Maryland dairy woes persist as state offers help

Andy Mason, 33, left, milks about 550 cows in Chestertown, Md., with his mother Alice Mason (not pictured) and his wife, Valerie Mason, right, who holds their 3-year-old son, Abel. Gov. Larry Hogan’s recently announced program to pay dairy farmers’ premiums for federal milk insurance was a nice gesture, Andy Mason said, but it’s unlikely to significantly help the state’s dairy industry. (Photo by Jonathan Cribbs)

Andy Mason said he doesn’t need to leave his Chestertown farm for news about the state of Maryland’s dairy industry. The news comes to him, and most of it is bad.

“Every salesman who drives up here tells you about someone who’s selling out or is going to sell out,” the 33-year-old dairyman said. “I’ve probably been as down about it as I’ve ever been in my life here in the last six months.”

It’s a common feeling among Maryland dairymen, even as the state steps in to assist.

Gov. Larry Hogan announced last month the state would offer about $1.5 million to help pay farmers’ premiums for the federal government’s new Dairy Margin Coverage Program. The voluntary insurance plan, revamped in the 2018 Farm Bill, pays out when the national average margin between milk income and feed costs falls below farmer-selected coverage levels.

Those premiums could yield up to $17 million for Maryland producers, Hogan said.

Dairy farmers welcomed the state’s assistance last week. How much it will help the shrinking dairy industry, however, remains to be seen. After about 40 closures and herd liquidations in 2018, there were fewer than 370 remaining dairies statewide in January, said Dale Johnson, a farm management specialist with the University of Maryland Extension. There were 455 in 2014.

“These low prices are just dragging on and on,” he said. “The price of milk is below the cost of production. A lot of farmers are digging themselves further in the hole each year.”

Dairy farmers are struggling with a confluence of national and regional challenges. The dairy industry nationwide continues to produce too much fluid milk everyday, and consumers are drinking less of it, while the cost of labor and equipment rises.

Maryland dairies face heavier regulation than those in other states and are often hemmed in by commercial and residential development, making it difficult to expand. They’re small generally, and low milk prices favor larger, more efficient dairies of 500 or more cows.

Growing the family herd may be one of the reasons why Mason’s Fawnwood Farm still makes a small profit, said Andy Mason’s mother, Alice Mason. The farm milks a diverse mix of about 550 cows: Jerseys, Holsteins, Brown Swiss and Ayrshires. The milking herd is nearly four times as large as it used to be.

They’re paid slightly more for that milk due to the number of Jerseys, which produce more valuable milk components, Andy Mason said, but the farm is still paying off a new million-dollar milking parlor built five years ago. It’s an uncomfortable situation, and Hogan’s assistance won’t change that, he said.

“It’s a nice gesture, I guess,” he said. “I don’t think it’s going to make or break us.”

Ed Fry, another Chestertown dairy farmer, was busy last week trying to determine if the Dairy Margin Coverage Program will benefit his organic milk operation. He praised the governor’s announcement but wondered if something could have been done sooner.

“I think it’s way too late for many dairymen who have sold in the last couple years,” he said.

John Callahan, a 75-year-old Cordova farmer who milks about 175 Holsteins, characterized the state’s dairy industry as “piss poor.”

“I guess we’re making ends meet, but that’s about it,” he said.

His farm has little debt, but its barns are in poor shape and its milking parlor is about 45 years old, he said. In an ideal market he would build new barns, but he lacks the money. He said he hasn’t considered Hogan’s announcement or the milk insurance program, which he’s never joined. That could change, however.

“I’m not much for government handouts, but the way they waste money, if they’re going to let you have it, I’ll take it,” he said.

Some dairies across the state are profitable, Johnson said, but the size and number of Maryland farms will continue to be a problem. Milk prices are low, feed prices are high, and large dairy farms with thousands of cows profit regardless, he said.

The average Maryland dairy farm spends $19.22 to produce 100 pounds of milk, Johnson said. Large farms in states such as New York, Pennsylvania or California spend as little as $15 or $16 per hundredweight. To reach profitability, Johnson has advised farmers in the past to cut where they can and limit feed costs. But after five years of declining milk prices, many dairy operations have little left to cut, he said.

Still, Hogan’s assistance could be significant for many farmers, said Colby Ferguson, the Maryland Farm Bureau’s government relations director. The Dairy Margin Coverage Program raised the payout threshold from $8 to $9.50, meaning if the margin between milk prices and feed costs falls beneath that, farmers will be paid the difference. The new premiums cost 15 cents more per hundredweight, and the state is paying for that price increase.

“It’s not going to make a farmer go from losing $10,000 a month to making a bunch of money,” Ferguson said. “If anything, it’s going to try to get them back to break-even so they’re not losing money.”

Allen Stiles, a former president of the Maryland Dairy Industry Association and a Carroll County farmer, said he’d rather see milk prices rise. He’d also like to see the state place money into its dairy emergency fund, which has sat empty since the legislature created it to assist farmers in 2007. Industry leaders have repeatedly asked the state to put $5 million into it since its creation, though legislators have generally seen dairy assistance as a federal issue.

“I think the situation we’re in now, I think that’s as good as (Hogan) could do,” Stiles said.

Back in Chestertown, Andy Mason said two changes would help the market: if people drank more milk and farmers produced less of it.

“They always say when milk prices are good, people make more milk, and when milk prices are bad, people make more milk,” he said. “It’s a catch-22.”

Johnson said he’s asking farmers to do a full and honest financial analysis of their operations, particularly if they find their cost of production is $22 or $23 per hundredweight.

“If your net worth is decreasing over the last three years, I think you need to take a hard look at the farm,” he said. “You might find that it’s better to get out now than later.”