Dumping milk is exactly what happens when an industry that is trying to consolidate itself gets caught off-guard by a pandemic.
There are three major points that you need to understand about the dumping of raw milk. But first, I suppose it is worth mentioning a little about myself, and who I am exactly. I am, to put it mildly, nobody. My professional education consists more of experiences, than a formal slip of paper framed and clinging to a wall. I studied Business Management through the University of Wisconsin-Platteville, and dabbled in two understudies in Australia, which included a semester of Tropical Marine Biology on the Great Barrier Reef through the University of Queensland, as well as Tourism and Hospitality through La Trobe University’s Bundoora campus.
I have been intimately involved with the dairy industry for the majority of my life – I grew up on a dairy farm and showed cattle from the time I was in grade school, right through high school. To be completely honest, I never really liked showing cattle. Imagine a beauty pageant, except for cows.
Upon graduating from high school, I spent a year overseas on a work abroad program. I saw rotational grazing for the first time on various dairy farms in Australia, and experienced the concept of agri-tourism while in Switzerland. I learned to speak German fluently enough to be able to either flirt or offend, and sometimes both.
In 2006, I returned to my family’s fourth-generation dairy farm in South-central Wisconsin with the idea of incorporating the lessons I had learned overseas. I resisted the urge to expand, which is an endemic way of thinking in agriculture – get big, or get out. In America, the big get bigger, and the small get out.
In 2008, it would have cost “only” $1 million to expand our dairy herd and facilities, which is what we were supposed to do – that’s what everyone does. Putting pen to paper, I did not see how such a huge investment in overhead, plus the exponential increase in operating costs that would inevitably follow, would cash flow. So instead, I invested a measly $30,000 renovating our existing structures and stayed at the same size we have always been – 450 acres, 60 milk cows; an excellent land-to-cattle ratio. Brown Swiss cows with bells, grazing on grass – Norman Rockwell could not have painted a more quintessential example of a traditional Wisconsin Dairy Farm. Even our barn is red.
I know what you are probably thinking, and if you’ve come up with words and phrases like “archaic”, “dinosaur”, “clinging to the past”, “outdated model”, “get with the times”, believe me – if I had a dollar for every time I’ve heard something along those lines about my dairy operation, I would be chatting with Jeff Bezos right now instead of you.
But there’s one thing about my model of dairy farming that is worth celebrating – my breakeven point was $10 milk. As you know, the price farmers get paid for the milk they produce is famously volatile – for the purposes of this conversation, think of these numbers as an hourly wage. From 2008 to 2018, my paycheck milk price ranged from $12 to $31 – a tremendous fluctuation that could affect monthly net revenue by thousands of dollars, and gross revenue by tens of thousands of dollars; even for a small operation like mine (imagine if the hourly wage you got paid fluctuated in the same manner, with little or no warning, and oh – by the way – you have absolutely no control over what that price may be from month to month). And that is exactly why I purposely kept overhead low, and managed my output according to my operating costs. No modern, progressive, forward thinking, state-of-the-art, industry approved, **insert superlative here**, dairy operation can boast a $10 breakeven point.
For the past three years, dairy farming has been a breakeven or below game. The small operations (like mine) are going bankrupt and selling out at record-setting rates. Every week, all you need to do is look – the detritus of a multigenerational farm trickles down the roads and highways after a dispersal sale. Farmers are killing themselves at a rate that meets or exceeds the suicide rate of military veterans. No doubt, you are already aware of these statistics, but believe me – the challenge is getting people to care. Grocery stores (until about three weeks ago) have never been better stocked, and the United States is a country that is built on the concept of cheap food. So, why should anyone care?
