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Last week, the Minnesota Department of Agriculture rolled out a state program that aims to inject cash into the state’s struggling dairy industry.
More than 1,100 Minnesota dairy farms closed up between 2012 and 2017, leaving only about 3,600 farms in an industry beset by years of low milk prices and a long, hard winter that delivered enough snow and wind to collapse the roofs of at least two dozen dairy barns.
The Minnesota Legislature passed the $8 million Minnesota Dairy Assistance, Investment and Relief Initiative (DAIRI) this year, in response to crisis in the dairy industry in Minnesota, the seventh-biggest dairy producer in the United States.
While an influx of cash could help, dairy industry watchers are looking toward the future with trepidation.
A string of lows
The state the dairy industry’s in is nothing new — and that’s the problem. For dairy farmers, a 5 percent profit margin is considered a good year, said Lucas Sjostrom, a dairy farmer and the executive director of the Minnesota Milk Producers Association. Lately, lots of things have been eating away at those profits.
Like farmers in any ag sector, dairy farmers’ income depends on a lot of things that are outside their control: weather and international commodity prices among them. Farmers are used to some degree of price fluctuation year-to-year.
The dairy industry was on a fairly consistent three-year cycle from the early 2000s, with good prices every three years or so. Until it wasn’t. In 2014, dairy prices smashed records. Then, prices stayed low for a couple of years. Dairy industry watchers thought things might look up in 2018. And then they didn’t.
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There are lots of factors keeping milk prices down, on both the supply and demand sides.
On the supply side, there’s more milk on the market. By breeding for specific traits — higher milk yields and healthier cows — production in the dairy industry has become more efficient and milk more plentiful. That can put downward pressure on prices.
At the same time that it’s easier to produce more milk, demand for U.S. milk products is down, both domestically and abroad. Americans are drinking less milk, and trade disputes in recent years have shrunk global markets for U.S. dairy.
In 2017, Canada changed its pricing system, decreasing the cost of a specific milk type domestically, which made U.S. milk used for the same purposes too expensive to reasonably import.
Then came the tariffs. From both Mexico, the U.S.’s No. 1 dairy export market, and Canada, its second largest market, Sjostrom said.
“It’s been a tough year, but the only reason it has been a tough year is because it’s been a tough roughly four and a half years,” he said.
In 2018, the median Minnesota dairy farmer made $14,700 — the smallest median annual income in a string of lows, according to the most recent year of data available from the Minnesota State and University of Minnesota Extension farm income survey.
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Last year, 50 percent of dairy farmers surveyed reported a negative net farm income, and the average dairy farmer lost about $29 per cow, said Joleen Hadrich, an associate professor and extension economist at the University of Minnesota who specializes in the dairy industry.
“Prices really haven’t recovered since then, so that’s something on our forefront. We know farmers are really becoming financially strapped. They may have been able to dip into their cash reserves, if they had any, but those opportunities are really bottoming out,” she said.
DAIRI
Enter DAIRI. The new Minnesota program, designed for small and medium-sized farmers, became available last week. To be eligible, farmers have to produce less than 160,000 hundredweight of milk (a hundredweight, the unit of measurement used in the dairy industry, is 100 pounds). That’s what about 750 cows can produce, and would cover most of Minnesota’s dairy farms, said Paul Hugunin, of the Minnesota Department of Agriculture’s Ag Marketing and Development Division. Farmers also have to sign up for five years of coverage under the new federal Dairy Margin Coverage program in order to be eligible for the state program.
The Dairy Margin Coverage program, authorized in the 2018 farm bill, is like crop insurance for dairy farms: Farmers pay a premium each month, and the federal government will send farmers a check to make up some of their losses if prices go below a certain level.
The state program is designed to work in concert with the federal program. It would pay 10 cents per hundredweight of milk, up to 50,000 hundredweight.
Hadrich estimates a farm with 100 cows would get about $8,000 from the federal program this year. Minus the cost of their premium, including a discount for signing up for the state DAIRI program, such a farm would net about $5,700.
The farm would get about $2,000 from the state DAIRI program, which would bring it up to $7,700. Add that to the $14,700 median dairy farm income last year, and that farmer’s hypothetically making $22,400.
