Post by eljay on Mar 10, 2018 13:30:21 GMT -5
www.lancasterfarming.com/farming/dairy/dairies-entering-termination-territory/article_32ecf24d-cd8c-5921-89db-105d651d2a68.html
Alisha Risser is in a race against the clock.
The Lebanon County dairy farmer and her husband John just received notice that they will lose their milk market at the end of May.
In between daily chores, she has been working the phones to try to find a home for her product. She called eight other milk marketers last Saturday, hours after receiving the notice.
So far, no takers.
“I don’t know what else I could do,” she said. “At this point, we are worried about our family and how our kids are handling it. We are trying our best to get a market.”
The Rissers were one of 42 Pennsylvania dairy farmers that were notified last week that Dean Foods would be terminating their contracts.
And that was just one of several surprises affecting Mid-Atlantic dairy farmers.
Maryland & Virginia Milk Producers Cooperative Association sent a letter to its farmers about a reduction in their advance milk checks issued on March 1.
And Land O’Lakes Inc. is offering a voluntary buyout program to dairy farmers in portions of the eastern and upper Midwest.
The choices might be about economics, but there is a human price to the situation, Pennsylvania Agriculture Secretary Russell Redding said. The loss of markets is forcing farm families to make choices they might not otherwise consider.
“The first concern is these families and how we help them,” he said.
Redding is exploring assistance options through the state Department of Community and Economic Development.
The Center of Dairy Excellence is ramping up efforts to assist farmers with pending decisions, and Redding said farmers should contact the center for help.
Redding said he received the first emails from independent dairy producers last Saturday. Sixteen western Pennsylvania and 26 eastern Pennsylvania farmers received a certified letter.
Dean Foods also sent letters to farmers in Kentucky, Tennessee, North Carolina and Ohio.
The Pennsylvania Milk Marketing Board was also notified of the terminations.
In a Dairy Herd Management article on Monday, Reace Smith, Dean’s director of corporate communications, said a surplus of raw milk, declining fluid milk sales and companies entering or expanding in the milk processing business “have exacerbated an already tenuous situation in a highly competitive market.”
“We are trying to keep our heads above water. It’s just been overwhelming,” Alisha Risser said. “We are trying to get our work done, and everything else.”
She said her heart is breaking for all of the other farmers who have also lost their markets. She and her husband started milking cows 17 years ago. Now, part of their conversation is an exit strategy if they can’t secure a new market for their 80-cow dairy.
Price volatility has been a part of the dairy landscape since the mid-1990s, said Andrew Novakovic, an agricultural economics professor at Cornell University.
He said the macro- and microeconomic situation is a “concern and somewhat uncharted.”
Uncertainty, instability and inadequacy drive volatility. Novakovic said futures markets and forward pricing only address “the certainty part of this problem, maybe a little of the stability part — but not much — and offers absolutely no guarantees on adequacy.”
Supply and demand in the national and global marketplaces influence the current situation.
“Challenges come and go, but I think we are in for a protracted period of tough fundamentals and are not at all well-positioned to deal with the adjustments that will ultimately be required,” Novakovic said.
“It took us at least 10 years to dig out of the largely self-inflicted hole of the 1980s,” he said, “and I think this situation is a good deal more challenging.”
According to a letter sent to Maryland & Virginia’s 1,300 producers, its Federal Order 1 and Federal Order 33 members received an advance check of $10 per hundredweight. Federal Order 5 and 7 members received $12.62 per hundredweight. The co-op’s membership extends from Pennsylvania to Georgia.
“The cooperative is managing through a tight cash position, made tighter by unforeseen mechanical issues at two key plant operations in late January and early February,” the co-op said in a prepared statement to Lancaster Farming. “The decision to reduce the announced advance was driven strictly by cash availability.”
The cooperative owns two fluid and two dairy ingredient plants.
“The cooperative is still in business,” Maryland & Virginia said. “We’re navigating a challenging marketplace, just as our members are doing on their individual farms.”
Maryland & Virginia members are encouraged to attend one of the cooperative’s annual meetings at the end of the month. The Pennsylvania meeting will be March 27 at Liberty Mountain Resort in Carroll Valley. A second meeting is set for March 29 in North Carolina.
Land O’Lakes sent letters to members in its East region and select areas in its Upper Midwest region. Qualifying members have the option to exit their milk marketing and membership agreement, and receive their equity in a single lump sum payment.
The value that members receive for their equity will be based on the discount value they provide as part of the bidding process.
“This decision was made because ongoing market volatility has impacted Land O’Lakes’ businesses and created economic uncertainty for many of our members,” the company said.
“The buyout could help Land O’Lakes by limiting our need to market excess milk to unprofitable outlets, while also supporting members by providing a one-time lump sum payment of their equity,” it said.
Qualifying farms would need to stop shipping milk to Land O’Lakes by June 30. The farms can sign with another milk market. This is the first time Land O’Lakes has offered a buyout. It had previously instituted a base program in its milksheds to better manage its milk supply.
Independent farmers are scrambling for a new market, but the options could be slim. Dairy Farmers of America said it will not be taking on new farmers.
“We are sympathetic to the farmers who have been impacted by this decision and realize it has created a tough situation for them,” said Monica Massey, DFA’s senior vice president and chief of staff.
“We currently face a difficult marketing environment, particularly in areas of the Northeast and Mideast, and unfortunately don’t have a market for their milk at this time,” she said.
The next unknown to the market is Walmart’s entry into dairy processing.
“Its business model is based on disciplining suppliers to sweat out as much marketing cost as possible,” Novakovic said. “By deciding to make their own milk products, they are saying that they think they can do a better job of it than the biggest processor in the U.S.
“That’s pretty strong stuff,” Novakovic said.
Walmart’s Indiana plant is scheduled to be operational at the end of May.