Two years ago, it was the small farms like mine that got out. Anyone milking less than 100 cows had a big fat target painted on their classic red barn. Last year, the size of the herds selling out began to increase to around 250. This year, it is bigger yet – anyone milking under 1,000 cows is feeling the pinch. If you prefer, I can quote statistics and list references, and I will bore you to death. Let me put it this way, so that none of us turn glassy-eyed and begin to drool:
I have a major farm refinance coming up in July of this year (which has nothing to do with current market conditions – when I bought my family’s farm in 2016 it was set up as an adjustable-rate mortgage to be revisited in 2020). Because of this upcoming refinance, I have spent the last several months shopping around. I have spoken to a dozen or more agricultural lenders, financiers, investors, and overall have started the research process of taking a million-dollar mortgage, and figuring out how to make it cash flow into the next generation.
Let me tell you with absolute clarity and certainty – the missing puzzle piece to what is happening in American Agriculture comes down to one simple and totally overlooked concept – Agricultural Lending.
Without exception, at some point in every conversation, this paraphrased exchange occurs:
Me: “Let me ask you something. Why are the smaller farms selling out and not the big ones? How are the larger-sized dairies that have massive overhead, multiple payrolls, and need to import feed and export manure actually turning a profit on $15 milk?”
Every lender ever: “They’re not turning a profit. They’re just too big to fail. There’s too much money tied up in these large dairies to cut them loose.”
Let me say this loudly and clearly – the ONLY reason small farms are going bust, is because we are easy to liquidate. If I made the decision to sell out today, by next week my farm would be rolled up like ditch weed and repurposed into something – anything – else. About a month ago, I walked into a meeting with a commercial lender. He had just gotten off the phone and his conversation was clearly a stressful one. Exasperated, he vented to me: “Well, I just had to cut off a 600-cow dairy. They’ve burned through all their equity and we can’t continue to finance them.”
Then, the clincher – “Who the hell is going to buy a 600-cow freestall and parlor?” He’s absolutely right, and his statement alludes to a terribly underrepresented developing situation.
Let me say something else, as clearly and loudly as I can – In no way is this the fault of the lenders and financiers that I have spoken to. In the past two years, the U.S. Federal Government has bailed out (their words, not mine – not once did anyone say “invested in”; it has always been “bailed out”) corporate agriculture to the tune of $30 billion. That’s $30,000,000,000. An article in Forbes from August of 2018, “Mapping the US Farm Subsidy $1M Club”, outlines how the money is spent. Look it up if you want to, but I guarantee this – practically none of it is earmarked for operations like mine, which begs the question:
If economy of scale truly exists in production agriculture, why the need for a $30 billion bailout?
Let’s have some fun. To give you an idea of just how much money is $30 billion, consider this – imagine that you got paid one dollar per second. So, every minute you would earn $60, and every hour you would earn $3,600. It would take – get this – 951 years to burn through $30 billion.
With that kind of money funding my competition, why the hell would anyone want to finance a farm like mine? Profitable or not, bigger is better. At least that’s what I’ve always been told.
So then, why is milk getting dumped when there is a limit on grocery store purchases? That is the point of our conversation, is it not?
The first thing you need to understand is this simple, yet fundamental point – the American Farmer does not grow food. The American Farmer grows commodities. Let’s start with corn, because you’ve no doubt come across a delicious piece of agricultural propaganda at some point that shows a gorgeous field of corn with the headline, “The American Farmer Feeds the World,” which sounds nice and makes your chest swell; except you’re not looking at food. According to the USDA, more than one-third of the US corn crop is converted to ethanol, so you may as well be looking at an oil field. Another one-third of the crop is turned into animal feed, while the remaining one-third is processed into a wide variety of goods ranging from breakfast cereal to penicillin (ever hear of high-fructose corn syrup?). Speaking of commodity crops, how do those futures look?
Animal agriculture is even more consolidated. According to Successful Farming, 40 individual producers account for two-thirds of the total US swine breeding herd. In beef, a grocery store run on meat somehow translates to a loss for farmers. Picture this – under current conditions, a beef producer is losing more than $100 per head, while the packing plant is profiting more than $500 on that same animal. Poultry is practically a lost cause – a November 2019 article in The Atlantic, “The Human Cost of Chicken Farming” points out the chilling efficiency at which factory chickens are raised. If we raised human babies in the same manner as broiler hens, the average person would weigh nearly 700 pounds by the time they turned two months of age. But hey – bigger is better, and that’s progress. At least that’s what I’ve been told.
