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Follow us on TwitterAlthough the net loss figures presented to U.S. Rep. Bruce Braley by Iowa dairy families last Friday were shocking, the fact that the families wanted to discuss their non-existent revenues with an elected official was expected. The same couldn’t be said, however, for the subsequent discussion about comprehensive immigration reform.
As U.S. Rep. Bruce Braley prepared to leave the Delhi farm home of Larry and Nancy Stover, Nancy (right) served him coffee for the road. Although the gesture was one of pure hospitality on the part of the Stovers, it pretty much guarantees a return visit by the Congressman, who will need to return the family's travel mug.
The meeting between Braley and about 30 dairy families, which took place in the Delhi farm home of Larry and Nancy Stover, was intended to be an opportunity for the Congressman to hear directly from those who are being impacted by federal policy.
“Rural America hasn’t shrunk much in size, but has shrunk a lot in influence,” Braley said to open to the discussion. “Iowa is going to lose another congressional seat in 2012. That means that we are going to lose 20 percent of our clout in Congress, and that is not an insignificant thing.”
Ben Blanchard, who owns a large dairy (by Iowa standards) with his mother and two brothers in Clinton County, presented Braley with financial statistics based on his own operation, which weren’t too different than the stories told by dairy farmers throughout the nation. In 2007, their farm was doing well financially, but began to see revenues deteriorate in 2008. By 2009, the farm was receiving some of the lowest prices for its milk that it had ever experienced.
“This is for our farm of 700 cows for a nine-month period [in each of those three years], and you can see the average monthly expenses and then I provided our average monthly break-even price,” Blanchard said. “So, when you compare that to the price that we are paid, you see if we made above or below the break-even point. In 2009, you can see that even though our break-even point was better than it was in 2008, the milk was significantly lower, which resulted in a $4.42 per 100-weight loss. That amounts to a monthly loss of $64,800 for our dairy farm. Looking at the nine-month period for this year-to-date, we’ve lost $582,000.”
Although many of Iowa’s dairy operations are smaller and operated by family only, the Blanchard farm, and other larger operations, has a significant outlay in employee costs.
“We pay in payroll $350,000 over nine months,” Blanchard said. “There are a lot of people in our community Charlotte and in Clinton County as a whole who depend on our dairy farm. … So, when we are hurting, the community is hurting.”
As Braley noted, the available workforce pool in rural Iowa is quite different today than it has been previously.
“The way I feel, and I know that others may not feel the same way, but there needs to be legislation to allow them to come over and not just on work permit or whatever for six months,” said Blanchard, who noted that his family employs more than 20 immigrant workers.
Legislation that would allow immigrants to come into the U.S. and work for extended periods of time needs to be developed, according to the farmers in attendance, because short-term work permits do not provide for consistency in training and maintaining a workforce. Otherwise the available workforce for the areas in which farms exist has aged, and the few younger workers have learned that they can make better paychecks for less manual labor by working in retail establishment such as fast food.
“This put the complicated issue of immigration right out on the table,” Braley said. “There simply are no easy solutions… it isn’t just in dairy, it is in a host of different businesses. And, unfortunately, because immigration is such a controversial topic, we don’t seem to be able to have a meaningful, rational discussion on how we solve these problems.”
Norm Voelker, a farmer from Ryan, said there also needs to be a federal change in how the E-Verify system punishes employers that are attempting to do the right thing by utilizing the system to verify employment status of people they hire.
“Make an incentive for the people who need immigrant workers — and we definitely need immigrant workers. I’ve changed my thoughts on that during the past five years,” he said. “[Those who hire immigrant workers] need a way that they can go online and easily verify whether this person actually should be here or not.”