It’s not designed to make farmers rich, but it might help cover a feed payment and keep some farms afloat.
“These programs are not meant to be profit maximizers; they’re very much meant to be revenue stabilizers,” Hadrich said.
If there’s money left over after the state makes initial payments from the DAIRI fund, qualifying farmers will get another check, of an indeterminate amount, in the fall.
Sign-up at local Farm Service Agencies started last Monday, and by Tuesday, the state already had its first application for DAIRI.
“This particular program, from a state level, is the state trying to help bridge that gap between where we are today and when things improve,” Hugunin said. “We need to make sure we can help farms weather the storm, so to speak, and survive to see better days.”
Better days ahead?
It’s not yet clear when the markets will improve.
Dairy farmers necessarily have to look years ahead as they make plans for the season: It takes two years for a calf to grow big enough to have a baby and start producing milk, and it’s five years from birth until a farmer gets a return on investment out of her, Sjostrom said.
“You’re basically making a five-year plan every time a calf is born,” he said.
For some, that future looks uncertain. One big question is what the price of corn and soybeans, used to feed cows, will be in the future. Bad weather this year may well drive them up, while tariffs could bring them down.
And there’s another wild card: Swine fever in China has killed a large share of that country’s pigs. On one hand, for dairy farmers, that’s depleted the market for whey permeate, a milk product shipped to China to feed piglets.
On the other hand, fewer pigs in China . could increase demand for U.S. beef abroad, another source of profit for dairy farms. Dairy farmers typically make 10 percent to 15 percent of their income on beef — selling calves to become steers and dairy cows who age out of production for meat, Sjostrom said.
“There’s only so much protein in the world, so when people buy less of one type of meat, they buy others,” he said.
As the daughter of dairy farmers in Central Minnesota, Hadrich said it’s in their nature to be optimistic.
“I think there’s a lot of people who want to stay in dairy and they’re trying to find creative ways to stay in the industry,” she said. “For a lot of them, this is a way of life.”
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I was speaking with a former dairy farmer this past weekend. I asked him if he missed dairy farming. His response? “Every single day. I would drop everything and go back to it right now if I could.”
“Why can’t you?”, another friend asked.
“Can’t compete with big industrial dairy.”
“Do you suppose Trump will raid the big dairy’s?” my friend asked the former dairy farmer, referring to the widespread use in big industrial dairy of illegal immigrant labor.
“Nope,” said the former dairy farmer.
Dairy was a backbone of local economics. Neither Liberals nor Trump nor establishmment republicans have stood up for dairy farmers, the number of farms cut down by 90% the last 40 years. (But Liberals often stand up for illegal immigrants, while casting aspersions on rural people who thought Trump would help them economically.)
There are millions of people, perhaps tens of millions, who would be happy to return to farming, but are prevented by capital constraints. That former dairy farmer agreed with me. When I said it must take a million dollars to get started from scratch, he laughed and said, “that will get you through start-up and maybe through your first year.”
Meanwhile foreign investors have been buying up land and farms and herds, along with east coast private equity, putting small farms further out of reach for regular Americans.
Subsidies aren’t going to fix systemic absurdity, with every advantage for big capital and consolidation and even foreign money, and regular people thrown to the economic wolves.
I would add, I have another friend and his wife who are dairy farmers selling milk to Organic Valley. Their cows are rotationally grazed in the style of Joel Salatin, his cows are very happy and healthy, the matriarch at 12 years and still milking well, the land is lush, the soil as healthy as the cows, pollinators welcome. The cows eat no corn, only grass from the fields just as cows were born to do. With organic corn from 100 acres for sale and the 65 head herd, they make a decent living.
His neighbor has 6000 dairy cows, most of those cows don’t make it to their fifth year, they are force-fed little but industrial corn and antibiotics, the thousand plus acres are like rolling hills of concrete covered with chemical residue, and most of the labor on the farm is illegal.
Which farm is healthier for America? Now guess which one is more supported by subsidies outright and hidden, and economic and political policy generally?
Another thing: start taxing pollution and organic family farms would be the norm, while those big polluting industrial dairies would disappear.
