The Price of Milk

Vermont agriculture is on a collision course with Vermonters’ expressed values.  On July 24th , it was reported that the UVM extension service has set up a hotline for Vermont farmers seeking either financial help or assistance with the emotional stress brought on by having to sell their milk for less than 2/3rds the price of production. Earlier this year, the VT Council on Rural Development published its comprehensive review of Vermonters’ values, finding that the highest ranked value among us is our shared love of our working landscape.  That landscape is at risk.

Unlike a factory, where the owners can downsize, sell out, close up and lay off workers, farmers have stewardship of 100 to 1000 animals that can’t apply for unemployment, conduct a new farm-search or milk themselves twice a day. Even if the farmer, as many are, is losing $1000-$10,000 a month because the price of milk is 40% lower than his or her cost of production, they still have stewardship of living animals. Many farm businesses are now, in fact, managed by the banks to which they are beholden. Farm debt is secured by farm assets, animals, land and equipment and those assets, like many homes, are worth less than the credit they secure, so that banks are unwilling to allow auctions or sales at below the value of their securing assets.

The result is that Vermont dairy farmers are caught in a trap that is much more restrictive than that of other business owners, who can simply cease operation and liquidate inanimate assets.  The farmer must continue to feed, milk, shelter and muck out his or her animals and in many cases is prevented by the bank from reducing or eliminating livestock.

Today, the average gallon of milk sells for $3.49 and weighs about 8.5 lbs. The farmer is paid now about 11.5 cents a pound or about a dollar a gallon. (corrected) Where does the other $2.50 go? It goes to the processor and the retailer.  If the farmer is getting 30 percent of the retail price which is only 60 % of his cost of production, something needs to be fixed and fast. The problem has devastating implications for Vermonters who revere Vermont’s agricultural heritage and working landscape. This is no romantic attachment. Our economy will suffer as well.

There are those who would simply dismiss dairy as an artifact of the past and champion the emergence of diversified agriculture, believing that commodity milk production is better left to the mid and far West. But the problems there are only worse because the scale is larger. Cornell long-since established that profit is based on the output per cow and that scale effects are less significant in dairying.

Vermont is indeed nurturing and pioneering new forms of agriculture that will help to stabilize farming, but we still export 95% of our milk for cash, more milk for the Northeast than any other New England state.

If we love our working landscape, we need to love and support the farms that sustain this rich heritage.

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