Looking at the trend of American Agriculture, it should come as absolutely no surprise whatsoever, that veganism is the fastest-growing lifestyle movement.
Crops and animals are no longer raised or even considered on an individual basis in the United States – mainstream agriculture has become a war of commodities, which is exactly why milk is being dumped while grocery store shelves sit empty. Dairy is simply following in the footsteps of beef, poultry, pork, and industrial cropping – the U.S. Dairy Industry is simply a few steps behind, and got caught off guard by a pandemic. I would imagine that dairy executives and leaders within the dairy industry are being ridiculed by their beef, poultry, pork, and crop counterparts as to why the hell it is taking them so long.
Put into terms that any of you non-farmers can understand, imagine that a cow produced hand sanitizer. A farmer currently sells hand sanitizer at below the cost of production, and the future outlook is even worse. Meanwhile, Wal-Mart turns around and sells that same hand sanitizer for ten bucks a bottle, having purchased it literally at cost, and oh – Wal-Mart is the only market that a farmer can sell their hand sanitizer to.
Still with me? Good – we’re on to the second reason as to why dumping milk should come as no surprise. I need you to look at the image of dumping raw milk onto the ground from a different perspective. I need you to imagine that you are a dairy farmer. In 1933, farmers in Wisconsin disrupted the milk supply chain and famously dumped thousands of gallons of milk in an effort to demand a fair price. It was brutal – people were shot, and the National Guard was called in to restore order. The best part – the strike did not work. Farmers who dumped milk, in the end, figuratively shot themselves in the foot. The image of milk being dumped on the ground generates no sympathy for the producer – just the opposite. Do you think Joaquin Phoenix or Anne Hathaway or Ellen DeGeneres are going to suddenly appear in a ‘Got Milk’ ad campaign? No consumer is going to suddenly change their dietary habits because of milk getting dumped. That image has a much darker purpose:
Again, please imagine that you are a dairy farmer. The image of milk getting dumped is the equivalent of receiving a ransom note in the mail with a photo of a loved one bound, blindfolded and gagged to a chair with the clear message, “Do this or else.” The second reason that milk is getting dumped, is because it is an intimidation tactic to other dairy producers. For my military-minded friends out there – this is psychological warfare.
The third thing you need to know about the image of milk getting dumped actually builds off the first two – no one, and I mean no one, within the U.S. Dairy Industry is suggesting that the farmers give the milk away for free.
Raw milk is an amazingly versatile product. It would take me less than 30 minutes to print off a list of guidelines for safe handling and at-home processing, much of which you can do on your stovetop. With very little effort or extra ingredients, raw milk can be easily and safely converted to a variety of soft cheeses, condiments, ice cream, beauty/bath products, hell – feed it to your pet. Milk has also been proven to combat childhood obesity, is a superior hydrator than water, and chocolate milk is a better post-workout recovery drink than Gatorade. But, no one is suggesting giving it away for free in lieu of dumping it on the ground, because milk is viewed as a commodity just like everything else in the agricultural world. And with commodities, the further apart the producer is from the consumer, the weaker they both become.
The more obstacles that are placed between the producer and the consumer, the more controlled they both become, and that is precisely why milk is getting dumped.
If you want to see the future of the U.S. Dairy Industry, please ignore the patronizing articles and videos that are being produced like boilerplate by the industry, and look no further than the current state of beef, poultry, pork, and commodity cropping.
Rather, if you want to see the future of the U.S. Dairy Industry, look no further than the images of milk getting dumped, compared to the images of empty grocery store shelves, and compare both of those images to the five-year forecast of Wal-Mart stock.
But hey – bigger is better, and that’s progress!