Cows are not force Fed antibiotics. I do t think any oral antibiotics are approved for dairy animals. You comment is not ckrrecte
Excuse me but where did you come up with the idea that non-organically raised cows only make it to year 5 before they’re sent to slaughter? Did you get that from some organic-biased newsletter?
A well managed here should have average 3 lactations or so, with the caveat culling should be for production. The offspring should be genetically superior to their dams, thus improving the herd.
I wish we could have smaller, more humane dairy farms like in the good old days when times were simpler, because “big industrial diary” often leads to conditions that are horrific to cows and calves, as in the inhumane treatment of calves by some employees as shown on the videos at Fair Oaks Farms made public recently. This is an isolated case (I hope) but still . . . to see those poor calves cooped up, individually in a small fenced area, with an individual plastic crate (they looked like large plastic dog houses) for shelter, in extreme temperatures, made my heart bleed. Or to see cows who never experience the freedom of a grassy field, but are milked by a mechanical milking machine, and kept in an enclosure most, if not all, of their lives, seems inhumane to me to say the least.
And I love milk and its diary by-products – but I’ve even considered giving it up because of the above mistreatment of cattle.
If only cash incentives could be given to small diary farmers to make it worth their while to remain small and humane, and yet be able to compete with “big industrial diary”. I guess in a perfect world . . . but still . . . I believe provisions could be made and bills passed to reduce the animal abuse and provide incentives to small diary farmers. Farmers are the backbone of America in my opinion.
Cash? Give cash? But, we’ve been told that creates dependency and destroys self-esteem.
And you have to drug test too.
“Farmers are the backbone of America in my opinion.”
Paul Wellstone knew that. He stood with them, defended them, advocated for them. Dems and Republicans alike since have sold them out to the forces of globalized finance and corporatism.
Far too many Dems, especially the national party, have long since shed the Red Wing work boots in favor of a comfortable pair of Gucci loafers, the better to fit in with their Donor Class.
Collecting huge speaking fees for talking to Wall Street barons was a huge blow to Clinton’s campaign.
I had been having digestive issues for a few years so I tried cutting out various things from my diet. Milk was the culprit. I quit drinking milk for good last year and my digestive issues have gone away. Adults should not be drinking milk. Its bad for you.
Try organic milk and cheese from cows that lived like cows are supposed to live (healthy cows rotationally grazed can be good for the land too.) Or better yet, raw milk straight from healthy cows, if you befriend such a farmer. Some of the healthiest adults I know drink raw milk. It might not help you, however industrial antibiotic, corn produced milk isn’t healthy for cows, the land or people.
You are an uneducated individual! I’ve spent my entire adult life farming and have done both organic small scale dairy and large conventional factory farming. There is no difference in the product that you’re consuming. Raw milk is raw milk just as pasteurized is pasteurized. Both styles of farm coexist and are needed for our survival. It’s not realistic to think farmers can milk small organic herds and supply the world. If your pockets are deep and you feel strongly towards organic I recommend that’s where you spend your money. If you’re after an equally good product and organic isn’t for you then conventional dairy meets your needs. Just don’t try and sell people on a product that is no better. As I said I’ve farmed both ways but to down play the antibiotics that keep the animals healthy is ridiculous. After all those antibiotics are not in the milk, they test every load. I’m glad you’re sold on what works for you, but don’t bash the other guy as without factory farms your friends at the tiny organic farm would also be kissing their operation goodbye
Justin,
So you say I am uneducated, because I say milk from a cow stuffed with corn that cows are not evolved to eat, which makes them sick enough that they would die without regular antibiotics, and die anyway by age five because they are forced to make milk with hormones 365 days a year, is unhealthy….while cows that romp around in diverse grass fields eating and doing what cows are evolved to do, living healthy lives with little need for medicine often to age 12 or so, and are allowed to take a third of the year off not making milk like they were evolved to do, is good for the animal and people?
Some facts about the real dairy problem: overproduction.
1) Supplies of cheese have as much as 3 years’ sales.
2) Genetics have produced cows that can produce as mush as 5 times as much milk as a milk cow 20 years ago.
3) Older stantion-type dairy barns are being replaced with automated milkers and loafing barns- the cows walk themselves into the milkers at the right time.
4) “Industrial” does not equate to worse conditions for the animals or the product- it in fact makes for less stressed animals who are washed and dried en mass and have cleaning systems that run all the time.
