BRUCE ROWLAND
Press-Republican
PLATTSBURGH — In 2011, the highest milk prices ever recorded — more than double compared to the lows of 2009 — are allowing dairy farmers to pay down debt, improve their facilities and relax a little while preparing for the next unpredictable roller-coaster ride.
"It's a different world all right," said dairyman Don Dimock of Dimock Farms LLC of Peru. "It's been a lot more enjoyable, that's for sure."
Always unstable, prices for the perishable product that can't be stored by farmers until prices improve now can fluctuate month to month, making it extremely challenging to manage farm finances.
"Costs have been up some too, but there's been some profit, so it makes it a lot easier," Dimock said. "It's allowed a lot of us to do some catching up that's badly needed."
COST OF CORN
The most significant cost increase had been for corn. The spring flood and Tropical Storm Irene severely damaged the crop in the North Country, while droughts in Texas and diversion of corn for ethanol in the Midwest combined to keep supplies scarce.
"Feed is a big expense in the dairy business," Dimock said, adding that fuel, fertilizer and seed prices have increased as well, so it's taken a little of the glow off the high milk price.
"The corn price being up has an influence on the other grains, too."
Corn prices aren't expected to drop a lot, but may not be as high as they have been for the immediate future.
Fortunately, Dimock said, his farm largely survived the vagaries of Mother Nature last year.
"Here, we weren't flooded out," he said.
But on Aug. 30, Tropical Storm Irene came through.
"We had a lot of corn that was blown down and it made it challenging to harvest it," he said.
Labor a problem
But in the end, despite the leaning stalks, they were able to bring in 90 to 95 percent of a crop.
"It looked a lot worse than it was."
Another challenge currently faced by dairy farmers is finding adequate labor without violating immigration laws. There is no guest-worker program for dairy like there is for apple growers.
In fact, Dimock had to turn to Craigslist recently to find some help.
"It can be challenging, but over the years we've been able to find people locally," he said.
The Craigslist applicant was from Plattsburgh and seems to be working out despite the fact he's had no experience milking cows.
"So far, so good," Dimock said.
As for the future of milk prices, Dimock said, economists expect demand to continue to be fairly strong. Exports need to hold up as consumers in China and the emerging world improve their diet and develop a taste for dairy products.
"We're expecting the price of milk to drop a dollar or two, not a big drop," Dimock said. "As long as we keep exporting dairy products, it keeps the supply in line."
SUPPLY AND DEMAND
While farmers definitely don't want to see the extremely low prices again, if milk gets too high, they begin to lose demand, especially in the cheddar-cheese market. He said work being done by dairy cooperative Agri-Mark and others on the next Farm Bill focusing on smoothing out the wildly fluctuating prices to bring more certainty for farmers.
"The highs and lows get worse all the time," Dimock said. "In the dairy business, we're trying to establish a program that will lessen these extremes. There is government legislation in the works at the federal level to stabilize the dairy economy somewhat."
He said it may allow farmers to buy insurance that would help pay for the cost of any program that controls the price of milk.
"It's been just too disruptive in the past few years," Dimock said.
value-added products
On the positive side, he said, dairy farmers are benefiting from the buy-local movement as their co-ops get involved in production of cheese and other value-added products for retail sale.
"I'm not looking at too bad a year," he said of 2012. "I think it's going to be doable."
Anita Deming, a dairy specialist and executive director of Cornell Cooperative Extension of Essex County, noted that milk dropped as low as about $10 per hundredweight for a while in 2009.
This caused many farmers to go out of business and set the stage for the recent surge to as high as about $22. The average price in 2011 was $20.75, compared to an average of $11 in 2009.
The dairy business is now global, and markets are affected by the value of the dollar. A disruption like a string of bad growing seasons in New Zealand, a major dairy producer, can have a ripple effect.
"The world had a decrease in the amount of milk," Deming explained. "In the U.S., Texas had a drought and had to cull many of their animals."
Dairy herds were also significantly diminished in the United States when prices tanked in 2009 and farmers went out of business. They also fed less due to high corn prices, producing lower yields of milk.
Demand stayed strong, though, as consumers cut back during the recession, favoring cheese for protein over steak. A lot of pizza with mozzarella was eaten during hard economic times, but parents didn't skimp on fluid milk.
"If people need milk for the kids, they'll buy it," Deming said.
For the upcoming year, Deming said, economists are predicting a milk price of $19.25, down $1.50, and for budget-projection purposes $17.50 should be a good planning number.
"Right now, we're at the high end of the cycle, but it probably won't stay that way," Deming said, adding that many farmers still haven't pulled themselves out of the hole from 2009. Farmers were losing $200 per cow, she said, and the bigger you were, the more you lost.
