Family Dairying and the Dairy Establishment

We all need to eat wholesome food, while farmers need to make a “living income”, just as the rest of working people need to make a “living wage”. Too many of us, farmers and consumers, are struggling to survive – while a precious few live high on the hog.  How can we change this broken and savage system, and who are the agents of the changes that we need? More to the point, who is blocking change?

Consider one section of the food industry, dairy farming. I will try to describe what I call the Dairy Establishment, which would include mega-dairies, the equipment and supply industries, the big marketing and purchasing Coops, the Dairy Departments of Land Grant universities, state and federal Departments of Agriculture, and most of the farm press.

While there are, within all these businesses and agencies, valuable and energetic critics of the official understanding of the industry’s strengths and weaknesses, the general opinion of the Dairy Establishment, and especially agricultural economists, is that small dairy farms are out of date and inefficient. The proof of the inefficiency of small dairies is the plain fact of their disappearance, either by bankruptcy or retirement of their owners. As President Nixon’s Secretary of Agriculture Earl Butz put it many years ago: “Get Big or Get Out.” For others, the proof is the problem
One way of measuring efficiency is by comparing the net dollar value of sales with the volume of output – in dairy farming this is usually done in terms of net dollar income per hundred pounds (a “hundredweight”) of milk, abbreviated as “cwt”. The Agricultural Economics Department of Cornell University has been doing this for decades using samples of “small” farms of 80 cows or less, compared with “large” farms of 300 cows or more. I have averaged the figures for the 9 years from 2001 to 2009. The average size of the sampled farms are, respectively, 55 cows and 734 cows. The startling numbers come to $2.94 per cwt profit for the 55 cow farms versus $1.68 per cwt for the 734 cow operations. The small farms have higher income per cwt because their costs are lower: they are more efficient producers of income. So what other factors, that affect small farms but not large, can explain small farm loss?

I believe that one of the biggest, linked to the “family” nature of small dairying, is the cost of family health insurance: a friend of mine calculates that it takes the milk of 25 cows to cover his insurance: farming is a dangerous game. So I claim that one of the best ways to support family dairies is with State or Federal Single Payer Health.

Farmgate milk prices are notoriously volatile: they can increase by 100% or drop by 50% in the space of a year, in many cases well below the cost of production. Big and small farms have to borrow their way over the dip, and small farms pay more, if they are even able to get a loan. Various other discounts are available for big farms: milk pick-up is cheaper, as well as many kinds of bulk purchase. Tax codes favor large farms, and small farms are more exposed to second home and hunting preserve buyouts.

Economists add one last cost, their most important reason for the loss of small farms in the long run, called opportunity cost: this is the foregone opportunity of doing something different than the business that you are in: in the long run, you will lose the benefits of a better investment of your capital, as well as the better paying job than the 12 hour days and parts of the nights that you spend attending the birth of a calf. I haven’t included these costs in my analysis, partly because it demands estimates, by the farm family, of job and investment opportunities that can only be estimates: the family can only find out if they’re real after they sold the place.
But there is another way of looking at this: let’s consider the benefits of a well run family dairy. I say well run, because a poorly run farm is not, in my experience, in the running at all.

Family dairying can not only be cash efficient: it demands (and rewards!) a huge variety of skills, dealing with herd and soil health, equipment mechanics, construction, all sorts of ingenuity and planning. Small farms are capable of using radically less antibiotics, petroleum and petroleum based insecticides, herbicides and fertilizers – manure becomes a resource, not a waste product that requires long distance trucking, and therefore even more petroleum. Mega-farms are largely responsible for the dead zones of the Chesapeake Bay and Gulf of Mexico while small farms are more adaptable to the sustainable practices of no-till cropping and intensive grazing. All of these small farm practices are benefits to the farmers, their animals – and to the Nation. Aren’t nations, also, subject to the disciplines of opportunity costs?

I’ve sketched some of the reasons I believe we’re losing family dairying, but a successful program can only be designed by family farmers, themselves. Farmers must lead, but need allies, consumers educated about the facts: that the supermarkets, like Krogers, reaped up to 24% profits on investment in 2009 while farmers were losing $80 per cow every month. As a whole the food system is vertically integrated and outrageously profitable- second only to the health care industry. Farmers and processors get little, while parasitical distributors, retailers and agribusiness get rich – by underpaying at the farmgate and overcharging consumers at the checkout counter.

Many farmers think the food system is a free enterprise system, screwed up by an insane state. Dairy prices, like farm subsidies, are in fact administered by the USDA, which encourages that illusion. The face of the State is what people see, and serves to hide the real designers of dairy programs: the Dairy Establishment. Our problem is politics, not economics. So people get wars that they oppose, health care that costs too much and doesn’t work, “job creation” programs that send jobs overseas, and milk pricing that can’t support dairying. But, as one young farmers explained to me many years ago, “at least we’re Free!” (I wonder if he’s still farming!)  I believe that most dairy people are aware that they are being screwed, but live on the hope that the market, however corrupted it may be, will overcome that corruption and justify them. But there is no Invisible Hand here: these markets are human constructs, and serve their creators.
They are in the wrong hands.

Jim Amory
63 Cheddar Lane
LeRaysville, PA 18829


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