Just days before their contracts with Dean Foods run out, nine Kentucky dairy farmers met with an Ohio co-op, and made a handshake deal to sell their milk.
The offer allows half of the 19 farmers who had their milk procurement contracts terminated by Dean Foods effective July 15 to narrowly avoid shuttering their dairy operations.
It’s a temporary relief in an otherwise frantic stretch of months for the scattering of dairy farmers in rural Kentucky who hung onto their herds in hopes of saving their livelihood.
But the deal with Scioto Milk Producers of Ohio won’t pay them what Dean did. Scioto doesn’t need the farmers as much as they need Scioto — each of the farmers will cut back on their milk production, and will end up paying more to ship the milk to the processing plant that Scioto works with, in Charleston, West Virginia. One farmer, David Sammons, said that his hauling costs will double to $90,000 per load.
“Most of us will be losing money,” he said. But Sammons said he is grateful for an opportunity to keep milking, even if it does come at a significant cost.While the deal is not yet official, by taking a year-long contract with Scioto, he and others hope they can make enough to stay in the game until markets turn upward again — if they do, that is.
Milk prices have been in a downward spiral since 2014, when a hundred weight of milk — about 10 gallons — went for $25.70. Now prices are closer to $16, according to the U.S. Department of Agriculture.
Small and large dairy farmers have borne the brunt of the declining milk market as consumer tastes change and more people choose nut milks over dairy. Grocers are engaging in price wars over milk — the price of which is often advertised to lure consumers into the store.
Walmart recently announced it will open a milk processing plant in Fort Wayne, Indiana and stop buying Dean’s milk for its Great Value brand. As a result, Dean is closing down its milk plants, including the one in Louisville, and terminating its contracts with over 100 farmers in Kentucky, Indiana, Pennsylvania, Tennessee and three other states, the Courier Journal previously reported.
Dean notified the 19 Kentucky farmers in February that it was terminating their milk procurement contracts on May 31. That deadline was extended to June 30, then to July 15. That led some farmers to sell their herds and begin searching for a way out.
“The industry didn’t want us or need us,” said Curtis Coombs, who runs a farm in Smithfield, Kentucky, with his wife, Carilynn. Since they received the letter from Dean terminating their contract, they scrambled to call as many co-ops or processors that they could — anyone who could take their milk.
And while others were still rushing to find a new buyer as the clock ticked down on their contracts, the Coombs decided to start selling their cows before the market got flooded.
Their income from the farm has been reduced from $30,000 to $5,000, Carilynn said.
The farmers who held out considered the meeting with Scioto, the Ohio co-op, a “hail Mary,” said Maury Cox, executive director of the Kentucky Dairy Development Council. The organization has been working alongside the Governor’s Office of Agricultural Policy to connect local dairy farmers with options to sustain their production.
Ron Fenton, manager of the Scioto co-op, realizes he can’t do as well as Dean. “The offer I’m making is not as attractive as what they had,” he said. “It’s the best that I can do.”
Scioto has managed to survive mergers and buyouts of small co-ops by big giants like Dairy Farmers of America, which is comprised of around 14,000 farms. Scioto, by contrast, has just 50 members. Some cooperatives are not taking on new farmers during this market shift as they seek to protect their current members, Fenton said.
Mike Zahrndt, who milks around 40 cows in Hodgenville, attended the meeting with Scioto on Wednesday. He said he hadn’t decided whether he’ll sell to the co-op or stop production altogether.
“The market’s never going to be good,” he said. “You make money for three months and you starve to death for three years. We need to get out. We were looking at maybe next year or maybe 2020 to get phased out. It came a little early.”
In the midst of the 2014 economic boom, many farmers expanded their operations. Chris Goodlett, a Harrodsburg farmer, built a new $200,000 dairy barn. He had expected to work eight more years to pay it off. The Coombs family bought several acres of new farmland, and put in new waterbeds and fans in their barns.
When the market started to turn sour, the Coombs started to diversify their farm. Three years ago, they bought beef cows. Now, they’re selling the hay that they no longer need for their own cows, and thinking of buying their own processing equipment to make ice cream or bottle milk. Still, milk made up 85 percent of their income, and an investment in processing equipment would cost them around $500,000. That’s a price they’re not willing to gamble on.
As the Coombs family and others sell their cows, rural feed supply sellers and veterinarians will feel the effect, too.
“We contribute to a lot of our local economies, so it’s really rural America losing out,” Carilynn Coombs said. Vet bills, feed, fuel and equipment run about $14,000 a year per cow, the Courier Journal previously reported. The average farm feeds about $1 million into the economy, Cox said, adding that the 19 farms employed close to 40 people.
Rick Nethery owns a farm supply store that serves the Coombs and Taylor farms. “Three quarters of my revenue comes from small businesses,” he said. “It’s going to be a total change in the economy of the country.”
The burden of losing your livelihood hits not only financially but emotionally.
“It’s not like just losing a job,” Zahrndt said. “If you lose a job, you don’t have to go to that place every day, Whereas if you walk out the door, you’re still here. We took pride in what we did. We didn’t make a dime, but we still did the best job we could.”
The farmers’ investments are now starting to crumble. In Smithfield, Curtis Coombs has started to sell his animals for $1,100, even though he says they are worth $2,000.
On a recent visit to this farm, his sons, ages 1 and 3 — who he hoped to pass the farm down to in 30 years — rest inside while Curtis sits outside in his red pickup truck. It is the same truck he will use to transport one of his last cows.
He said he doesn’t know what he’ll do when they’re all gone: no more waking up before the sun to milk the cows, no more 18-hour days.
“To be honest, I don’t have a clue when to eat breakfast,” he said.
Even for farmers signing on with Scioto, the future remains uncertain.
“I’m very worried,” Sammons said. “There’s 10 of us here. A year from now, I’m worried if there will be any of us left.”
Source: MSN News