Low prices, increased competition create difficult situations for small dairies | TheFencePost.com

Low prices, increased competition create difficult situations for small dairies

Ashley Edstrom holds her daughter, Blake, 3, as they stand by a pen on their dairy, Sugar Hill Dairy, outside of Kersey. With milk prices dropping in the past year, smaller dairies like Sugar Hill have been suffering. Edstrom has been forced to divide her time between parenting, working and helping at the dairy.
Joshua Polson/jpolson@greeleytribune.com | The Greeley Tribune

What about water?

Since land prices and water resources are much more competitive in California, when dairies move to Colorado, they’re able to do more with the same amount of money. That leaves homegrown producers drying up.

The lack of water in California is a large factor pushing dairies into Colorado, which is something Ashley Edstrom said all dairies in the state need to think about. Dairies use massive amounts of between keeping the barns clean, cooling milk, watering animals, any farming operations on the dairy and any other uses.

For example, Steve Edstrom said a water tap with the Central Weld County Water District is allocated 750,000 gallons of water to use per year. Even a small dairy like Sugar Hill uses that much in a month.

At 3:30 a.m., Ashley Edstrom rises from her warm bed, straps on a headlamp carries an armful of bottles to the calves at her Sugar Hill Dairy.

She used to wake up and fix fried eggs and sausage or bacon for her husband, Steve, and three children. She’d pack their kids’ lunches and take her oldest daughter, Campbell, to school.

Then, in January, Sugar Hill Dairy’s full-time calf feeder quit. After months of falling milk prices, Ashley and Steve had to decide whether they could afford to fill the position. They decided they could not. After working her full-time job as a mother, wife and gofer on their dairy, she decided to take on another.

That meant giving up those few, precious quiet moments. It meant giving up volunteering in Campbell’s classroom. It meant far less time to can and preserve food, something Ashley loves. It meant putting dinner in a Crock Pot instead of making it from scratch. Most of all, it meant waking up with the calves instead of her family.

“It’s feast or famine. It’s so hard for us to make plans when there’s just no stability to it.”

It’s been more than a year of sustained low milk prices. For small farms like Sugar Hill, a first-generation dairy Steve started 15 years ago in Kersey, that means difficult choices, like Ashley coming back to the farm, just to make it. Every month, Steve sits down and looks at which bills he paid the month before. Sometimes, those bills have to go unpaid..

The U.S. Department of Agriculture recognized the struggle of American dairymen this summer when they bought $20 million worth of surplus cheese to help reduce the market glut. The department also increased funding to the Milk Protection Program, an insurance program for dairy producers.

Steve said these efforts make little difference to small producers, though, since the insurance payments only help when things reach catastrophic levels, and the relief from the government purchase doesn’t trickle down to the little guys.

If economics and history tell the Edstroms anything, it’s that every down eventually comes back up. They’re just hoping to survive until then.

Changing with the times

At its peak in September 2014, milk prices were more than $25 per hundredweight, 100 pounds and the unit of measurement for dairy. Then prices started to drop. By April 2015, the U.S. milk price was $16.50 per hundredweight. By May 2016, that number dropped to $14.50. That price rebounded slightly to $17.10 per hundredweight in August, according to the most recent data available from the U.S. Department of Agriculture.

It’s not the worst they’ve seen. In 2009, prices dropped to $12 per hundredweight and below, an unsustainable number that pushed many small operations out of business.

Steve is working with the futures market now — the agricultural equivalent of stocks, where farmers can sell products in advance for projected prices.

“It’s all about managing your risk,” he said. “If you know it’s going to cost you $17 to produce your milk, you’ve got to do everything you can to bring in at least $17.”

Some costs are out of the farmers’ hands, though. Most dairies require outside labor for milking and herd upkeep, but farmers struggle to find affordable labor, since other trades draw many potential employees and offer higher wages.

Steve said when the oil and gas industry first started booming in Weld County, he had to raise the wage for his milkers $3 per hour. Now he’s fighting the same battle with the thriving construction industry.

Ashley now keeps a pen of butcher hogs to sell. She also works a part-time job at a guest ranch near Kersey. She has to bring her youngest, 3-year-old Blake, with her when she feeds the calves, checks on their growth and monitors for health issues. In between it all, she tries to do as much around the home as she used to.

