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Got Milked?

Who is skimming all the profits out of dairy farming?


Published July 23, 2003 at 3:39 p.m.

It's 5 a.m. on a recent summer day and the sky is a crisp, pale, predawn blue. At a gourmet organic produce farm in Greensboro, four young people are squatting and shuffling, razors and white plastic buckets in hand, among beds of ankle-high plants. The pungent aroma of shorn arugula drifts in their wake. Compared to waist-high fields of wheat or towering stalks of corn, this crop seems Lilliputian. The beds of greens are about the width of a city sidewalk; the plants, on average, six inches tall.

Directing the foursome is a young man in brown Carhartt pants whose rumpled blonde hair spikes up like a tattered sunflower. He's Peter Johnson, 31, namesake and proprietor of Pete's Greens. Johnson's minute mesclun greens point to possibilities beyond their petite, picturesque plot. Even as Vermont's dairy farms have been shutting down at an unprecedented rate -- 77 in 2002 alone -- the number of small farms in the state has been rising over the past decade. According to Lindsey Ketchel of the Vermont Fresh Network, 97.6 percent of Vermont's agricultural enterprises are classified as "small farms." Pete's Greens illustrates the viability of small-scale farming. His business is booming -- in each of the last six years its gross income has grown by 50 percent.

A typical workday for dairy farmers Maureen and Paul Lehouillier begins at 4 a.m. and doesn't end until 9 p.m. They work seven days a week, 365 days a year, milking 80 cows on their small family farm in Irasburg in the Northeast Kingdom. They rarely take a day off and almost never go on vacation. And for all their hard work, they would be thrilled just to break even. Like most of Vermont's dairy farmers, they work in a dysfunctional system: The more milk they sell, the deeper in debt they go. As Maureen puts it, "Every time that milk truck drives away with our product, they've stolen it."

Even in the best of times, dairy farming is a labor of love with few financial rewards. But lately, even old-timers are saying this is the worst they've ever seen it. Last spring, farmers saw the price they received for their milk plummet 30 percent from a year earlier to its lowest level in 25 years. In May 2001, Vermont farmers earned about $1.47 for a gallon of milk. This May, they got $1 -- well below what it cost them to produce it. In the last two years alone, 134 Vermont dairy farms went out of business. As of the end of May, only 1417 dairy farms remained. Unless the trend is stayed or reversed, this rate of attrition likely spells extinction for that long-standing Green Mountain icon, the family farm.

"You get to the point where if you went to auction and sold everything, you still wouldn't break even. So you've worked all those years for nothing," says Lehouillier. "But the more you go on, the deeper you get. You can't afford to stay in and you can't afford to get out."

But the Lehouilliers aren't selling the farm just yet. Instead, they're getting organized. They and about a dozen others have been zigzagging the state in the last few months signing up 315 dairy farmers to form a collective-bargaining group called Dairy Farmers of Vermont. Their goal: to find out what's become of their profits. And with the help of Vermont's labor unions and Anthony Pollina, the 2002 Progressive Party candidate for lieutenant governor, they intend to get some answers -- from the supermarket chains, the big food processors and especially their own dairy cooperative, which claims to represent their interests.

Pairing traditionally independent farmers with organizers from the AFL-CIO and the International Brotherhood of Electrical Workers may seem an unlikely alliance. But Dairy Farmers of Vermont is not a union in the traditional sense. Under federal law, farmers cannot unionize. Since DFV's members annually produce more than 850 million pounds of milk, or one third of Vermont's total output, however, they believe they're in a good position to bargain. And now they've tapped into the expertise of seven Vermont labor leaders who have significant bargaining experience to help them negotiate a better price for their product.

Under the current system, dairy cooperatives negotiate the milk prices on behalf of their members. Acting essentially as brokers between the farmer and the food processor, they pick up the raw milk, sell it to the processor and cut the check to the farmer. In theory, they're supposed to secure the farmer the highest price they can for their product.

