USA TODAY International Edition
FINAL SPRING
Caught in a brutal economic system, 90 Wisconsin dairy farms – three a day – had to close their doors in April
One by one, Emily and Brandi Harris removed the leather collars from their Jersey dairy cows as the final round of milking on their farm wound down. They spoke little as the cows quietly munched on organic hay, a milking time ritual at Wylymar Farms for the better part of a decade. Brandi lingered with the cows, giving her “babies” some extra attention. A barn cat, Arnold, took it all in from his perch above the milking stanchions.
Emily reached for a cigarette, something she’d sworn off – but not too far off. “It’s been so stressful for the last year,” she said.
Outside the century-old barn, the wind picked up, and rain started to come down, a fitting backdrop for the end of yet another dairy operation.
As if on cue, a pickup with New York license plates pulled into the farmstead, hauling a livestock trailer. The driver came to a stop, then backed down a muddy hill to the barn.
Ed Flood, a cattle buyer for 45 years, was there to pick up the cows.
Farms calling it quits
A worldwide surplus of milk has driven down the price farmers receive to the point where many have lost money for months, or even several years, at a time. Nearly 3,000 U.S. dairy farms folded in 2018, about a 6.5% decline, according to U.S. Department of Agriculture figures. Wisconsin lost nearly 700 last year — almost two a day — as even dairy farmers used to enduring hard times called it quits in a downturn headed into its fifth year.
The fallout will probably continue as farmers, on the cusp of spring planting, decide whether to invest in seed, chemicals, fertilizer and other supplies needed to raise the crops they feed to their cattle. More than 300 Wisconsin dairy farms shut down from January to May, including 90 – three a day – in April alone.
Some will find the decision is out of their hands as banks refuse to extend them credit.
“It’s enough to test even the most optimistic farmer limping out to the fields,” said Ronald Wirtz, regional outreach director for the Federal Reserve Bank in Minneapolis, which regulates banks in parts of six states, including northwest Wisconsin, and keeps close tabs on agricultural lending trends.
For all the rural romanticism attached to it, dairy farming has long been a demanding business. Cows must be milked twice a day, 365 days a year, regardless of milk prices or farm costs.
Family dairy farms are at the mercy of trade wars, economies of scale and a complex, often opaque pricing system.
Farmers don’t know what they’ll be paid until weeks after their milk leaves the farm. Sometimes the only way to stay in business is to put off muchneeded farm improvements and produce ever-higher amounts of milk – which adds to the surplus.
“If this downturn is the new normal, then what’s the endgame? There’s not a day goes by when I’m not worried about this whole situation because it’s not sustainable,” said Hans Breitenmoser, who has 350 cows on his dairy farm in Lincoln County.
Breitenmoser has been through tough times, including a fire in 2014 that destroyed his century-old barn.
“We are more or less wired to roll with the punches,” he said. “But when the whole economics of the industry have changed, and not for the better, you just don’t see the light at the end of the tunnel anymore.”
At the kitchen table of their 1890s farmhouse in Jefferson County, the Mess family mulled the finances of their dairy operation, Mesa Farms.
Clem and Cathy Mess, along with their son, Patrick, and his wife, Carrie, milk 100 cows on a farm Clem purchased after returning from the Vietnam War in 1971.
Old buildings and equipment remain in service years after they should have been replaced.
Under better circumstances, the Mess family would have built a barn at a cost of about $750,000. They would have spent several hundred thousand dollars on robotic milking equipment and a manure storage system to keep the farm efficient.
But these are not better circumstances.
Last year, the Mess family purchased $167,194 in cattle feed, in addition to the feed grown on the farm, and spent $88,351 on hired labor. They spent $44,505 on milk hauling and more than $30,000 on repairs to buildings and machinery – and that was just to hold things together.
All told, the farm had more than $603,000 in expenses for the year and net income of about $19,000.
The family didn’t borrow heavily to make improvements when milk prices were higher and banks were eager to extend credit. “If we had pulled the trigger and signed the papers then, we’d be done now because there’s no way we could make the payments,” Patrick said.
He and Carrie would like to leave Mesa Farms to their two young children someday, provided they want it and the farm is still in business. But they are realistic about the disruption going on in dairy farming.
“As times change, farms have to change, too. We love the idyllic red barn with the stanchions and cows. I grew up with that. But the reality is it’s not the business model you can make a profit on now,” Patrick said. “Businesses in town change, too. You no longer have the seamstress, the cobbler and the blacksmith.”
Patrick gave up a $60,000-a-year job to farm full-time. He loves the work, though it takes a lot out of him physically and emotionally. He thinks about returning to a nonfarm job where he wouldn’t have to worry so much about how next month’s bills will be paid.
“You question yourself on a weekly basis,” he said. “It’s like watching a train coming straight at you and you hope it switches tracks before you’re run over.”
Losing money every day
After selling their 40-cow herd of Jerseys, Emily and Brandi Harris shut down their organic dairy operation. Saddled with roughly $400,000 in farm debt, they kept the barn, their house and their 92 acres of farmland.
Emily, a fourth-generation farmer and U.S. Navy veteran, took a job as a heavy equipment operator. Brandi, a city kid who had come to feel at home sharing her partner’s dream, continues in her administrative job at Blackhawk Technical College in Monroe.