In addition to workforce demands, an immediate concern for dairy farmers is farm-retail price differences. In 2007, according to Blanchard’s figures, consumers were paying roughly $3.50 for a gallon of milk at the store while farmers were receiving $1.50 per gallon for their raw milk. In 2008, those figures held steady with the consumer price increasing slightly to $3.80 per gallon and raw milk prices also increasing slightly to $1.66 per gallon. In 2009, however, the prices went lopsided with farmers being paid 89 cents per gallon of raw milk while consumers paid $3.15 per gallon.
“We pride ourselves — we have high production levels — we feel we are a very productive dairy farm. But then, as you write these numbers out, it’s almost heart-breaking,” Blanchard said.
Holsteins on Larry and Nancy Stover's farm could be seen through the kitchen window as dairy farmers gathered inside to discuss low milk prices. The Stovers are the third generation of their family to dairy farm on this piece of land near Delhi.
Larry Stover, who hosted the meeting in his home, is a fourth generation dairyman who runs a much smaller operation than the Blanchard family. On a typical day, he milks 90 Holsteins on the same farm that his family has run for three of those four generations.
“I think probably every dairy farmer in the country has taken equity off the balance sheet in order to keep going, to pay the bills,” Stover said. “And, in some instances, they’ve had to borrow more money to pay the bills — probably in a lot of instances. Other than that, you just try to do the best you can. You don’t dare skimp on too many costs because your cows won’t be there when the price comes back.”
Dairy farmers have recently experienced small increases in their milk prices, although they continue to be paid well below production costs. An informal poll by The Iowa Independent of those attending the meeting with Braley showed an average payment of $11.16 per hundred weight. Most operations require at least $14 per hundred weight in order to break even.
Most farmers, as Stover explained, have borrowed excess money to continue their operations, with the hope that the small increases are an indication that prices will continue to rise. The reality is, however, that the markets are being propped by incentives through the U.S. Department of Agriculture that include large commodity buys and herd culling. As a result, banks that have offered additional loans to dairy farmers are beginning to fear for their investments. Some banks are requiring that dairy farmers, who often cut their corn for livestock food, harvest it by combine it instead so that the crop can more easily be sold if the loans go south.
“I would like to say that this is just supply — just an over-abundance of supply. But at the same time, you have to think that everybody has to feed their kids,” Blanchard said. “Dairy products are one of the most nutritious things that you can feed to your families. I understand that exports are down and that people are hurting all over the world. Between here and there, one thing that I feel is that somebody’s got to be making that money because people are still paying it. I don’t know if they have reasons behind it, but when a processor is making record profits and we’re hurting and struggling to get by every day, it makes you really think.”
More than anything else, the dairy farmers who have made it through this extremely rough patch want assurances that the market which governs their price will not continue to be as volatile.
“The price of milk is starting to come up a little bit and, on the futures, it looks somewhat promising compared to where we’ve been,” said Doug Fairbanks, who farms near Anamosa. “A lot of us are established dairy farmers, so we’ve lived off some of our equity, and we’ve burnt that equity this summer. Those resources are tapped. Our lines of credit are full. If this corrects itself for six months or a year and then it happens again… it will devastate the dairy industry. … Just because you are still in business doesn’t mean that you’ve come out of this OK.”
Braley said that he received a great deal of information that will help him as he advocates for rural America in Washington, D.C.
“I’m a firm believer in the safety-net approach to agricultural commodities,” Braley told The Iowa Independent after the meeting. “When the bottom drops out of the marketplace, there have to be protections in place to continue our safe food supply. … I think most of the people here are interested in an opportunity to continue to do what they love and know that the federal government is not going to promote policies that will drive them out of business. And, at that same time, to have a safety net in place if they are at risk of losing their entire operation.”
In addition, Braley said that it is time for the government to start breaking up monopolies in the dairy industry and provide stricter oversight to ensure that the market is not being manipulated.
“We have deregulated so much that we have abdicated our oversight responsibility in many of these federal agencies, and we need to restore the public confidence that somebody is keeping an eye on speculators whose profit motivation is bad overall for the American economy,” he said.
