Milk surplus, lower prices threaten NH’s dairy farmers

Morrill Farm Dairy in Penacook has had to dump 5% of its surplus milk. (Photo courtesy Morrill Farms)

Amid  the Covid-19 pandemic, the dairy industry has seen two of its major markets — restaurants and schools — dry up overnight, leading to a surplus of milk nationally and the dumping of millions of pounds of milk that could not be sold.

While 2020 was looking like the year dairy farmers would emerge from depressed milk prices, that surplus is once again driving down prices and many fear will drive more dairies out of business.

“It’s going to take several years to get out of this. The survival of small dairy farms has yet to be established at this point. They are standing on shakier ground than ever before,” said Amy Hall, director of Granite State Dairy Promotion. “They are going to feel some financial pain because they have never seen demand get cut so quickly and so severely.”

Rob Johnson, policy director for the NH Farm Bureau, noted 7% of all milk produced by the largest dairy cooperative in the country nationwide was dumped in one week in early April due to the surplus. Hall said while the amount of milk dumping in New Hampshire was not known, dairies in New England have dumped 18 million pounds of milk in the past three weeks.

“They [dairy farmers] lost the school market and restaurants. That has been an enormous hit,” she said.

Dairy farmers are seeing markets shrink overseas as well. International trade markets have dipped anywhere between 15 to 17%, Hall said.

State Agriculture Commissioner Shawn Jasper said all these challenges at the national and international levels are being felt by the state’s dairy farmers.

“We are not an island unto ourselves. It will have a huge impact on milk prices. Milk prices to farmers could drop by more than one-third and put most farmers out of business,” if the pandemic drags out, Jasper said. “If nothing changes, it will be devastating and we will lose even more farms.”

Among the dairy farmers affected by the crisis is Morrill Farm Dairy in Penacook, a fourth-generation family farm run by Rob Morrill, his wife and three sons.

Morrill received a letter from his dairy cooperative stating it has seen sales drop 12% since the onset of the Covid-19 crisis and had to dump 5% of its surplus milk. Beginning May 1, the cooperative said it would be guaranteeing full price for up to 85% of what the dairies produced in March. Any milk produced over that amount will be paid at a substantially reduced price.

“We’ve got to try and curtail our production,” Morrill says. “Right now we are facing the unknown.”

He adds dumping milk is a last resort solution and there is an effort to get surplus milk to food banks instead.

Under pressure

The dairy industry in New Hampshire is relatively small but plays a major role in the state’s agricultural sector. There are about 90 dairy farms in New Hampshire, down from about 125 five years ago, Johnson said.

The New Hampshire dairy industry generates $55 million in state tax revenue, employs 5,300 and generates annual sales of $191 million, which is 30% of the state’s total gross agricultural sales, Hall said. New Hampshire dairy farms average 120 milking animals per farm and account for 70 percent of farmed land in the state.

Dairy farms were already operating under tight margins after four consecutive years of low dairy prices and Jasper said prices had finally begun to rise again in 2019.

“It was starting to come back and we were looking forward to 2020 looking better,” says Charles Price, who runs his Price Family Farm in Gilmanton Irons Works with his son and grandson, producing 1.7 million pounds of milk annually with 70 cows. With the surplus created by Covid-19, prices are again plummeting.

“It looks like we’ll have to tighten our belts,” Price says. “I won’t be buying any new equipment, that’s for sure.”

The price farmers will be paid for their milk is projected to drop to $12 per hundredweight by June, Jasper says. Hall said many dairy farmers in the Northeast region need $19 per 100 pounds to just break even. “It is devastating,” she said.

A number of factors had already put economic strain on the dairy industry before the Covid-19 crisis, including less people drinking milk as more non-dairy alternatives entered the marketplace, Johnson says.

Another factor is that dairy farmers across the country were adding more cows when prices were down in order to make up revenue losses but continued to add cows when prices were high to capitalize on those prices, Jasper said. That contributed to the depressed milk prices, he said.

“Even though tens of thousands of dairy farmers have gone out of business across the country, the number of cows didn’t seem to fall,” he said.

Federal relief

The federal CARES Act included $9.5 billion in emergency response funds to provide direct support to farmers, including dairy farmers. The CARES Act also adds $14 billion to the Commodity Credit Corporation, which can also be used to assist farmers.

Using those funds, the U.S. Department of Agriculture relief program will provide $16 billion in direct support to farmers affected by Covid-19. The federal government will also purchase $3 billion in fresh produce, dairy and meat to be distributed to food banks and other nonprofits. That plan includes spending $100 million per month on dairy products.

Hall said while the federal aid is helpful, it is a “teardrop in an ocean of need.”

The Northeastern Association of State Departments of Agriculture sent a letter to U.S. Agriculture Secretary Sonny Perdue urging him to put in price support provisions that would not allow dairy prices to fall below $19.50 per 100 weight, Jasper says, which is considered to be a break-even price for dairy farms.

Farmers were also eligible to apply for Payroll Protection Program loans though the CARES Act. Morrill, who has a full-time employee and three part-time employees, applied but said he did not receive a response yet. Morrill says his farm will likely see some of the federal relief money , and while it will help, it will not make up for the shortfall in revenue. He is waiting to see what the guidelines will be as to how it will be disbursed.

Price initially did not plan on needing federal aid. “I’m fortunate enough that I don’t have any loans I need to repay,” Price says. However, he received a letter from his coop stating it had to dump surplus milk and that milk prices would be dropping. “It is way below margin to produce milk,” Price says.

Help from NH programs

There are efforts at the state level to help New Hampshire farmers. The University of New Hampshire Cooperative Extension created an interactive map on its website to connect residents with local farms. UNH Extension teamed up with the New Hampshire Department of Agriculture to gather the farm listings. The online map includes farm locations and contact information, product categories, online and social media links and more.

And once the economy opens again, Hall wants to see the state move forward with the “NH’s Own” dairy premium program.

The dairy premium program, signed into law by Gov. Chris Sununu last year, allows the state Department of Agriculture to market milk from New Hampshire dairies with a “New Hampshire’s Own” label, allowing consumers to opt to pay for New Hampshire products with a 50-cent premium that would be returned directly to the farmers. The program was in development but put on the backburner when the COVID crisis hit.

“It’s even more important now than its ever been to get this product on the shelves,” Hall said.

The Department of Agriculture surveyed shoppers and found more than 80% supported such a program. Jasper said his department will be working to bring the program to fruition once the crisis has passed.

“We need people supporting New Hampshire agriculture and buying products that may be a little more expensive but are better quality products,” Jasper says.

This article is being shared by partners in The Granite State News Collaborative. For more information visit collaborativenh.org.