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‘Too much milk’: Production is up, prices are down and farmers are in crisis

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‘Too much milk’: Production is up, prices are down and farmers are in crisis

NEW-LISBON — It was an icy morning, and Tom Litkea trudged from house to barn over frozen ground in sub-zero temperatures, limping through a journey he’s made nearly every day since he was a kid working the farm with his dad more than 50 years ago.

The recent spate of arctic weather was tough on the spare New Lisbon farmer. First the sky dropped tons of snow on his barn, straining the roof to the point that he had climb up and clear it off with a shovel. Then the temperature plummeted and the water pipes burst.

“This whole barn was just solid ice,” he said as he stepped through the door into air warmed by the body heat of 42 milking cows, frost still clinging to his gray beard. He grabbed a shovel and shuffled down the aisle between two rows of hind ends, clearing dung. Next came the feed, then the milking. Except for help from his son-in-law, a pipe inspector whose job often takes him on the road, Litkea does it all himself.

At 67, the farming life has taken its toll. A few years back a cow crushed his left foot. Another accident sliced the big toe of his right. After putting in 19-hour days to deal with emergencies caused by the cold snap, he can barely walk.

But he isn’t ready to quit.

“I do this because I love milking,” he said. “I might shrivel up and die if I don’t have these cows anymore. They have brought me through my whole life, and I am just gonna be lost without ‘em.”

Reality, however, is setting in.

The price Litkea gets for his milk is 43 percent off from its 2014 high. For all his work, Litkea said he's earning about $650 a month. A few years ago, he dropped his health insurance, a $1,100-a-month expense. Then he got rid of his crop insurance, farm insurance, even his car insurance.

Milk Prices

“I pay out more than I make,” he said. “I have an $800 loan payment, electric bills and feed bills and fuel bills.”

Through the years, he scraped out a comfortable living and raised a family. Now he’s on the brink of financial ruin.

“My son-in-law and my daughter are buying me groceries because I can’t afford it,” he said.

Litkea’s story is all too common. Once revered for their work ethic and their contribution to the nation’s food supply, small farmers today are being crushed under the weight of a glut that for the past four years has sent dairy prices tumbling.

The pure white milk Litkea sells to processors is being devalued by an array of factors that includes the world price of cheese, the price of dry whey, the price of butter and non-fat dry milk. He’s being hammered by a trade war he doesn’t support and a federal pricing system he doesn’t understand. He harbors bitterness, much of it directed toward the big farms he says are putting him out of business, and for the politicians that allow it all to happen.

“We elect politicians to help us with problems,” he fumed. “And what did they do for us? They do nothing. Nothing.”

But political inaction, factory farms and tariffs are merely the symptoms of a problem that lies at the heart of Litkea’s troubles. Brian Gould, a recently retired University of Wisconsin-Madison agricultural economics professor, summed it up in four words:

“There’s too much milk.”

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Tom Litkea: "You always worked your butt off for the money, and now the money's not there."

Headlines have become common proclaiming the demise of the dairy farmer: record numbers of farms going under, bankruptcies, suicides.

In the past year, Wisconsin lost 714 dairy farms — 8.2 percent — mostly smaller milk producers, bringing the total in February down to 8,046. That's roughly half the number of farms in the state 16 years ago. While the number of America’s dairy farms has been declining at least since World War II, Wisconsin had never before seen an 8 percent loss in one year, at least not since the state started keeping records in 2003.

Joel Greeno, a Kendall farmer and president of the small-farm advocacy group Family Farm Defenders, said fallout from the loss of farms cuts deep into local communities. The flow of dollars from farmers to local businesses that provide feed, equipment, repairs and food has dried up, leaving storefronts empty and shuttered. 

“You don’t have to take much of a drive through Monroe and Juneau counties to see the real story,” he said. “When you’ve lost thousands of family farms that supported our rural communities, it’s no wonder our rural churches and our rural schools and all of our rural businesses are in utter collapse and decay.”

Some stubbornly hang on, with a family member taking a job for health insurance or simply to put food on the table. But for many, like Litkea, there already aren't enough hours in the day for the daily demands of running a dairy farm.

“You always worked your butt off for the money,” Litkea said, “and now the money is not there.”

Some have survived by borrowing to keep their operations afloat as they wait for the day when prices rebound. But as the crisis enters its fifth year, creditors are calling in the chits. According to the Minneapolis Federal Reserve Bank, 84 farms in the Upper Midwest filed for bankruptcy from June 2017 to June 2018, 50 of them in Wisconsin.

“It appears that bankruptcy filings have been particularly high among dairy farms there,” a November report from the Fed said.