"That was the time when people went out of business," Deming said, adding that the number of cows in the North Country has been trending downward. "People are doing other things."
RISES AND FALLS
With the economy struggling, the farms that were sold haven't been going for development, although there has been a ready market.
Fortunately, there has been expansion by farms such as Giroux's Poultry in Chazy, which has been buying land to grow its own feed for its chickens. So, much of the land has stayed in agriculture but has been put to other uses.
Until the next crop comes in, Deming said, the price of corn will likely stay high.
"Even with these super-high prices of milk, it has not been a windfall," she said.
Corn was $3.55 a bushel in 2009-10, $5.18 last year and is expected to come in at $6.70 for 2011-12, and soybean prices have also risen.
IMMIGRATION EFFECTS
Deming agreed labor is a problem with no guest-worker program, adding that it's very hard to find Americans who are willing to work on a dairy farm for any length of time.
"There are fewer and fewer of these people around," she said.
New immigrants are a traditional source of farm labor, but that's been slowed by immigration crackdowns.
If an applicant looks Hispanic but has papers, it's the law that a farmer/employer has to accept that and not be guilty of discrimination. However, if the papers turn out to be fake, the farmer has hired an illegal worker.
Sweeps can happen where farm workers are gathered up by authorities and held in custody while their status is being determined. Even if they turn out to be legal, that leaves no one to do the milking on the farm.
"If you haven't gotten your cows milked in a week, you're down the tubes," Deming said, adding that it's a real Catch 22. "The farmers are worried about how all this is going to turn out."
One trend, as a result of the difficulty finding labor, is a closer look at automation. Though costly, robot milkers, one for every 50 cows, have been showing up on some farms.
"It seems to work all right," Deming said. "One thing is that it's very patient, and it never gets mad at the cows."
'A BIG IMPACT'
At the William H. Miner Agricultural Research Institute in Chazy, where more than 300 cows are milked as part of the research operation, the increased milk prices have had a significant positive impact.
"A $1 change at our level of milk production has a $100,000 impact on our revenue," said Wanda Emerich, dairy outreach coordinator. "It's a big impact."
She said that when the price is down below $17 per hundredweight, "it costs us to produce."
Farms the size of Miner have had to learn how to ride out the busts and take advantage of the booms.
"For the most part, people are talking about paying down debt," she said, adding that farmers try to borrow money as cheaply as possible and pay it back as soon as they can.
LOOKING TO THE FUTURE
She agreed that the period of low milk prices in 2009 led to a lot of consolidation, but there can be silver linings.
Some farmers may be aging and not have a next generation to hand the operation off to, and they've found buyers in the form of larger dairy farms or other agricultural enterprises.
"Everyone in the business needs a good transition plan," Emerich said.
As bigger farms buy smaller ones, there are efficiencies that come into play.
"For the co-ops receiving the milk, it's one stop instead of four," she said.
Milk prices used to shift some, she agreed, but not like now.
"It's a lot more volatile than what we're used to," she said. "You're producing a commodity that you don't know what you're selling it for."
She said more future trading in milk to manage risk may be a coming trend. You miss out on the high highs, but avoid the big dips.
"It's like us buying insurance," she said, adding that co-ops may offer it as part of their programs and it's available to producers of any size.
ECOLOGICAL ISSUES
Another coming worry for farmers are Concentrated Animal Feeding Operations (CAFO) environmental rules that deal with animals fed in confined areas like dairy cows in barns.
To limit non-point-source pollution, where containments get into streams, lakes and water supplies, often from dairy farms, states regulate how each producer uses the manure generated on the farm.
"Some changes are coming. There will be in the future further permitting required," Emerich said, explaining that winter spreading of manure and soil-quality tests may come into play.
Stemming from the U.S. Environmental Protection Agency (EPA) and the Clean Water Act, the rules are implemented by the states and differ in New York and Vermont.
"In even the farther future, you'll be seeing more regulation on odor and air regulations," she said.
Emerich agreed that the spring floods and Tropical Storm Irene impacted the quality and quantity of feed that producers had for harvest.
"There was a lot of sediment left in the corn," she said. "It changes the whole profile of what the corn is."
She said predicting changing weather conditions and length of the growing season at a particular farm and matching varieties of corn that maximize production to those expectations can be a key to success.
For example, choosing the most productive stock doesn't work if it doesn't have time to mature.
"There are a lot of good changes genetic-wise going on with corn," Emerich said. "You don't want to stick with some variety just because you've always stuck with that."
She said farmers can use the good times they're currently experiencing to plan for the future and improve their operation. Maybe not a big expansion, just smaller improvements such as constructing more comfortable stalls for their cows.
"I think it's a matter of relief to still be in business," she said.
