Beating the Odds: American Dairy in a Time of Crisis
“We go forward carefully,” says Chelsea Sprague when asked about the future of the dairy industry. She’s sitting in her office, an insulated room attached to Sprague Ranch’s 600-cow dairy barn. The office is filled with evidence of years of hard work. A large sign that says Dairy Queen. Awards scattered about. A framed poster of the history of Ford tractors.
Her husband, Keith, whose family started the farm in 1864, chimes in. “It’s a very good life,” he says, “Hard, but — .” He stops and shrugs.
In a world where 25% of Vermont’s family-owned dairy farms have gone out of business in the past decade, the shrug seems to be an understatement. Chelsea and Keith Sprague have beaten the industry odds — at least for the time being.
From 2009 to 2017, the number of dairy farms in Vermont declined from 1,051 to 780, according to the Vermont Agency of Agriculture. The cause is a combination of national supply exceeding demand, a lack of markets for milk producers, and industry consolidation as farms scale up or get out. From behind her desk in Brookfield, Vermont, Chelsea Sprague leans forward and asks, “How can milk from California be cheaper [at the grocery store] than milk from here? It’s because of scale. The scale has changed since Keith’s family started.”
SCALE UP OR GET OUT
The history of Sprague Ranch is similar to the stories of many small dairy farms. The ranch began as a family farm in 1864, evolved to a local milk delivery service, and eventually grew to 100 cows; after taking over the farm in 1998, Keith Sprague expanded to 600 cows, buying up land in his valley in Brookfield to house cows and chop feed for his herd. Sprague’s decision to grow from 100 to 600 cows was directly related to the decline in milk prices over the past two decades. In order to compete in the industry, Sprague had to scale up and produce more milk or leave the industry altogether.
Expanding a farm while prices are in decline seems counterintuitive, but it is a tactic some small dairy farmers adopt. This is a phenomenon that the late Bob Parsons of UVM Extension calls the “conventional treadmill.” In a 2014 article for the Northeast Organic Dairy Producers Alliance, he explains the concept simply: “add more cows and produce more milk per cow to meet rising expenses.” But, while expenses have continued to rise, the price of milk has declined over the past five years, leaving farmers with fewer and fewer options.
The conventional treadmill has led to an industry consolidation that is reflected in the numbers. Over the past decade, 17,000 dairy farms across the US have closed, a 30% decline. Meanwhile, the average herd size has grown from 163 cows to 234. While farms are becoming more consolidated, so are options for selling milk. Farms like the Sprague family farm can no longer deliver milk to consumers’ doorsteps: they must sell their milk to a processor, and processors are now in control of the market.
MILK MARKET CONSOLIDATION
In the United States, dairy is rarely a direct-to-consumer product, asraw milk is shipped to a processor and handler then to a retail store. Farms are often contractually obligated to work with one processor and if that contract is canceled, the farm often has no way to sell its milk, because most processors now control vast swaths of the country.
This control, wielded by large processors like Dean Foods and Dairy Farmers of America, has been challenged in multiple class-action lawsuits from farmers in the American Southeast and Northeast. In early 2018, farmers finally received payouts from a 2009 lawsuit against these processors, totaling to $4,000 per farmer. The average cost of one dairy cow is around $1,900.
Despite the class-action lawsuits, industry markets are still controlled directly by processors and farmers are often forced out of business if their contracts are canceled. In 2017, the Dairy Farmers of America canceled over 200 contracts with regional producers in the Eastern United States, followed by Dean Foods canceling over 100 contracts in the same area in 2018. The Dean Foods’ cancelation was directly linked to Walmart opening its own milk processing location. The cancelation of these contracts caused an upheaval in the industry and the closure of more family dairy farms in 2018.
OVERSUPPLY
One reason behind contract cancelation is an oversupply of milk in the United States. Fluid milk sales have declined since 1975, while herd size continues to grow. The oversupply is both due to a complex pricing structure from outdated government policy and a lack of demand for milk attributed to the popularity of nut milks.