“It’s massive bloodletting,” said John Peck, Family Farm Defenders' executive director.

He said his group is getting more calls than ever looking for help. But the organization, which grew from the 1980s farm crisis with support from celebrities like Willie Nelson and John Mellencamp, now has meager funding.

“I had one guy call me,” he said. “He was thinking about going under and he owed like millions of dollars. I’m going, ‘We can’t help you with that.’”

Despite the bloodletting, Wisconsin and the nation as a whole is producing more milk. For every small farmer who goes out of business, there’s a big farmer to fill the void.

According to state figures, there are currently 272 dairy operations listed as Concentrated Feeding Operations, or CAFOs, which have 700 or more cows. That’s up from 50 CAFOs of any kind in 2000.

In a study, UW-Madison economists estimated that farms of 500 or more cows produced 40 percent of the state’s milk in 2013, compared with 22 percent in 2007.

While the number of farms decreases, the number of cows is holding steady: 1.27 million in 2012, 1.27 million today. What’s different is the amount of milk each of those cows produces. With continual advances in genetics and technology, there seems to be no limit.

“Yield per cow in the U.S. goes up year after year after year,” said Gould, the retired agricultural economics professor. “There are too many cows, and productivity of those cows is going up.”

In 1933, the average Wisconsin cow produced 5,140 pounds of milk per year, according to the U.S. Department of Agriculture. By 1978, that number had more than doubled to 11,735 pounds. In 2017, the last year for which data was available, the amount of milk per cow doubled again to 23,725 pounds, soaring nearly 23 percent in just the last decade.

Milk Production
Number of cows in Wisconsin

At the same time, Americans are drinking less milk. According to USDA estimates, in the five years between 2012 and 2017, consumption had plummeted by more than 12 percent. Since 1975, it’s down more than 40 percent.

That leaves farmers at the mercy of the export market for storable milk products like cheese, dry whey and non-fat dry milk — a market dominated by big exporters like New Zealand, Germany, the Netherlands and France.

In 2015, the European Union lifted dairy quotas, unleashing farmers to increase production, adding yet more dairy commodities to an already saturated world market.

Not coincidentally, that’s about when the bottom dropped out for American dairy farmers. In 2014, milk prices soared to a high of $24.31 per hundred pounds, driven by increased demand in China and Southeast Asia. By the end of 2015, the price had dropped to $14.44. The hard times continued to 2018. Then there were signs of a recovery.

A year ago Bob Cropp, a UW-Madison emeritus professor of agriculture and applied economics, predicted that milk prices would rebound to more than $15 by last July and top out somewhere in the $17 range, from a low of $13.40 in February 2018.

But then the trade war erupted.

When Mexico, China and Canada slapped retaliatory tariffs on dairy goods last summer, hopes for a recovery evaporated. As of last month, the price for the Class III milk — the type that Litkea produces that mostly goes for cheese production — stood at $13.96 per hundredweight, 4 cents lower than January 2018.

Mexico, which had imported 20 percent of U.S. cheese exports, started buying from the European Union. And China cut back on U.S. imports of dry milk, cheese and dry whey, a main ingredient for products like infant formula and protein powders.

And a market lost is not easily won back.

“There’s a lot of milk production going on in the world,” Gould said. “There are other places to go to get products.”

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Litkea is not encouraged by the recently signed U.S. farm bill, which he said provides too many incentives for mega-farms.

While milk prices have put farmers like Litkea in crisis mode, some are weathering the storm.

Innovations like robotic milking systems, for those who have the capital to invest, have allowed some smaller operations to expand without having to hire extra employees.

Others have adopted alternate business models to offset the loss of profits.

“We were just looking at how to grow the family business without just milking more cows to keep in the commodity agriculture business, so we decided to do the real illogical thing, and that was build our own on-farm cheese factory,” said George Crave, president of Crave Brothers Farmstead Cheese in Waterloo.

Crave, who started out with 57 cows on a rented farm in Mount Horeb, decided 20 years ago that if his dairy operation was going to provide for his family he had to do something different. In 1980 he and his brothers bought a dairy farm in Waterloo. A few years later he learned how to make cheese, working with UW-Madison’s Center for Dairy Research. Then he hired a cheesemaker, Kurt Premo, who’s been with the farm ever since.

Now the cheese factory sits across the street from the family’s 2,200-cow dairy herd, operated by his brother, Mark Crave, as a separate business that sells the milk to the cheese factory at market price. Rather than turn the milk into commodity traded cheddar, which accounts for about 90 percent of milk produced in the state, the factory produces specialty cheeses like fresh mozzarella, string cheese and curds. The company’s cheeses sell at grocery stores coast-to-coast, including retail giants Whole Foods and Kroger and local grocers Woodman’s and Metcalfe’s Market.

