February 28, 2020

 

US Wisconsin's farmers predict bleak future

 

Collapsing prices, the rise of mega farms in warmer states such as Texas and Arizona and demand fluctuations have all led to a mass of bankruptcies in "America's Dairyland".

 

The milk industry's woes have been a long time in the making and no single factor accounts for them. Increasing international trade in dry milk products like whey protein, Trump's tariffs and shifting consumer habits have also contributed to its decline.

 

Last year, Wisconsin was the state with the highest number of farming bankruptcies–57, its highest total in a decade. In the past 15 years, the number of dairy farms across the state has fallen by 49%.

 

The decline is fundamentally changing the state's rural landscape as schools and small businesses collapse taking the rural communities that supported them. America's largest milk producer, Dean Foods, filed for bankruptcy last November. Borden, founded in 1857, filed for bankruptcy in January.

 

The irony is that as the number of farms in bankruptcy rises, milk sales and prices are also on the rise. In 2018, per capita dairy consumption reached 646 pounds per person, making it the most popular year for dairy in the US since 1962.

 

America is not drinking as much milk as it once did but the popular narrative that milk alternatives are killing dairy doesn't hold up. The percentage of milk sales lost to "plant milks" is small compared with other drinks–bottled water, in particular–that have already taken a share and milk still outsells plant-based imitators by a margin of more than 11 to 1. And the US is still buying cheese, butter, yogurt, milk powders in infant formula and protein in bars and shakes.

 

For a state that has defined itself by dairy, the consequences of change are profound.

 

The economics are tough. Milk prices have come back recently to about US$17.55 per hundredweight in February 2020, but that is still way down from around $25 in 2014. Prices are expected to rise but in the meantime global forces have battered farmers. Feed prices rose as ethanol production took more crops, China bought more soy and tariffs increased equipment prices. For too many small farmers even as prices recover from a long slump, the cost of producing milk exceeds the prices they can sell it for.

 

"There was a period in 2013 when China panicked and started to buy every drop of milk on the planet," says Peter Vitaliano, chief economist at the National Milk Producers Federation. "We had milk prices that dairy farmers would tell their children about."

 

The buying spree followed the melamine crisis when Chinese producers had been adulterating milk, baby formula and other foods with melamine, a chemical that is toxic in large quantities, to increase their apparent protein content.

 

US milk producers started oversupplying milk. Smaller farms like those in Wisconsin produce more of their own feed than the huge players so for a while they were at an advantage. But when China got its milk industry back on track and feed prices came down, the advantage vanished and the collapse started in earnest. "It was particularly brutal on the smaller operations," says Vitaliano. "That pressure is, unfortunately, likely to continue."

 

Jim Goodman, who was coming from a family that has been in the dairy industry since 1889, made the shift to organic in 2014. For a while, it worked. But organic prices collapsed as vast industrial-style dairies in Texas and other warm states with 10,000 or more cows flooded the market with cheap milk. The huge farms were shipping organic milk from Texas into Wisconsin for a lower price than Goodman was getting paid. "You know, you can't compete with that," he said.

 

As prices collapsed a planned sale fell through. He sold the land and then the cows.

 

Farm Aid, the farmers' support group, started a crisis line during the farming crisis of the 1980s. According to them, the level of calls is now higher than back then.