ALBANY–Local dairy farmers, buffeted by last year’s deep drop in milk prices, could see an increase in their milk checks if federal Department of Agriculture officials agree to a request from the state to set a national base price for the milk consumers drink.
State Agriculture Commissioner Patrick Hooker recently wrote to USDA Secretary Thomas Vilsack encouraging him “to consider the benefits of establishing a national floor” for the prices of fluid or drinking milk, which is called Class 1 milk.
Commissioner Hooker wrote, “Our current system is outdated. In fact, the current system devalues fresh, locally produced milk by directly connecting its price to the value of manufactured products, which primarily compete in a national and international market.” The letter to Secretary Vilsack was contained in a recent press release from Commissioner Hooker.
“I think it’s a good effort, it’s always good to ask,” Kinderhook dairy farmer Eric Ooms, president of the Columbia County Farm Bureau and vice president of the New York State Farm Bureau, told The Columbia Paper March 9.
The establishment of a floor or base price would help farmers in the Northeast get more money for their Class I milk, unshackling it from the price farmers are paid for milk used to make manufactured products like cheese. Farmers typically receive less for manufactured classes of milk, which drives down the overall price they receive for their product.
“Drinking milk [prices] should not go up and down totally at the whim of cheese prices,” said Mr. Ooms, who, with his father, two brothers and four employees, milk 400 cows at their A. Ooms & Sons dairy farm, established in 1952.
Mr. Ooms says about half of the milk he produces becomes drinking milk, while the other half goes into manufactured products. The last check he received for all milk produced in December was based on just over $16 per “hundredweight” or cwt (100 pounds of milk). Mr. Ooms said depending on the market price of cheese in the coming months, the implementation of a Class I floor at a suggested level of $18.50, would mean an increase of $2.50/cwt.
The amount Mr. Ooms received for the milk that went into manufactured products was between $12.50 and $13/cwt for December milk.
If the floor price for drinking milk is instituted in New York, “that could mean an extra $15.5 million per month for dairy farmers and the potential of $465 million annually for the upstate economy when one includes the economic multiplier effect of milk production,” said Commissioner Hooker.
The dairy price collapse of 2009 was one of the worst in decades, resulting in unprecedented losses for producers. In this state, the average combined, or “blend” price for the year was $12.26/cwt, down from $17.87 in 2008. That’s well below the cost of production.
As a result, many dairy farmers incurred losses that translated into about $100 per cow per month. For an average size dairy farm in the state of about 100 cows, the monthly loss was $10,000.
Mr. Ooms said that despite the price crisis, production was only off by four tenths of one percent. “I don’t know how people are staying in business,” he said.
Not only are milk inventories high, people are not eating out like they used to, either. When people eat in restaurants they consume more dairy products than when they eat at home, said Mr. Ooms, noting, “That’s just the way it is. Pizza Hut puts much more cheese on a pizza than Tombstone does.” Tombstone is a brand of a packaged frozen pizza that consumers heat up at home.
The U.S. is not exporting as much as it used to, and that also contributes to the problem. Mr. Ooms mentioned the melamine scandal in China, in which some milk processors there added the poisonous chemical to baby formula, causing some children to die. That depressed the Chinese milk market, creating a ripple effect here. “More than ever before we are in a world marketplace,” said Mr. Ooms.
That’s why now locally supplied milk cooperatives like Hudson Valley Fresh offer “a great opportunity,” said Mr. Ooms. The five-year-old, not-for profit dairy cooperative pays eight local dairy farmers a fair price and gets the milk on store shelves within 36 hours after leaving the farm.
“Here in the Hudson Valley we have a huge affluent population that cares about local products and is willing to pay a premium for them,” said Mr. Ooms.
The economic impact of the state’s dairy industry is calculated at more than $10 billion in-state and $50 billion regionally. This state has 6,200 dairy farmers with an average herd size of about 100 cows. Studies have shown that one dairy cow generates around $15,000 in economic activity typically spent locally benefiting feed suppliers, equipment dealers and small businesses in upstate, rural communities.
Ten years ago Columbia County had between 45 and 50 dairy farms, according to Columbia County Cornell Cooperative Extension Educator Stephen Hadcock. Today he estimates there are 31 dairy farms. The total number of dairy cows has dropped from about 9,900 a decade ago to about 6,900 today. “We have lost farms, but the farms that remain, in general, have gotten larger,” Mr. Hadcock said by email.
In his letter to the USDA, Commissioner Hooker asked that the base price be established immediately “to ensure a fresh local food supply for our consumers at home, and appropriately compensate those farmers who produce it.”