Sometimes, the family runs out of socks.

Compounding problems

It would be one thing if it were just dairy prices down, but the problems dairy producers are facing are compounded by low beef prices.

On a dairy operation, once the cows can no longer productively calve and milk, they’re sold for beef. Male calves are either sold soon after birth or raised to a certain weight, then sold as steers.

In 2014 and early 2015, when beef prices were high, dairy farmers were paid a premium for their bull calves and cull cows — cows that can no longer milk. Now, bull calves and steers aren’t even selling for the cost of raising them.

Ashley said a little over a year ago, she was getting about $500 for every day-old bull calf she sold. Now those same animals are selling for $20.

As far as the girls go, many dairies purchase replacement heifers when they sell an older cow. When the market was better, a cull cow would more than pay for her replacement. Now, it takes two — sometimes, even three — cows going out of production to purchase one new one.

“It’s feast or famine,” Ashley said. “It’s so hard for us to make plans when there’s just no stability to it.”

Fierce competition

In April, Leprino Foods submitted plans to the City of Greeley for its second expansion. The factory, at 1st Avenue at 13th Street in Greeley, plans to add a new boiler, two raw milk silos, two skim milk silos, a dry tower, a break area for additional employees and expanding the dry storage warehouse, locker rooms and processing area, which will bring production up to 700,000 pounds of cheese each day.

Currently, Leprino requires the milk of about 80,000 cows each day, and all of those are located within a 60-mile radius of the factory. The latest expansion will require at least 30,000 more cows.

For the most part, the dairies moving into Weld County to fill that need aren’t small like Sugar Hill. Many are moving from California, where land and water are both expensive. When they sold their operations there and moved here, these businesses came with more money and resources than the locals can hope to compete with.

Leprino’s latest expansion — and the influx of new farms — makes things even more difficult for the Edstroms.

“It’s frustrating to see them encouraging more producers to move into the area so they can expand when we’re not really getting paid a fair price,” Ashley said.

Ashley stressed the frustration small dairy producers are feeling at low milk prices on their end but consistent milk prices at the grocery store. She said the biggest challenge dairy farmers face is handling the relationship and the disparities between the payout for the milk processor and the payout for the farmer. Though there is enough supply on the market to cause farmers’ cash payouts to stay low, consumers still pay steady amounts.

For Josh Cleland, a third-generation dairy farmer in the furthest southwest corner of Weld, that’s the most frustrating thing about the Leprino situation. It requires new dairies to move in, but doesn’t allow existing dairies to expand, since the prices farmers are getting is so low.

“The supply and demand chain is not working how it should,” Cleland said. It’s the middlemen — the grocery stores and processors — that are still making their bottom line, he said.

Blake Edstrom linked her fingers in the wire of one of the new calf hutches. The toes of her cowboy boots poke through the wide openings in the fencing. A jersey calf named Riley pokes her brown head out of the plastic, doghouse-like structure, bats wide eyes and wobbles on too-long legs toward Blake. The two little girls stare each other down while Steve and Ashley watch, smiling almost as wide as the baby-tooth grin on Blake’s face. Their youngest child loves Jerseys and auburn-and-white-spotted red holsteins, which she calls “red cows.”

If there’s any upside to the downswing in prices, Ashley said it’s spending more time like this. It’s seeing Blake’s face light up when she sees her favorite kinds of cow. It’s spending every day working side-by-side with her husband. It’s the way the family has come together.

They’ll keep on like this as long as they can, which Steve says is quite a while — he doesn’t see a specific expiration date on the dairy as long as they continue to make smart choices. They still have some equity. They haven’t exhausted their resources.

“As long as it doesn’t go backwards again, we should be fine,” Steve said.

But he admits it’s difficult and discouraging to put in the same amount of — and sometimes, more — work into a product and still go backward. With a shrug, Steve ran his hand through short hair permanently shaped to the baseball caps he wears. There’s no guarantee of making a profit in any business, he said. He just wants to keep his son and his girls — wife, daughters and cows — fed while he makes a product to feed others. ❖

Bridgett Weaver contributed to this story.

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