5) A milk cow needs good forage. Corn and soybeans are not a milk cow diet, as they cause e.coli and other digestive problems. (BEEF cattle that are fatteend in feedlots are not milk cows.)
High protein grass is the best diet, cut and dried at the right time.
“Fed “antibiotics”? Baby pigs, maybe. Milk with antibiotics will be rejected. Careless words hurt the whole industry.
I suggest folks actually visit a dairy. Maybe a big one and a smaller one. Myths are unnecessary and harmful to the industry. Appreciate American agriculture and stop promoting the idea of a few hippies raising perfect food somewhere on land that doesn’t need to pay the taxes or sustain the humans. (wink wink)
Maybe American food consumers are spoiled and uninformed. I know our Farm Program is being written by people who don’t know how to limit production with support programs that will sustain livable returns. We once understood overproduction to be a problem that needed management.
Clearly we have passed into a fact free age, where 15,000 cows in a industrial setting is less stressful for cows than life for 100 cows in a big field; where no cow is ever fed corn or antibiotics; where all cows in industrial conditions live to a happy, ripe old age; where cows bred to produce 150 lbs of milk a day are happier cows than cows were 20 years ago; where anyone advocating for healthy conditions for cows, people, land, water and pollinators is a silly hippy who doesn’t understand economics.
(any random internet search offering diverse perspectives and real facts from gov, industry, organic and edu. And talk to farmers.)
Grass is low protein relative to alfalfa.
Most cattle receive a large portion of diet from corn silage, a forage.
The fermenters in a cows but don’t care what they are fermenting.
Grazing inhuman graze can produce revisionist as readily as a stored diet, that is the driver of e coli.
A cow in a modern free stall barn is orders of magnitude more comfortable than a cow in an old fashioned sanction barn.
Should say, grazing cows can also have screaming acidosis, which supports e coli. Grasses can have high fermentable carbohydrates just like grain.
Yes, I would say you are uneducated in regards to dairying.
Cows are not pumped with antibiotics to live.
Normal lactation is 305 days. Try to have all your hear, and income not producing for 1/4 if a year, while feeding them. Try grazing in a spring like the one this year.
Cows are not dying at age 5, they maybe be filled for production, and I suspect your Frazer has to sell cows that fall out of synch with season.
You are allergic to milk. Others adults aren’t. Saying they shouldn’t drink milk is much like alcoholics saying those with drinking issues should not drink.
Very interesting article.
Given the prospect of declining demand for dairy products, and given the impact of dairy farming on CO2 emissions and water use, it would seem to make sense to offer incentives for dairy farmers to shift what they produce. The only alternative would seem to be ever-increasing subsidies.
Yes, thank you for this interesting article. It seems that Minnesota already has some tools for managing concentrated animal feeding operations (CAFOs). A licence was recently denied to a proposed pig feeding operation in Fillmore County out of concerns about water contamination; bluff country is said to be more vulnerable to ground water contamination than other ecosystems in other parts of the state. As for small dairy farms and their marketing cooperatives, I’ve seen USDA and farm media reports about the need to invest in efforts to produce and market more cheese, yogurt, ice cream and other dairy products as demand for drinking milk declines.
“But Liberals often stand up for illegal immigrants, while casting aspersions on rural people who thought Trump would help them economically.” Wow, a Fake News TwoFer! Liberals stand up for making illegal immigrants legal, so they aren’t exploited on these farms. And, yeah, I’m going to cast aspersions on anyone who voted for Trump. I’m not going to bail you out for your own stupidity!
There’s an over-supply and a dropping demand for milk. Just as in any similar industry, not sure why we should subsidize that losing proposition.
Stupidity, you say? 🙂
How many times have I heard liberals and dems say that, and much worse, about anyone who voted for Trump?
For forty years and more, rural and working people have watched as Dems and Repubs have sold them out to corporations, banks and billionaires and neoliberal globalization, while hearing from Dems and many liberals especially, too bad, that is the way of things, you could handle it if you weren’t backward and retrograde, etc…
Then a politician comes along who actually speaks directly to their economic concerns. Guess what? People do irrational things when desperate, when treated badly, when condescended to for generations.
