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Opinion: Help Is Needed for Family Dairy Farms

Oversupply of milk and decreasing consumer demand mean low prices.

Dairy farmers across the nation are facing low milk prices and decreasing consumer demand. For many farms, such as my family’s farm in eastern Iowa, the future looks bleak. Small commercial farms are being bought out by large corporations, and with hundreds of milk contracts recently cut by companies like Dean Foods, the future of the traditional family dairy farm is at risk. Three top concerns are the oversupply of milk, decreasing consumer demand for milk products, and the price of milk.

Per capita consumption of fluid milk has dropped by 25% in the last 20 years, according to the USDA, while alternatives like soy and nut-based drinks are on the rise. Dairy farmers and industry advocates are seeking stricter labeling regulations form the FDA for the use of the word milk on plant-based drinks.

My father, Bob Kettelkamp, shown above, says milk surpluses first became a big issue with the use of the growth hormone BST back in the 1990s. “The first few farmers to use BST got ahead of the game and everyone else never really caught up,” says Kettelkamp. “Most small farmers were against the hormone, but big producers really took advantage of it, increasing their production.” 

The gap between milk supply and demand has increased in the past four years, further lowering the price of milk. According to the USDA, milk production has risen from 206,054 million pounds in 2014 to a record high of 215,466 million pounds in 2017. This 9,412-million-pound increase was met with a drastic drop in milk prices from $24 per cwt (hundredweight) in 2014 to an average of $17.60 per cwt in 2017, with some regions well below $14 per cwt.

Prior to 2014, the dairy industry was using a risk-management program that protected producers from low milk prices. In the 2014 Farm Bill, the Milk Income Loss Contract (MILC) was replaced with the current Margin Protection Program (MPP).

According to the USDA Farm Service Agency, the MPP is a voluntary risk-management program created to protect producers from low margins, rather than only low milk prices. MPP calculates the margin by subtracting average feed costs from the state-specific all-milk price to determine what protection is necessary.

Dairy cows in eastern Iowa

Some farmers are concerned with the accuracy of the calculation. “The feed-cost formula doesn’t reflect conditions across the country,” says Kettelkamp. “It also doesn’t calculate producer price differential. The actual milk checks we are getting are substantially lower than what the formula uses.”

According to Farm Bureau, enrollment in MPP dropped from 41,809 licensed dairies in 2015 to only 20,314 enrolled as of March 2017. This year, the program saw a continued decline in enrollment and has reopened the enrollment period until June 1. Farmers enrolling between April and June of 2018 will receive retroactive cover from the first of the year.

Farmers can participate in MPP or the Livestock Gross Margin (LGM) insurance program. As part of the revisions to MPP, the program is waving registration fees for underserved farmers (veterans, minorities, and women). The program will now calculate margins each month instead of every other month. It has also increased the catastrophic coverage rate from $4 per cwt to $5 per cwt, offering more protection for the same price.

“I’ll have to look into the updates, but I’m afraid these changes came too little, too late for some farmers,” says Kettelkamp.

Niche markets

Some dairy farm families have found success through niche marketing. Hansen’s Dairy is a family-owned, sixth-generation dairy farm in Hudson, Iowa. The Hansens stepped out of traditional commercial production in the early 2000s when they began processing and bottling their own milk.

Brett Hansen, one of four sons currently running the farm, has been witness to many of the issues facing commercial dairy producers, but notes that his farm is insulated from a lot of the issues because they process and retail their own product.

“The farm has to provide for our five families,” says Hansen. “If we weren’t processing ourselves, we wouldn’t be farming.”

With lower-than-ever milk prices, dangerously minimal demand for milk products, and a nationwide milk surplus, the current state of the industry is cause for concern. However, there are ideas to revitalize the dairy industry, including improved dairy promotion and FDA enforced labeling laws to increase consumer demand.

“We need to keep creating new products using milk and broaden our customer segment,” says Hansen.

The future of the family dairy farm lies in the flexibility, creativity, and hard work of producers and advocates. The industry’s hope remains in farmers’ abilities to take advantage of alternative markets and creative promotion strategies.

About the author

Sara-Anne Kettelkamp is a sophomore studying agricultural communication at Iowa State University. She was raised on a dairy farm in eastern Iowa. 

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