Local dairies close

Ten dairy farms in Mercer and Auglaize counties have either closed or liquidated all or a significant portion of their herds over the past year due to low milk prices, local agriculture officials say.

An excess supply of milk has cut prices and profits for dairy farmers.

Denny Riethman, OSU Extension educator for Mercer County, said he knows of six dairies that have ceased operation in the county in the last year. Some closed because increasing profit would have required them to expand, purchase new buildings and modernize equipment. The investment was too great of a risk given the low prices, Riethman said, adding that he anticipates more closures in the next year.

Anita Green, Auglaize County Farm Service Agency executive director, said four dairies have liquidated all or a significant portion of their cows during the past year in her county.

Riethman said the closed Mercer County dairies were smaller, long-standing operations. Green said dairies that have closed or reduced herd sizes in her county were a mix of small, medium and large operations.

Both said dairies are trying to cut costs where they can to ride out the low prices. Those cuts may include getting rid of low-producing cows and postponing purchases.

According to the Ohio Department of Agriculture, Mercer County has 89 dairies and Auglaize County has 35. The ODA does not keep year-to-year statistics on the number of dairies per county, but rather continually updates those figures, ODA spokesman Brett Gates said. Six years ago, Mercer County had 121 dairy farms and Auglaize County had 58, according to the U.S. Department of Agriculture's 2012 Census of Agriculture.

The closures are a result of both low prices and industry changes favoring larger operations, officials say.

"The smaller dairies, in order to be profitable, they are going to have to increase in size," Riethman said. "That investment in buildings and equipment would be a major investment for a smaller dairy. The next generation may want to do a dairy, but it's a tremendous investment and infrastructure improvements that have to be made to be profitable and continue."

Green agreed, saying "for the most part, dairies are getting larger and business practices and production practices are changing."

St. Marys-area dairy farmer Melvin Fledderjohann, 82, said when he started milking in 1970, his 70-cow operation was considered large. Today, it's small. He still milks 70 cows.

"Four years ago, you made pretty good money because milk and grain prices were great," he said. "This year it really hit us. It started after Jan. 31."

Fledderjohann said he and his son do all the work, saving costs compared with some dairies that hire extra help. They also keep all their heifers and add them to the herd once they are old enough.

He said he's decided to stay in the dairy business because he enjoys it and his finances are sound enough to withstand the downturn.

"We have a couple of dollars in the bank, so we will wait and see what's down the road," he said.

New Bremen-area farmer Lou Brown milks about 300 cows, a medium-sized herd for this area. He said he is going to be able to weather the downturn because he has a well-established operation and no hired help. He is still considering an operating loan to cover expenses this year. He operates the dairy with his brother, Alan; his son, Tony; and Alan's son, Mitchell.

"I am making just a little profit because I do not have any hired people here other than my family," Brown said. "I am an older farmer in my upper 50s and well established versus one who is not and building a barn. Some of those are the guys the bank has foreclosed on them."

Many producers expanded or started milking a few years ago when milk prices were good contributing to the problem, he said.

"Some of the aggressive farms really expanded because the price of milk was really good four years ago. That was fine, except China and Russia quit buying (as much) U.S. milk," he said. "China has not bought much since about three years ago, when they bought a lot. Russia has not bought very much in the last three years, too."

The uncertainty in prices complicates dairy farmers' planning, Brown said.

"How are we supposed to plan two years in advance or even one year in advance? You start raising calves, and it's going to be two years before they are able to milk. We can't just jump in and start milking them because prices happen to be good at a particular time or stop milking them if prices aren't good."

Nervous about the dramatic drop in prices, Ohio's dairy farmers are leaving the business at an unusually high rate, according to the extension. Every year, some farmers retire and give up their dairy licenses, but an uptick has been seen recently. In March, Ohio had 2,253 licensed dairy farms - a drop of 59 in five months.   "Farmers are deciding they can no longer dig any deeper into their equity to pay for what I call 'the privilege of milking cows,' " said Dianne Shoemaker, OSU Extension field specialist in dairy production economics.

In 2014, dairy farmers nationwide basked in high prices. Worldwide demand for milk was high, and the number of cows producing milk was comparatively low. Since then, milk prices and farmers' profits have steadily declined, according to the extension.

Milk prices in 2014 averaged $23.16 per 100 pounds. So far this year the average is $14.43, a 38 percent drop.

"There's just so much excess milk right now, and it looks like that's going to continue to be the case for a while," Shoemaker said.

Green hinted more operations may close.

"Any time there are continued low milk prices with increased costs related to hauling or marketing, as well as increased complexity or requirements of contractual regulations, dairy farmers weigh and contemplate these related costs to the longevity and profitability of their dairy operation," she said. "Many contemplate exiting dairy."

As some dairies close, others may actually grow, she pointed out.

"The multitude of factors currently influencing dairy operations will result in decisions that some dairies will exit," she said. "When this occurs many of those cows and resulting production is sold to other dairies that may actually increase in size."

Green said the decision to close often involves multiple generations in the operation, and the decision to remain in milk production can be difficult and emotional.

Michelle Stahl, Mercer County FSA executive director, said she hopes dairy farmers will be able to weather this downturn and the next farm bill improves dairy safety-net provisions.

"Our producers are managerially geared toward survival with not only milk prices but crop prices as well. It is my hope that all are able to stand tall through this difficult time and eventually thrive again," she said. "Perhaps there will be better provisions in the not-yet-established farm bill that could assist a bit more during these volatile years."

Brown said how long low milk prices continue will be a determining factor on how long some operations can withstand profit losses.

"It's a matter of what if it (price of milk) doesn't go up in a year. Maybe a son will have to get a part-time job. We don't know," he said. "If we don't get good crops and get the feed we need, we could always sell some cows to help us get by. So far our milk goes through a co-op and we have a home for our milk."

Help available for farmers:

The U.S. Department of Agriculture's latest improvements to the dairy safety net under the Margin Protection Program took effect with The Bipartisan Budget Act of 2018. Changes to the program are as follows:

• Signup was reopened for 2018 regardless of whether the operation had previously participated in MPP. Signup runs through June 1.

• It raises the catastrophic coverage level from a $4 to $5 margin for the first tier (5 million pounds of annual milk production, which equates to roughly 217 cows). This recognizes the increased growth in herd size across the country. MPP offers protection to dairy producers when the difference between the all milk price and the average feed cost (the margin) falls below a certain dollar amount chosen by the producer.

• MPP significantly reduces the premium rates for every producer's first 5 million pounds of production, enabling dairy farmers to afford more coverage that will better protect against low margins. No changes were made to the second tier of premiums (greater than 5 million pounds).

• The margin calculation is set monthly rather than every two months to make the program more accurate and responsive in difficult months.

• The annual $100 administrative fee was waived for underserved farmers, including limited resource, beginning, veteran or socially disadvantaged farmers.

• Dairy producers may access the web tool to calculate premium costs and evaluate historic prices and probabilities: fsa.usda.gov/mpptool.

Local farmers should contact the Mercer County Farm Service Agency office at 419-586-3149 or the Auglaize County FSA office at 419-738-3918 for guidance.