And guess what? Doubling down on treating them like they are idiots will only make them vote for someone you like even less than Trump. That seems curious, when Dems have been losing the states now for a generation because they abandoned rural and working Americans…but think themselves more evolved because they stand up for illegal immigrants…which, btw, I generally stand up for illegal immigrants long in the country, and working people, and rural folk….
You’re trafficking in the obscuring generalizations of Fox and the mainstream media, conflating the left with “dems” and “the elite.” Those on the left are no more elite than those who voted for Trump. The left hasn’t condescended to rural and working people – that is the self-flagellation of a very thin slice of establishment liberalism turned into a wide fictional net over all the rest of us. We on the left also have watched for 40 or more years as establishment Democrats have served their economic clientele, just as Republicans have served theirs. We vote for Democrats because elections are binary and Democrats obviously are the lesser of evils.
As to those who voted for and continue to support Trump: “Idiots” is somewhat imprecise. Ignorant, manipulated by fear and misaimed resentments, certainly. If they’d been able to keep their wits about them, they’d be on the left where they belong, and we’d have had a supermajority of ordinary Americans that could have demanded an agenda that promotes and keeps a decent society for all of us, and could have put into office those who would advance it. Instead they spent 40 years voting for those precisely responsible for their desperation, and in their willingness to march to the authoritarian Right, vacated the space just behind into which establishment Democrats could follow.
If you voted for Trump, you failed your civic duty to yourself and to all of the rest of us. You’ve done your part to make it very likely that my daughters will witness civilizational collapse before they even hit 30. Stop asking the left for repentance. Repentance needs to run in the other direction.
With respect Chuck, I can’t watch Fox any more than I can watch CNN or MSNBC, as I tend to get inflamed when I am being manipulated.
As for me doing my part for civilizational collapse, I have spent my life advocating for a healthy and moral treatment of the land and waters, uniting ecology and economy, taking care of local economics and local communities, particularly about food production and preparation – advocating for local economic and ecological resilience.
I have called current economics ecocide, and I have accused both left and right corporatists/gobalists of driving the world toward ecological and civilizational collapse. Climate change is merely part: filling the oceans with plastics, exterminating pollinators with pesticides, emptying the oceans of fish, ever more pollution in the water, spreading invasive monopolistic species across ecosystems…
Did Trump accelerate civilizational collapse? I see him as merely part of an inevitable trend, that has been accelerating for 40 years at least, with the fiancialization of the economy and an ethos that the only thing that is truly important is GDP growth. We more than doubled the global population in the 45 years I have been alive. Hillary Clinton as example would have changed nothing about these trends, any more than Trump has. Voting for a lesser evil always does damage to your soul.
William – I should clarify that by “you,” I didn’t mean you, I meant the impersonal “you.” From your MinnPost comments, I highly doubt that you voted for Trump, but you may well not have voted. In either case, I would say that, in that respect, you did fail your civic duty. We can and need to work for better candidates, better platforms, and better citizens in between elections, but once we get to election day, and there are only two candidates who can win, it’s binary and the less-harmful choice is essentially always obvious. Each of us votes as a trustee for everyone else in our society, and has a duty to go and make the choice that will result in a less malignant society with a better chance of one day not being malignant at all. If voting for a lesser evil does damage to one’s soul, that’s only in the very idealistic sense of a life as a succession of solely affirming choices for a very pure soul. Life is full of choices where the preference might be “neither,” but one has to choose. Clinton would not have altered the trend, but there are many, many ways in which a Clinton administration would have been less permanently damaging to the possibility of democracy.
I don’t question how you have lived your life ethically, though again from your comments, I would guess pretty well. I agree with every word of your reply. The wealthier nations have had a 70-year window to use a great surplus of economic and social capital to move toward global democracy and sustainability, the opportunity has been squandered at every turn, and the window is closing. It’s not so much that Trump has accelerated this, it’s that at the moment of our very last chance, requiring a mobilization of the highest order, Trump has appeared – to the rapture of the Republican establishment and the indifference of the Democratic establishment – to drive the stake into our heart with such particular relish.
I think I’ve lost the train of thought…. wasn’t it about dairy cows or something?
Chuck,
I see defending cows and dairy farmers as being about defending local community, local economics, and the foundations of America.
