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Agri-mark to limit milk production

  • As milk prices are forecast to continue declining in February, Agri-Mark dairy cooperative farmers received a letter with their monthly milk check providing contact information for financial and mental health help organizations. The letter also stated that the cooperative is preparing to provide a "free, comprehensive member assistance program." "As you can imagine, farmers aren't too keen about asking for help," said Paul Doton, of Barnard, right, a member of the Agri-Mark board of directors for 23 years. Doton does barn chores with his wife Sherry Doton, middle, and his son Bryan Doton, left, on their farm in Barnard, Vt., Wednesday, Feb. 7, 2018. (Valley News - James M. Patterson) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

Published: 10/22/2019 10:14:02 PM
Modified: 10/22/2019 10:13:59 PM

Struggling just above the break-even point, the Agri-Mark dairy cooperative, which has about 900 members in New York and New England, is instituting a supply management program on Jan. 1.

Supply management is seen as one way to save the struggling dairy industry, which is rapidly losing farms after five years of low milk prices. In Vermont, the number of dairy farms has dropped 5% since January, from 700 to 664. In 2011, the state had 996 dairy farms.

The Andover, Mass.-based Agri-Mark operates milk processing plants in Springfield, Mass., Chateaugay, N.Y., Cabot and Middlebury. It markets more than 300 million gallons of milk for about 1,200 dairy farmers in New York and New England. The co-op outlined the supply management program — which was approved by its board — in a letter to its members Oct. 1.

“The co-op profit is barely above the break-even point as we have experienced significant losses on excess milk and the downturn in world trade, especially on whey products, continues to create losses in this area,” the co-op said in the letter.

The co-op said that in September as the market for cheese grew, the market for butter shrank, reducing the co-op’s year-end profit forecast by $2 million.

Agri-Mark’s program will allow its members to supply up to 2 million pounds of milk per year, broken up into monthly production amounts. There will be an average price deduction for any member who exceeds the monthly base that the individual farm has established.

The idea of a supply management program is not popular with all farmers, especially the larger producers. In Canada, which has a supply management system in place, there are economists who have called for it to be dismantled, saying that it artificially inflates prices for milk and other dairy products.

But among many in the dairy community in the U.S., supply management is widely seen as part of the solution to the low milk prices that are putting farmers out of business. The Vermont Milk Commission in the last few years has supported a national supply management program.

“If you had a more balanced supply and demand across the whole nation, the price would come into a range and stabilize,” said Diane Bothfeld, who runs the dairy program for the Vermont Agency of Agriculture. “That would be helpful for farmers.”

The Agri-Mark program announced Oct. 1 is internal, but comes during a national discussion about supply management. Last fall, the cooperative weighed in on the broader debate about supply management at the annual meeting of the National Milk Producers Federation, said Agri-Mark spokesperson Doug DiMento.

“It got a lot of discussion, but it ended up getting shot down,” said DiMento, noting that the largest dairy-producing states, including California, Wisconsin, and Idaho, don’t want anyone to control production.

“They’re fine with growing like crazy,” he said.

The state’s other large dairy cooperative is the St. Albans Co-op, which merged with the much larger Kansas-based Dairy Farmers of America last summer. DFA has not instituted any cooperative-wide supply management programs, but in some regions, it does have a program similar to the one Agri-Mark approved, according to Brad Keating, senior vice president and chief operating officer of DFA’s northeast area.

“As a cooperative, Dairy Farmers of America does not have limits on how much milk a member can produce,” Keating said in a prepared statement. “In some regions or areas, particularly when market dynamics are difficult, we have utilized various programs that allocate the cost of additional milk production to members that produce more milk.”

Supply management is the only way that U.S. farmers can compete as international operations expand into the country and all farmers use technological advances to create larger dairy operations with lower margins, said farmer Eric Lyons of Toledo, Ohio, in Dairy Business magazine.

Lyons wrote that efforts to meet the oversupply challenge through more aggressive marketing of fluid milk overlooked the “new dairy reality” in which consumption of cheese, butter, sour cream, and yogurt is reaching record levels.

“If you live in the real world, there is only one other way to avoid having to trust your livelihood to traders, export marketers, retail food monopolies, or politicians’ foreign policy whims,” Lyons wrote of supply management.

Agri-Mark members that have expansion projects underway as of Oct. 1 this year will be able to petition the Agri-Mark board to increase their base production amount above the two million allowed under the supply management program.

“We need to maintain a solid financial position to keep our five-year CoBank loan agreement which has very attractive rates and a great deal of borrowing flexibility” the co-op said in its letter.

In addition to branded products for Cabot Cheese and McCadam Cheese in Chateauguy, Agri-Mark also manufactures condensed blends for ice cream and bakery items, bulk cheese, butter, non-fat milk powder and whey products.

“They are trying to match up the milk lines of their own cooperative to the demands beyond their cheesemaking,” Bothfeld said.

Milk prices have been falling for about five years now, although they rebounded slightly in the second half of 2019. The largest drop in dairy farms this year, nearly 15%, has been in Essex County, according to Bothfeld’s data. Chittenden and Washington counties have seen declines of nearly 11 and 10% respectively.

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