Dairy farmers’ futures uncertain after rising costs, drought

SWEET SPRINGS, Mo. – It’s almost 5 a.m. Nathan Hemme rolls out of bed and walks to the barn with his Labrador retriever trailing behind. He releases the 150 cows from their pens. The cows line-up in a linear fashion and wait to be milked.  Hemme puts on his rubber boots and gloves, then he sanitizes the cow’s udders one by one and attaches a milking machine. Once a cow runs dry, the machine detaches and another cow takes its turn.

This is a typical morning for Hemme,28, who works on his father’s farm in Sweet Springs, Mo., about an hour west of Columbia. Rain or shine, he milks cows twice each day, at 5 a.m. and 5 p.m., seven days a week, all year long. Yes, even on Christmas.

Hemme loves his job, despite the hard work. But like many other dairy farmers across the United States, Hemme has been feeling an economic pinch.

According to the U.S. Department of Agriculture, more than half of the nation’s dairy farms have gone out of business in the past decade. Missouri dairy farmers are no exception. In Missouri, the number of commercial dairy farms has declined by over 50 percent since 2000, according to the USDA.

The major drought across Missouri in 2012 made things worse. The sweltering heat burned up crops and drove the price of grass, grains and other feeds higher. Milk production has been steadily declining. And the price of dairy products such as cheese has increased.

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This graphic shows the decline of commercial dairy operations in Missouri from 2000 to 2014. Grade A dairy farms provide milk that is meant for consumption while manufacturing grade dairy farms provide milk intended for manufactured milk products like cheese and butter.

In April, Gov. Jay Nixon signed the Dairy Revitalization Act, which will use state funds to pay up to 70 percent of the premium for insurance that protects milk producers when drought or natural disasters ruins their crops and when the national dairy margin is too low. The national dairy production margin is the difference between the all-milk price and average feed costs. This will encourage farmers to enroll in the new federal insurance program and select the high-reimbursement cost option. By selecting the higher-bracket, farmers would receive larger reimbursements for their feed costs, and increase their likelihood to survive a rise in feed costs due to bad weather.

The law also will establish a scholarship program to encourage students to work in Missouri’s agriculture industry. As older, experienced farmers retire, fewer youth are entering the industry.

There have been a number of proposed solutions to deal with the dairy crisis. Some farmers have joined forces and decided to consolidate their smaller farms into larger ones. Other farmers have sold their businesses to massive corporations. But ultimately, these decisions leave people questioning the future of the family-owned dairy farming industry.

The concerns of the dairy industry

Larry Purdom, 72, is a dairy farming veteran. As a 13-year-old in the late 50s he joined the Future Farmers of America, a national educational program for those interested in agriculture and leadership, and started selling his own milk from two cows. He’s sold milk every day of his life since, he says.

Two of the 150 dairy cows at Nathan Hemme's farm stare out at the field. Photo by Berkeley Lovelace Jr.

Two of the 150 dairy cows at Nathan Hemme’s farm stare out at the field. Photo by Berkeley Lovelace Jr.

Three years ago when Purdom saw the price of corn increase from $4 to 7 per bushel and the monthly price of feed increase from $16,000 to 18,000, he was more concerned for the future of the younger generation of dairy farmers in Missouri. He says many older farmers have reserves to sustain their business after a major drought, but for the younger farmers just entering the business, weather-related incidents could mean bankruptcy.

Purdom worked within the Missouri Dairy Association administration for 25 years. There, he says, he witnessed the hard times for young farmers in Missouri. As farmers were making less money than they were spending during the drought, they couldn’t expand their businesses. They couldn’t invest in new technologies needed to keep up advances in dairy farming.

He saw farmers couldn’t make their monthly payments and shut operations down.

“People get old like me and they are going to be retired some day,” Purdom said. “[The young farmers] are the future.”

The average age of a dairy farmer is 58, according to Thomas McFadden, director of the animal sciences department at MU. He says older dairy farmers are nervous for their profession as they retire because fewer people are entering into the industry.

McFadden said this trend might be due to the job being so time- and labor-intensive. Most other types of agricultural professions are busy on a seasonal basis. Dairy farming, however, is a daily commitment.

“All of those inevitable milking times. That probably would be the main reason for farmers not entering into the business,” Mcfadden said. “It is year round.”

The decrease in the number of dairy farmers comes at a cost. According to data provided from the Missouri Dairy Research Center, the number of grade A and manufacturing commercial dairy farms has decreased in Missouri. Grade A dairy farms provide milk that is meant for consumption while manufacturing grade dairy farms provide milk intended for manufactured milk products like cheese and butter. According to the research center, from 2000 to 2014 the number of grade A commercial operations has decreased by 50 percent and the number of manufacturing operations has decreased by 29 percent.

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The number of milk produced per cow has fluctuated slightly from 2005 to 2014. Thomas McFadden says some dairy farmers expanded their farms with more cows.

McFadden said the decrease in dairy operations affected active farmers because they wouldn’t know how much milk to produce to meet demand. This decrease also resulted in problems for local cheese plants in Missouri as well.

For example, a plant working with Schreiber Foods Inc., a dairy company in Kansas City, Mo. which produces and distributes cheese, had problems. Without enough milk to produce cheese, the plants had to buy their milk from other locations across the Midwest which cost them more money for transportation expenses, Purdom says.

“I’ve seen people with tears in their eyes because they can’t pay their bills,” Purdom said. “Those were the young men that were going to be our future in the dairy people. Eighty-six people lost their job at the cheese plant because (there was) not enough milk.”

Solutions to the problem

That’s why Purdom says government assistance is essential for the stability of milk producers.

Purdom helped write the bill that Nixon signed. The team that wrote the bill previously tried to get it approved last year, but Nixon ultimately vetoed it. This year, after some revisions, the bill was sent back and ultimately signed.

The legislation will enhance the title provisions of the federal Farm Bill, requiring the Missouri Department of Agriculture to begin a dairy producer assistance program for producers who participate in the federal Margin Protection Program for Dairy program. The protection program gives producers weather-based coverage, at no cost to the producer except for an annual $100 administration fee. The state program reimburses dairy producers for 70% of their federal premium payment.

Purdom feels he is trying to save the future of dairy farming for family farmers like Hemme.

Hemme, who has a wife and two small children, has experienced the problems of keeping up with the rising costs as well. He says for many farmers it is tempting to turn your father’s dairy farming business into a small beef cash and crop operation. That’s more profitable, he says.

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The milk cow population has decreased by almost 30,000 in Missouri from 2005 to 2014.

“When you add small profit margins or red ink to the equation it makes it an easier decision to get out of the business,” Hemme says. “There are a lot of 28-year-old farmers that would rather climb into a tractor first thing in the morning than milk cows first, then climb into a tractor.”

Hemme is passionate and would rather stay in the dairy farming business. He wants his son to take over the farm when he is old enough.

Hemme notes that some farmers are not too fond of the bill. Some have nicked name the bill the “Obama Cow” because they see it as a government handout.

These dairy farmers think that the government should let the market equalize on its own, Hemme said.

Hemme, however, is happy with the bill and the support it will provide. “The reality of the situation is simply this;” Hemme says, “unless you want to see our states dairy producer numbers to continue to dwindle, we need to support our dairy producers, encourage the next generation to carry on, and improve their family’s dairy.”

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