Inforum: Empty barns: Prolonged low milk prices pressuring dairy farms to fold
By Karen Tolkkinen | Jan 31, 2018
ALEXANDRIA, Minn.—There wasn’t really a last straw that made Billy Euerle walk away from his Garfield dairy farm last year.
Things had been bad for several years.
He trudged through his days, milking Hot Chocolate and Caroline and Brooke and all the others, barely sleeping. Facing terrible milk prices and crushing debt, he struggled to find motivation. Every chore seemed to take twice as long, and his whole family was feeling the stress. To top it off, severe storms in 2017 ravaged several farm buildings.
“You just had to fool yourself every day that you were going to make it,” said Euerle, a father of four. “As a farmer, your mentality is that things will get better, but it didn’t.”
Euerle is by far not the only dairy farmer trying to cope.
Dairy farms around the region are struggling with prolonged low prices. While the market often takes dairy prices for a joy ride, the peaks and valleys typically come quickly. This time, however, farmers are entering their fourth year of low prices.
Farmers are paid per 100 pounds of milk, called a hundredweight. When the price per hundredweight approaches $20 and beyond, they’re generally doing pretty well. In 2014, they were getting paid close to $25 per hundredweight. The price plummeted late that year, however, and since then has staggered between $12 and $17 per hundredweight. Analysts predict it will get worse before it gets better, said Corey Freije, a Minneapolis-based federal farm economist.
Farmers say a federal insurance program designed to help dairies during times of low prices hasn’t helped.
“I’ve got some good dairymen quitting in a couple weeks here,” said Darrin Savoie, general manager of the Nelson Creamery. “It’s a shame.”
In 2017, nine of his dairy producers went out of business, and the creamery is down 2 million pounds of milk from the previous year. That hurts local communities, he said.
“The thing of it is your small mom and pop dairies, if they have a part break they shop locally,” Savoie said. “The local dairies support the local businesses. I’ve got a few big dairies, I know they shop local, but when you get these corporate farms, they probably buy everything in bulk from a manufacturer and the local supplier gets cut out of the equation.”
He added, “It’s pretty huge to the local economy and people just don’t realize it.”
Heart and Soul
Euerle wanted to be a dairy farmer from the time he was 4. He grew up in Osakis, in town. His dad worked as a machinist and his mom ran a daycare, but Euerle spent summers with an uncle who milked cows. He fell in love with the business. He especially loved how kids could have their dad home all day.
When he was 14, a hired man quit at an Osakis dairy farm so he began pedaling there every day before school to help with chores. He worked there six years.
After working at other dairies, he and his wife began milking on their own in a rented dairy in 2009. In 2013, they were able to start their own farm.
They got a 40-year loan based on 80 cows producing 80 pounds of milk a day and prices at $18 per hundredweight.
After contemplating names for their farm, they decided on the one that Euerle felt best expressed how he felt at finally owning his own spread: Heart and Soul Dairy.
He spread rubber mats in the stalls to make the cows, mostly Holsteins, comfortable. He bedded them with clean, dry straw. He installed big fans to keep the flies away. One year he hung wreaths around the cows’ necks and sent the photos to the Alexandria Echo Press, which printed them as Photo of the Week.
“It’s not just a job,” he said. “It’s literally the way you live. Dairymen do everything for their cows. They get fed before we do.”
Euerle knew he would face headwinds. He had endured the punishing milk prices of 2009, the lowest in a generation.
But some challenges proved unexpected.
The first was a poor well. It couldn’t keep up with the demands of a dairy herd, so the cows didn’t produce as much milk as expected, causing Euerle to partially miss out on the bonanza milk prices of 2014. The water supply was so meager that, at times, no water would come from the taps in the house.
When a well driller finally found a second source of water, it was so far from the barn that it cost $60,000 to install. That went in in 2015.
Meanwhile, dairy prices plunged.
“We went from $25 milk, six months later we were at $15. That’s $12,000 less a month,” he said.
There were times the milk check wasn’t enough to cover the feed costs. For two months, there was no milk check at all. Much of his wife’s earnings as a nurse went back into the farm.
“(Our lenders) kept telling us, ‘It’s going to go up, don’t worry,'” Euerle said.
But it didn’t. And the federal Margin Protection Program didn’t help him, he said. The program provided insurance that he bought into, but it paid him just enough to cover the cost of the insurance.
“It was a joke,” he said. “The government made so much money on it. It was a very confusing program.”
Then storms came along. Two storms two weeks apart wreaked havoc on Heart and Soul Dairy.
One knocked out power to the farm. He couldn’t milk for 30 hours, an eternity in the dairy industry, and there were too many cows to milk by hand. They developed mastitis, a painful disease that can also cause buyers to reject a dairy’s milk.
Strong winds ripped the roofs off the dry cow barn, machine shed and the back half of the dairy. They tore away the top of a silo and carried the top of a grain bin across the highway.
“I went mentally crazy trying to hang on,” Euerle said. “I don’t want to say I forgot about my family, but I didn’t know how to keep my farm going. It was so hard to see your dream die.”
Finally he realized that if things kept on, he was going to lose the farm and his family. In August 2017, he sold the cows and filed for bankruptcy, more than $800,000 in debt. Too grief-stricken to stay on the farm, he, his wife and their four children moved to a rental house in Osakis.
He went to counseling to recover from the loss and landed a job at the Osakis Creamery. It allowed him to maintain a role in the dairy world, and he relishes opportunities to see cows again and support dairy farmers. But it wasn’t easy to take that job.
“I was so scared that everyone around here would call me a failure,” he said. “But they haven’t.”
No building projects
Farmers around Douglas County are waiting for milk prices to rise.
Becky Bock and her husband Jason began farming in Carlos in 2001, taking over the dairy farm from his father.
“I think maybe we’ve had three good years in all that time,” she said. “I tell you what, there’s no major projects going on around here.”
The Bocks began with 12 cows and now milk 65 to 70 cows.
This prolonged stretch of low prices, Jason Bock said, “probably ties with second worst I’ve dealt with.” The worst year, he said, was 2009. That year, they had to borrow $100,000 just to keep farming. Since then, the good times haven’t lasted long enough to pay that back.
As a side business, the Bocks began selling feed in 2012.
“That’s the only reason we haven’t gone bankrupt,” he said.
Now they’re transitioning to organic to escape the volatility of conventional dairy prices.
The Bocks hope to stay in the dairy industry.
“I’d love to get it set up so our kids can take over if feasible,” Jason Bock said. “The farm’s been in our family for 120 years. You hate to see it go.”