“I wanted to milk organic Jersey cows the worst way,” Emily said. “It took me 10 years to get them, and I got to do it for nearly 10 years.”
Some dairy farmers have turned to organic operations – using feed grown without chemicals and pesticides – to get paid more for their products. It can take three years for even a small farm to make the transition, and what had been a profitable niche has become big business, attracting mega-sized farms in places such as West Texas.
The resulting ocean of organic milk has sunk some farmers’ prices and their hopes for getting through the crisis.
Emily Harris said her milk price fell by about a third.
The farm was losing money every day she and Brandi remained in dairy.
In a scenario repeated across the state, it was no longer a matter of how Wylymar Farms would endure another year of financial hardship, but how Emily and Brandi would exit the business with the least pain and financial loss.
Quantum change in dairy industry
Rewind five years, when rising global milk sales sent prices soaring.
“We were in our heyday. Farmers had some money in their pockets” and pumped out record amounts of milk, said Kevin Bernhardt, an agriculture professor at the University of Wisconsin-Platteville.
China had stepped up its purchases of powdered milk from the USA and Europe. In early 2014, U.S. cheese exports reached a record high fueled by a 100% increase to China, a 142% increase to Australia and a 48% increase to Mexico. It takes about a gallon of milk to make a pound of hard cheese, so Wisconsin dairy farmers were running at full throttle to keep up with demand. Then markets tumbled.
China realized it had imported too much milk powder. Russia, for political reasons, banned most food imports from the USA and Western Europe. The domestic market was awash in milk, and consumer tastes changed to favor a wide range of other beverages such as sports and nutrition drinks.
“All farmers know the good times end and the bad times come,” said Paul Mitchell, director of the Renk Agribusiness Institute at UW-Madison.
Milk production kept climbing, urged on by government programs that bolstered farm expansions and encouraged dairy farmers to step up their game.
Production has remained high, in spite of the loss of farms, but prices haven’t rebounded much.
“There has been a quantum change in the dairy industry. We are no longer seeing the typical cycles of high and low prices,” said Richard Bylsma, dairy sales director for the National Farmers Organization, a trade group based in Ames, Iowa.
Gary Sipiorski, dairy development manager for Vita Plus, a Madison-based livestock nutrition company, opened the financial records of another Wisconsin farm – with the owner’s permission – to show how the downturn took hold.
The farm milked 500 cows and supported three generations of a family. The first generation, a couple who started it in 1953 with a dozen Holsteins, moved into a retirement home. Their children, nearing retirement years, have been phasing out of the operation. Their grandchildren wanted a bigger stake.
In addition to the family, six employees relied on the farm for income. Some had worked there for more than 20 years.
In 2014, the farm had $939,000 in net income, a highly profitable year because the price of milk didn’t tumble until the fall. By the end of 2015, the farm’s net income was down 47%, and by the end of 2016, it was down 78%.
The dairy operation had a projected loss of $150,000 in 2018 as the price it received was no longer covering the cost of production.
“How do you recoup that? Either you don’t pay your bills, or you borrow more money to keep operating. As each month ticks by … equity slips away from the balance sheets,” Sipiorski said. Even the cows have lost value. As recently as 2017, dairy cows sold for about $1,500 or more in Wisconsin.
Today, they sometimes don’t even fetch $1,000, and farmers who used to rely on selling heifers and calves to supplement their income have lost much of that revenue.
Bull calves aren’t worth enough to raise; they are often killed at birth, a practice farmers and nonfarmers alike hate.
It’s not unusual for even a small dairy farm to have $500,000 or more in debt, and for bigger farms, it’s in the millions.
“Every year of poor prices makes it more difficult for the farmer to make payments and for the banker to keep extending credit – even though both of them want to,” Wirtz said.
In Newport, Sarah Lloyd said this could be the last year for the dairy farm she and her husband run. The farm near Wisconsin Dells has been in their family for more than a century.
“We milk 350 cows, and we’re going broke,” she said. “And I am tired of being told, as a farmer, that I just have to tighten my belt and be a better business person. I cannot make a living if I have to interact with a market that’s stacked against me.”
“You question yourself on a weekly basis. It’s like watching a train coming straight at you and you hope it switches tracks before you’re run over.” Patrick Mess, Wisconsin farmer
A system falling apart
The route that milk takes from the farm to the grocery store is fairly straightforward. And fresh milk, unlike corn, soybeans or other farm commodities, can’t be placed in storage while farmers wait for higher prices.
Calculating prices begins with valuing cheese, dry whey, nonfat dry milk and butter using weekly average wholesale marketplace trends monitored by the USDA. The actual minimum price received by farmers is a blend of prices weighted by the percentage of milk used in each class.
The process, fraught with risks and rewards, leaves many farmers frustrated in not knowing what they’ll be paid until a month after their milk is shipped to the processor. It even bewilders dairy economists at times.
“If farmers could truly understand how and why they got paid what they did, then we could go forward and work on changing it. But the way it is now … it’s a system falling apart at the seams,” Patrick Mess said.
Emily Harris vented her frustration over the low milk prices that forced her to quit: “I’m only 10 minutes from a cheese factory, and they can’t pay me more? It doesn’t make any sense.”
As Ed Flood’s truck pulled away, she waved and called out to her cows, “Bye babies.”
Then she had to get to the bank, cash the check and get on with her life.