Struggling dairy farms: As milk demand declines, some producers are giving up

The heyday of the local family-owned dairy farm is waning, with state agricultural officials saying several of the farms are shutting down each week in Indiana.

Doug Leman, Indiana Dairy Producers executive director, said Indiana had about 1,425 licensed dairy herds producing Grade A milk in 2013, by the end of 2018, there will be fewer than 900 remaining.

The American Dairy Association Indiana reports that Bartholomew County has only three remaining dairy farms, according to the state Board of Animal Health.

The Farmer’s Exchange, a New Paris-based publication aimed at the region’s agricultural community, has been filled with auction ads from dairy farmers who are giving up their herds, equipment and sometimes even their land.

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The statewide trend has been felt in Bartholomew County. For decades, Garry Arnholt was recognized as one of Bartholomew County’s leading dairy farmers, but gave up on the business five years ago.

In 1990, the nationally-known Kent Feeds honored the County Road 100N resident for the amount of dairy product produced from his herd of 93 cows. Two years later, Arnholt and his brother, Keith, were the only local dairy farmers to be selected as co-hosts for the 1992 Farm Progress Show.

Considered one of the premier agricultural events in the Midwest, the Farm Progress Show drew over 100,000 visitors to Columbus. At that time, the brothers had slightly over 100 cows in their milking string on the west edge of Columbus.

“Today, 100 cows won’t cut it,” Garry Arnholt said. “You need to be a huge conglomerate, with several thousand cows, to make any kind of money in dairy farming today.”

Factors at play

While Leman says tariffs instituted by the Trump administration haven’t helped family dairy farms, other factors are also leading dairy farmers to give up rather than stay in the business.

Milk consumption is down 10 percent while production was up 10 percent, according to Garry Arnholt.

Demand for milk has been declining because more consumers are opting to drink what dairymen call juices — but grocery stores label as “nut milks,” which might be made from almonds, soy beans or even coconuts.

“They shouldn’t be called those drinks ‘milk’,’ said Kevin Benter, a member of a long-established dairy farming family near Tampico in neighboring Jackson County. “They shouldn’t even be displayed in the dairy section.”

According to the USDA, the U.S. dairy herd dropped slightly to 9.36 million in October, but the thinning has to continue to get supply in better balance with demand, the agency stated.

Last March, both Benter and Arnholt, even though he is out of the dairy business, received letters from their main customer, Dean Foods Company.

A leading food and beverage company with brands such as Land-O-Lakes, Berkeley Farms, and Country Fresh, Dean Foods saw its stock drop by about 65 percent in 2018. In response, the Dallas, Texas-based corporation embarked on an extensive downsizing plan.

Benter’s letter informed him that Dean would stop purchase product from him in May because the company was closing its processing plant in Louisville.

“There really wasn’t much money in dairy farming, even when Dean was buying,” Garry Arnholt said. “But these letters sort of put the nail in the coffin.”

Garry Arnholt is now concentrating mainly on raising beef steers and crop farming.

When Benter contacted other potential processors, seven of eight companies told him that if he couldn’t fill a semi tanker with milk at least every other day, the corporation wouldn’t even consider doing business with him, he said.

“It would take me twice as long (as that) to fill that tanker,” Benter said.

Benter said he has been forced to sell most of his dairy cows, and the buyers took only his best livestock, and left him with a few older cows. After refusing to sell pregnant heifers that could have been slaughtered after birthing calves, Benter says he still has about a half-dozen cattle on his farm.

Corporations are taking more control of every aspect of the dairy industry with every passing day, Benter said.

“I get asked every day if I miss dairy farming,” Benter said. “It’s unbelievable how much I miss it.”

There was some initial optimism among Indiana dairy farmers after Walmart opened a milk processing plant in Fort Wayne last summer, Garry Arnholt said.

However, the Bartholomew County farmer said hope diminished after he learned that most milk at the Walmart facility is being shipped in from Michigan.

One of the biggest problems is that dairymen have simply become too good at what they do, according to national dairy industry experts. They are managing to produce ever increasing amounts of milk even as the number of cows is starting to decline.

That’s largely the result of years of careful monitoring to ensure only the best milk producers are bred for dairy purposes while other cows might be selected to produce beef cattle.

“There still are too many cows and too much milk,” said Robert Kelly, Purdue extension educator. Beyond thinning the number of animals, the dairy industry also has to do a better job fighting back against the negative perceptions of the product, improve marketing and even develop new products.

“We have to do a better job encouraging the consumption of dairy products,” Kelly said. “We have to get people to understand that milk is good for you.”

Better times ahead?

Some dairy farmers believe there could be an uptick in the business if smaller family operations look for new markets.

Benter anticipates some small dairy farmers may attempt to carve out a niche market by manufacturing high value specialty cheeses or ice creams. Recent examples include the introduction of Greek-style yogurt and new milk products that are higher in protein or lactose-free.

There are also Indiana dairy farmers such as Brian Houin, owner of Plymouth-based Homestead Dairy, who has taken advantage of “scale,” milking 4,800 cows at his operation in the largest robotic milking operation in the U.S., with the robotics reducing labor costs.

Houin has also installed a methane digester that converts manure and other waste material into enough electricity to power the farm and about 900 homes in the area.

Besides efficiency, other key factors include how much debt a dairy operator brought into the most recent downturn, or how much equity they have to tap into for loans, said Leman, adding that some farmers have taken side jobs in an attempt to preserve the business or at least the land.

Leman himself fell victim to the last big downturn in the dairy business in 2009 and eventually had to sell off the business he was planning to turn over to his children.

“Farmers are not typically the type of people who are willing to ask for help; it’s a very difficult thing to do,” Leman said.

Garry Arnholt said that no matter how many year’s he’s away from it, dairy farming “will always remain first in his heart.”

Leman understands the anxiety and stress of losing money every day while working long hours can take a toll on your mind and body.

“There definitely was a time that I would not walk into the doctor’s office, thinking that if something bad happened, my family would be better off without me,” he said.

So instead, he opted to walk away and eventually found a position with the state dairy group while his sons found good jobs outside the family farm.

“There were many dark days during the worst of it,” Leman said. “But by God’s grace I got through and the good Lord has provided for me.”

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Milk prices for 2018 never saw a major rally and held below breakeven levels for many dairy farms nationwide.

The price outlook for 2019 looks slightly better, but probably isn’t the level that producers would like to see.

When combining Class III and Class IV milk prices for 2019, the total price should average about $1 per 100 pounds of produce higher than last year, says Brian Rice, founder of brokerage firm Rice Dairy.

“But there will be no major rally,” Rice says of the forecast.

Source: Gary Truitt, Hoosier Ag Today

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