State

Kentucky’s dairy farms are disappearing; most milk at stores isn’t local. Why?

After more than 20 years as a dairy farmer, the numbers just didn’t add up anymore for Brian Hargis.

For months, costs had topped income from his herd of about 80 cows in northern Pulaski County.

His paycheck was $14 for each 100 pounds of milk, but with transportation, marketing and other costs, Hargis, 45, figured he would have needed at least $16 to break even.

He explored getting out of the business by selling his cows to another producer, but got no takers. So in October, he sold them for slaughter.

“When your milk check is less than your bills . . . you just can’t go on,” Hargis said.

Hargis joined an exodus of more than 10 percent of the state’s dairy farms in 2018.

There were 600 dairy farms in Kentucky at the beginning of 2018 with a Grade A permit, but that number dropped to 513 by Dec. 1, said Maury Cox, executive director of the Kentucky Dairy Development Council.

By comparison, the state had 1,400 dairy farms in 2005, Cox said.

Dairy operations are small businesses, so when one closes, it has an effect on other businesses as well.

Depressed prices

After several years of depressed prices, costs for feed, fertilizer and other needs outstrip milk revenue for many Kentucky dairy farmers.

In 2014, a banner year for producers, milk prices reached nearly $26 a hundredweight at times, but have dwindled.

In August 2017, one measure of milk prices in Kentucky, the “mailbox” price, was $18.63 per hundredweight; a year later, it was $15.82, according to the U.S. Department of Agriculture.

And that price does not take into account some costs, meaning the net to farmers would have been less, several said.

The dairy council surveyed producers’ checks in September and found farmers getting anywhere from $12.19 to $18 per hundredweight after deducting hauling costs, Cox said.

The average was about $15, set against production costs of $18 to $20, he said.

Kenny Burdine, associate extension professor of agricultural economics at the University of Kentucky, estimated the state would finish 2018 with $166 million in farm-level dairy receipts, down from the federal estimate of $196 million in 2017.

The decline is due in part to lower prices and partly to decreasing numbers of cows, he said.

Milk prices
Jason Lawhorn prepared to hook a milking machine to a Jersey cow in November 2018 at KC Farms in Russell County. The farm is owned by Dante Carpenter. Bill Estep bestep@herald-leader.com

‘More money coming out than was going in’

Some farmers are getting by by dipping into savings, delaying payments or selling a few cows.

The price farmers can get for dairy cows is down, however, said Dante Carpenter, who started milking in Russell County in 1987 and is a member of Prairie Farms, a farmer-owned cooperative.

“It’s been a tight year,” Carpenter said.

Jerry Gentry, who runs a dairy farm in Pulaski County on land his father cleared, said he is receiving $4 to $5 less for each hundred pounds of milk than he got two years ago. If bills for water, electricity and feed come in the same week, he sometimes has to put off paying one.

“I don’t like living that close,” Gentry said.

Dale Ratcliff, of Lincoln County, shut down his milking operation in 2018 after more than 40 years as a dairy farmer.

Things had gotten to the point that if he had a flat tire on a tractor, he had to dip into savings to cover the repair, said Ratcliff, 57.

“There was just more money coming out than was going in,” said Ratcliff.

Ratcliff sold his 61 cows to a cattle broker — who probably sold them for slaughter — and got a job at a factory in Danville. He plans to start raising beef cattle so he can keep his farm and pay the taxes.

Some Kentucky farmers are continuing to milk, even at a loss, to maintain some cash flow as they hope for a rise in cow prices so they can sell out later.

With the uncertain financial outlook, younger people have been reluctant to replace older dairy farmers.

There are easier ways to make a living.

Gentry said he routinely works 16-hour days, getting up at 4:30 a.m. to milk, then spending hours tending to cattle and crops, then milking again in the late afternoon.

“Anybody that runs a dairy farm will tell you it’s the same thing,” he said.

Milk prices
Jersey milk cows fed on hay at Dante Carpenter’s KC Farms dairy operation in Russell County in November 2018. Bill Estep bestep@herald-leader.com

‘Too much milk’

The price farmers get for milk is based on a complicated federal formula. Overproduction of milk holds down the price.

“We’ve got too much milk nationwide,” Cox said.

There is not overproduction of milk in Kentucky, but producers here feel the effects. Even as farmers here struggle, milk is trucked in from other states for processing and stocking store shelves.

The federal marketing system subsidizes transport of milk into Kentucky, Cox said.

The system is designed to ensure an adequate supply of milk everywhere, but it “picks winners and losers,” he said.

More than a dozen Kentucky dairy farms lost their sales contracts in 2018 when Walmart decided to build its own processing plant in Indiana and stop buying processed milk from Dean Foods, which in turn announced it would close a plant in Louisville.

The Farm Aid organization argues that the milk-pricing system is unfair because it is controlled by large dairy corporations at the expense of small producers and consumers.

The number of extremely large dairy farms has gone up in recent years as smaller dairies were “flushed out” across the country, the organization said.

Farm Aid pointed to Walmart’s new Indiana processing plant as a example of large players taking over more of the milk-supply chain.

Large companies with processing plants typically would rather deal with a few large farms than many smaller ones.

Dairy farms in Kentucky are generally relatively small. Larger operations in other states can manage costs better and withstand low prices for longer periods, but other states have lost producers as well.

Help on the way?

Changing consumption habits also play a role in the oversupply of milk. People are just drinking less.

Milk consumption was 247 pounds per person in 1975, but dropped to 149 pounds by 2017, according to the U.S. Department of Agriculture.

The total volume of milk sold in the country dropped from 55 million pounds in 2010 to 48.6 million in 2017, USDA analysts said.

Cheese consumption has increased to counter that somewhat, but consumption of soy and nut-based products such as almond milk — which dairy farmers argue isn’t milk — has increased and eaten into the market for fluid milk.

Cox said the federal farm bill Congress approved recently includes measures designed to help dairy farmers, including a revenue-protection program.

They won’t help as much as a healthy price, however, he said.

Cox said forecasters project a pay increase in 2019 of $1 to $1.50 per hundredweight of milk, but that and the farm-bill measures won’t be enough to save some farms, meaning more are likely to close.

“That extra dollar’s just gonna get ’m closer to losing less,” Cox said. “We’ve got to have some way to manage the amount of milk that is produced nationwide.”

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