Milk pricing is government regulated, similar to oil and other commodities. Because of this, dairy farmers are at the mercy of complex policies that reflect consumer demand, but the farmers themselves cannot impact this demand. Like milk’s government-enforced pricing structure, its marketing is also controlled. Companies that produce nut milks can release marketing campaigns with ease, but milk is not marketed to consumers by farmers: it is marketed by regional dairy councils. Even the famous Got Milk? marketing campaign was licensed by the California Milk Processing Board, a nonprofit group of dairy processors that reports to California’s Department of Food and Agriculture.
Chelsea Sprague recognizes the obstacle in milk marketing, saying, “marketing and product development are a problem in this industry. Healthy is trendy. Why isn’t milk being marketed as healthy?” Chelsea’s point has not been missed by thousands of other dairy farmers, many of whom recognized the need for better branding and switched to the only niche left in dairy: organic.
ORGANIC DAIRY
To fight scaling up or selling the herd as the industry has bottomed out, some farmers chose to pivot to a different consumer platform: organic dairy. Demand for organic dairy increased throughout the 2000s until 2017, when the industry hit the same problem the conventional dairy industry hit years before: oversupply, a drop in demand, and consolidation of major processors. In spite of this, Joe Donegan still tends his organic herd in Charlotte, Vermont, working alone with the support of his wife and young children.
“I chose dairy because I knew enough to think I could do it, but not enough to know not to,” Donegan says as he milks one of his 70 Jersey cows. Donegan is unique in the industry — he does not come from a family farm. He started his organic dairy farm in 2009, when conventional prices plummeted to their lowest in decades. He cites a divine inspiration for going into farming, but also acknowledges that choosing to open an organic dairy was a marketing decision.
Donegan’s original plan was to sell raw milk, but to find a sales outlet, he connected with Wisconsin-based organic processors, Organic Valley. Under their cooperative structure, Organic Valley does not allow for the sale of raw milk in its bylaws. Stuck between his original vision and keeping his dream alive, Donegan dedicated himself fully to organic farming.
“The public can infer certain things from the [organic] label,” says Donegan, “People can assume cows are treated in a baseline way.” Organic dairy certification by the USDA comes with minimum requirements, including allowing cows access to pasture and limiting confinement.
That being said, Donegan worries that the consolidation of the industry, similar to conventional consolidation, is eroding public perception of the organic dairy industry and weakening the meaning of organic as a whole. “The organic movement has been bought out,” he says, referencing acquisitions and the sale of Stoneyfield from CPG group Danone to Lactalis in 2017.
Donegan challenges the way organic dairy has been marketed, focusing on farming practices instead of consumer perception about health. “The center of organic agriculture is soil and making soil something that is an inherited cultural resource,” Donegan says, standing in his barn after finishing the morning milking. His children come in and help quietly usher his cows to pasture, emptying the barn until the next milking.
MOVING FORWARD
While the popularity of fluid milk wanes and the industry’s once-darling organic falls out of favor, the future of dairy is unclear. Chelsea Sprague thinks a few solutions could be exporting milk or using it for products that are more popular than fluid milk itself. “As a dairy farmer, I don’t care if our milk becomes cheese or ice cream,” she says with a laugh.
Joe Donegan, meanwhile, isn’t letting industry news impact his outlook as a farmer. “I’m aware that things could get a lot worse before they get better,” he says, leading his herd out to pasture, his children in tow. The cows follow dutifully, walking the path they walk every day. Once the cows are in the pasture, he reflects on the closing of other dairy farms in the town of Charlotte, Vermont. “It’s hard to say when I’ll be the last one standing,” he says, looking over the cloudy hills. And it is hard to say when he will be the last one standing, as the industry changes almost daily. For now, farmers like the Sprague family and the Donegans exist in a world of uncertainty, where it seems all they can do is go forward, carefully.
