Low milk prices are good for consumers but bad for NY dairy farmers

Going on three years now, Churchville dairy farmer Kim Zuber has kept his budget lean, forgoing buying new equipment or doing repairs on his properties, which hold about 2,800 dairy cows.
Why? In part because milk prices have dropped to their lowest in a decade. While the price tumble might be good for consumers, it has meant New York farmers are making less money than they used to.
Milk is the New York farming industry’s number one commodity, and the state is the third-largest producer in the nation.
“It’s been pretty stressful for sure,” said Zuber, saying the downturn started for him in Jan. 2015. While he experienced a small reprieve last year, the general descending trend has had him keeping a close eye on the balance sheet. In addition to dairy production, he grows corn and alfalfa, most of which is consumed in-house, and wheat.
The milk price downturn is mostly out of the control of individuals or even groups of dairy farmers, said John Noble of Noblehurst Farms in York, Livingston County. It’s the global market that sets the prices.
“We are in a geopolitical marketplace, so it doesn’t really matter what we do,” he said. If the U.S. were able to export more milk — currently the U.S. exports about 15 percent of overall production — the prices might rebound, but there’s already a milk glut across the globe.
China was buying a ton of milk until 2014, when it suddenly stopped. In Europe, dairy market regulations meant to address falling prices in recent years caused the build up of milk powder on the continent. Those stockpiles are now weighing on the market and selling it back at too fast of a rate could further destabilize the market, Zuber said.
While some smaller farms may find it difficult to continue in this climate, often farms can ride it out if they watch their expenses, said Zuber. His father started the farm in the 1950s, and Zuber and his brother Eric manage multiple parcels across the region, totaling about 3,000 acres, he said.
At Noblehurst, they’ve been slowly diversifying their revenue streams, including a foray into food waste composting.
“Putting all our resources in milking cows, it just makes us more vulnerable to how the marketplace responds,” said Noble.
Milk prices dropping
The average price paid in 2016 to New York dairy farmers for a hundredweight — which is 100 pounds of milk — was down for the seventh year in a row to $17.25, according to the agriculture department.
A gallon of milk currently costs about $2.96 nationwide, according to the Bureau of Labor Statistics. In 2008, it was $3.87.
Milk prices in the U.S. are determined by a number of factors, including the class of milk, the trade value on the Chicago Mercantile Exchange, federal pricing guidelines and dairy agreements under the North America Free Trade Agreement, or NAFTA.
“Six months ago, we thought this year would be challenging, a little sober, but gradually gaining on the milk pricing issue,” said Richard Ball, commissioner of the state Department of Agriculture and Markets.
“But the world supply issue and concerns about NAFTA, etc., we still have an oversupply — and it looks like it’s going to be another challenging year for our dairy industry.”
New U.S. legislation, called the Dairy Farm Sustainability Act, is proposed to bring back the “price floor” for milk, U.S. Sen. Kirsten Gillibrand, D-N.Y., announced last week. It would work in tandem with the existing Margin Protection Program, which provides insurance for farmers during price volatility.
Too much milk
As New York milk production has continued on a general upward track, people are buying and drinking less of it nationwide.
The number of children who said they had not consumed milk on a given day doubled between 1978 and 2008 — from 12 percent to 24 percent, according to a U.S. Department of Agriculture study.
According to the Pew Research Center, Americans today are drinking about 42 percent less milk than they did in 1970.
There are more varieties of soft drinks, energy beverages, bottled waters and other milk alternatives, like soy or almond milk, available to consumers than there has been in the past.
There were about 400,000 fewer total sales of packaged milk products in New York in 2016 than there were in 2006, state figures showed.
During that same time span, though, New York milk production went up by more than 2 million pounds, or 22 percent more milk over the 10-year period.
The yogurt boom
The recent trouble for dairy farms is a stark shift from several years ago when the industry was on the rise because of New York’s yogurt boom.
In 2013, New York surpassed California as producing the most yogurt in the nation, thanks largely to Chobani producing Greek yogurt in central New York. The yogurt production growth fueled an increase in milk production: It takes as much as four times as much milk to make Greek yogurt as regular yogurt. New York Gov. Andrew Cuomo cut regulations to help the industry, but the worldwide drop in milk prices has stunted regional growth. Some upstate factories have foundered, leading to less milk than some producers had expected.
A big Quaker Müller plant in Batavia closed 2½ years after it opened and Kraft sold off a cheese plant in the Southern Tier, which even with a new buyer is not expected to need as much milk.
Dairy farming future uncertain
Farmers in New York said they are trying wade through all the different circumstances — and trying to stem the tide until milk prices come back.
Over 40 years in farming, Noble of Noblehurst Farms has been through downturns of this nature twice before. But he worries this one could speed up the decrease in dairy farms while acknowledging that this is what dairy farmers signed up for.
“Some can’t see the light at the end of the tunnel,” he said. “The economics aren’t working. But the bad comes with the good…we know it’ll turn around. It always has in the past.”
NVAUGHN@Gannett.com
STADDEO@Gannett.com
By: Natasha Vaughn and Sarah Taddeo
Source: Democrat and Chronicle
Link: https://www.democratandchronicle.com/story/money/2018/03/17/low-milk-prices-good-consumers-but-bad-ny-dairy-farmers/435523002/