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“In Wisconsin we’re fortunate,” George Crave said. “We have the university and the CDR (Center for Dairy Research) and a lot of stainless steel fabricators. This is our infrastructure, this is our industry in Wisconsin. So fortunately we have the expertise all around us.”

But that doesn’t mean chronically low milk prices aren’t taking a bite out of profits.

“We’re holding our own on the farm,” he said. “But it’s not easy at these prices.”

He said the farm is not just battling low prices, but increasing costs. In recent years the farm has been shelling out more for labor, energy, repairs, seed for crops.

“Everything has gone up substantially in five years,” he said, “and unfortunately the milk price doesn’t follow suit.”

Some farmers have chosen to expand, hoping that taking advantage of economies of scale will lessen exposure to price fluctuations.

In 2009, Rosendale Dairy in western Fond du Lac County won state approval to double its 4,000-cow herd. Today the dairy operation, with 8,300 cows, is the state’s largest, using state-of-the-art milking technology to produce about 81,000 gallons of milk a day.

Rosendale is owned by the partnership Milk Source, which also owns dairy farms in Michigan and Missouri. Company officials declined comment for this story, directing questions instead to the Dairy Business Association, which has worked with Republicans to rewrite the state’s regulatory rules in favor of large dairy farms.

Jamie Mara, spokesman for the association, said big farms like Rosendale “feel beat-up” from negative news coverage.

Rosendale has come under fire from environmental groups for pollution stemming from what Midwest Environmental Advocates, a public advocacy law firm, estimated to be 90 million gallons of manure produced each year. In 2009 the group challenged the farm’s groundwater discharge permit.

Cropp, the emeritus professor, said that large dairy farms have advantages. They can negotiate higher prices for milk because processors prefer to collect from a single source. They get discounts on feed.

But after a certain point, bigger isn’t necessarily better.

“Personally I don’t think we need those great big dairies,” Cropp said.

The pitfalls are playing out in places like Kewaunee County, where cattle number 97,000 and operations like the 6,500-cow Kinnard Farms have angered neighbors over truck traffic, stench and manure-tainted drinking water. Those grumblings are finding their way into the courts in the form of lawsuits against the state Department of Natural Resources for approving Kinnard’s expansion and for approving large withdrawals of groundwater by farm operations.

“We have a lot of related problems with that,” Cropp said, “particularly certain counties like Kewaunee County. I think it’s going to come to a head with greater regulations.”

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With assistance from UW-Madison's Center for Dairy Research, George Crave, pictured here in a 2002 file photo, learned to make cheese.

 After four years of pain, there are some signs of a brighter future.

The exodus of farmers has slowed milk production. Feed prices in the European Union and Argentina have increased. And analysts predict a slight increase in domestic demand. Those factors have contributed to an increase in futures — contracts to buy at a set price on a future date — on the milk that farmers like Litkea produce to $14.90 per hundredweight in March and more than $16 in August. That’s a considerable increase from the January price of $13.96.

In addition, the U.S. farm bill passed last year provides significantly increased insurance coverage for dairy losses on the first 5 million pounds of milk. According to Gould, the program is “really a no-brainer for a dairy farmer to max out enrollment on that program.”

“I think that’s going to help dairy farms quite a bit this year when it becomes enacted,” he said.

The issue of oversupply isn’t mentioned in the bill, but Gould said farmers are talking about it. While President Donald Trump rails against Canada’s system of production quotas, minimum prices and tariffs, some farmers look at our northern neighbor with envy.

“I’ve been in farm meetings lately where I’ve heard the words ‘supply management,’” he said. “Two years ago, you’d never hear that. But I think producers are realizing that there’s too much milk.”

Litkea, however, isn’t encouraged. The bill, he said, still provides too many incentives for mega-farms to produce more milk, which will keep prices down and drive more small farmers like himself out of business.

“The only way you’re going to let little farmers survive is a different pricing system,” he said. “Either by cow numbers or pounds of milk. Because if you give us a raise and the big guys a raise, they’re just gonna expand.”

So for now, Litkea plans to hang on until the day he can’t. And with the cards stacked against small farmers, he knows that day is coming.

“I’m very bitter inside,” he said, “because of the system, because of politics.” 

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Steven Elbow joined The Capital Times in 1999 and has covered law enforcement in addition to city, county and state government. He has also worked for the Portage Daily Register and has written for the Isthmus weekly newspaper in Madison.