As for voting for a lesser evil, neither of us really knows who the lesser evil would be. Hillary sounded like she was absolutely ready for “regime change” Iraq/Libya style in Russia, which looks like WWIII to me. How would that be for a lesser evil than Trump. Do you remember that TPP/TTIP/TISA trade regime Obama was pushing, that Hillary would have certainly pushed for as President? Turning America into a client state of a new trans-national corporatist political arrangement? How about the open borders she dreamed of?
Who is being righteous here?
William – I think our colloquy perhaps has reached its point of diminishing returns. I think I’ve made it clear how I feel about the corporatism of the Democratic establishment. It’s a trajectory toward authoritarianism, unfreedom and ecological collapse, just as is the trajectory of the Republican establishment and its torch-bearer, Trump. But it’s a slower trajectory, and retains at least the formal structure of democracy that is a prerequisite for a sufficiently engaged citizenry to assert itself. I’ve spent a lifetime scanning the horizon for the approach of that sufficiently engaged citizenry, and all I see are shimmering heat waves. But as much entropy as a Clinton administration would have unleased, it would not have dismantled the painstakingly formed structure of norms, values and institutions necessary for we as a society to undertake moral self-governance, while the Republican party has smashed it to bits.
Bush = Greater Evil
Gore = Lessor Evil
“460,000 deaths in Iraq as direct or indirect result of the war including more than 60% of deaths directly attributable to violence”
I guess I would trade 460,000 living, breathing lives for damage to one’s soul….
I will reiterate…start taxing pollution and farmers will need less subsidies, big industrial agriculture will disappear and family farms taking care of the land and water wil proliferate.
When I say that to people, mostly I hear, that’s a great idea, it won’t ever happen.
Well, do we want a polluted, dessicated, exploited mess of a nation, or do we want a healthy, ecologically diverse, economically vibrant, community oriented nation?
When Wal-Mart comes to the farm it is a tragedy, but not so to the small stores that folded up. Business is tough and not everyone can keep doing what they want to do–ask video store employees.
Fake news!
After farmers voted for Don Trump in droves, their lot improved bigly. They’ve got access to more markets than ever, commodity prices are through the roof, and they can’t sell it fast enough.
Trump is the least cause of the issue. Have you considered that they voted for trump.out of desperation due to the difficulty they are facing?
Actually the numbers look a little funky. In 2104 the hundred weight price was about $25, and in 2017 it looks like it’s $18, so that’s what a 27% decline. Yet the income declined is from $145k to $44k? That’s a 70% drop in income. Why is the revenue drop so disproportionate to the price of milk? Something else must be going on here besides the price of milk.
The largest cost is feed, which is also highly variable . Also production can be affected by feed quality and wether.
Also, it is the relative price of milk to cost of production.
For simplicity, if milk is $10, cost of production is $9.
Milk price drops $1 to $9, zero net income.
10% drop in price 100% drop in net income.
Thanks Greg,
But your basically saying that price of production has gone up dramatically. That makes sense, but that’s not what this article tells us, we’re being told that low milk prices are responsible for this revenue collapse.
Obviously, it is margin that matters, price over cost. The article does a poor job.
The other factor, of course, is just the expense of living. In the past, a 40 cow dairy could support a family. I don’t think we will e st see that again.
The take home is, higher prices would cover a multitude of sins.
Somebody must be making money off of milk. Whenever anyone presents data like this, you have to provide the range, not just an average or median. The median is point at which half the farmers make more, and half make less. In order to interpret that number we need to know the range. We know that 1,800 farmer are making more than the median, but how much more? This can give us some understanding of the economy of scale, at what size is a dairy farm turning a sufficient profit?
Milk is milk, and it’s not bad for adults.
I’m sure someone somewhere has calculated how much a gallon of milk would have to sell for in order to keep smaller dairies in business, it would nice to know what that price is.
I’m not going to complain about the farm subsidies I’m paying for, but farmers might want to think twice about complaining about my choo choos and buses, or my “values”.
With the subsidy, according to this article, a dairy farmer would make $22, a year? That could qualify them for food stamps depending what if any other income they have. Think about that.
I love milk, and drink a lot of it. I also like cows and farmers.