant because dairy remains one of the anchor tenants of New Hampshire agriculture,” Merrill said. “And dairy farmers are the stewards of much of the farmland in the state. Either dairy farmers themselves or other farmers who raise feed for dairy cattle.”
Some farmers adapt by investing in new technology to become more efficient, while others find ways to diversify.
“We have definitely seen an increase in farms doing value added processing, or making products from their milk that they can then sell to their customers, rather than just supplying the wholesale market,” Merrill said. “Nobody’s getting rich off of making cheese, but it can help.”
Erb says she and her husband Doug started making high-end cheeses in 2009 in response to that dismal year for the industry. Their Landaff cheese produced under the Landaff Creamery label can be found in local co-op stores and at Whole Foods around the Northeast. It’s a Welsh-style cheese inspired by the Caerphilly cheese produced in the area of Landaff’s namesake: Llandaff, Wales.
“Most farmers in New Hampshire have diversified somewhere. They do maple syrups, they do wood, they do bed and breakfasts. I mean, there’s a lot of ways that you can diversify. We chose cheese,” Erb said.
Right now, about 25 to 30 percent of the milk they produce from their 85 cows is used for cheesemaking. Still, the bulk of their revenue comes from commodity milk sales.
“Dairy farmers are some of the most innovative business people you will ever meet, some of the smartest people that you will ever meet,” said Amy Hall, director of Granite State Dairy Promotion.
It’s been Hall’s mission to push locally produced dairy and swat away claims that milk and other natural dairy products are unhealthy.
Lately, she’s been trying to be more proactive with educating the public about the benefits of dairy, since she often feels like the underdog cornered to defend dairy’s reputation.
While milk still faces steep competition from other beverages in the U.S. market, Hall says the local food movement has helped farms like Springvale find ways to leverage against an unpredictable industry with extreme highs and lows. 
But what most consumers don’t realize, Hall says, is that even big-brand milk we find on grocery store shelves is local, since the perishable nature of the drink tends to keep it close to its point of origin.
“In reality any brand that you would pick up off of that shelf directly supports not only New Hampshire’s dairy producers but New England dairy producers as well,” Hall said. 





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