But like virtually every other sector of American agriculture, the dairy industry has undergone drastic consolidation and corporatization in recent years. Today, just three co-ops -- Agrimark, St. Albans and Dairy Farmers of America -- control 75 percent of Vermont's fluid milk production, according to the Vermont Agency of Agriculture. And that, says Pollina, has created a system where the co-ops no longer represent the farmers' best interests. "If they were really doing their job, 315 farmers would not have joined this organization in the last three months," he says.

But DFV's leaders also say their goal is not to co-opt the co-ops. "This is not an anti-cooperative thing any more than calling your legislator means you're anti-government," Pollina says. Farmers simply want to know why the price of milk for consumers has remained virtually unchanged in the last two years while the price paid to farmers has dropped precipitously. Pollina says DFV will sit down at the table with anyone willing to talk to them in order to figure out how to make dairy farming profitable again.

DFV's announcement last week was not greeted with much enthusiasm by New England's largest dairy cooperative. Agrimark, which serves about 30 percent of Vermont's dairy farms, said last week it will not come to the bargaining table.

"To talk to this group [DFV] doesn't make any sense," says Bob Wellington, economist and senior vice-president of Agrimark. "They don't market any milk, they don't sell any milk, they don't pick up any milk. Our members would just be talking to themselves."

Wellington doesn't deny that Agrimark's members are frustrated by record-low milk prices, a fact he says explains why so many of its members signed up with this "informational group." When asked why his co-op has not secured higher prices for its members, Wellington points out that, despite its size, Agrimark still represents only 2 percent of the total U.S. milk market.

Nationally, co-ops may control as much as 90 percent of the milk at any given time. But with so much milk coming on the open market every minute, Wellington explains, it's the remaining 10 percent that sets the price. "It's an absurd way of doing things, but it's how the marketplaces works," he says. "To outsiders, it doesn't make any sense."

The same might be said for insiders. Pollina points out that a big part of the problem is the bewildering complexity of the federal milk-pricing system, which few people can comprehend, let alone explain. "You have farmers who are engaged in multi-million-dollar businesses who have their families, their livelihood and their homes on the line," says Pollina. "And they operate in an industry that, frankly, no one understands very well."

In fact, dairy farmers literally have no idea how much they're getting paid for their labor until they get their check in the mail.

The first step in correcting that problem, says Lehouillier, is to figure out who is making money. She has a pretty good idea. At last year's annual meeting of the Lehouilliers' cooperative, a Dairy Farmers of America spokesman spent the first half of the meeting talking about DFA's enormous profits, Lehouillier says. "My first question was, 'Where's my cut?'" she recalls. "'You're telling me you're making millions of dollars and we're starving here!'"

Lehouillier says she and other farmers are tired of the same old promises about investigations that lead nowhere. Now, she says, they're turning to organized labor for a new approach. And the unions bring more to the table than just their bargaining experience. They can marshal a large consumer base willing to support businesses who cooperate with DFV. Labor unions also have mechanisms in place for communicating with supermarket chains and food processors. "I don't think the folks at Shaw's are necessarily aware of the fact that every time they sell a gallon of milk, a farmer is losing money," Pollina notes.

DFV is also exploring the feasibility of acquiring a milk-processing facility in Springfield that would be owned and operated by farmers. The plant, which would require an estimated $5 million to get off the ground, would market Vermont-labeled milk products to capitalize on the premium image of the state's dairy industry. As Pollina points out, even if the Vermont brand costs a few cents more, consumers would know that those extra pennies are going straight to Vermont farmers and not some out-of-state corporation.

In the meantime, folks like the Lehouilliers struggle to remain financially solvent. Their credit cards are maxed out and they're in debt up to their eyeballs. Now they've even begun selling the hay they'll need to feed their 150 head of cows this winter, simply because they need the cash.

"The auctioneer says we're just putting off the inevitable," says Lehouillier. "But you can't explain it to ordinary people. You live to farm every day. And you don't want to let that go."

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