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Small Dairy Farms Are Making Big Changes to Survive

Low commodity dairy prices are herding family-owned dairy farms toward new business models

  • 15 min to read

Driving through rural Missouri and Illinois, you’ll spot plenty of happy cows lazing around on pasture. It’s nice to think that these cows produce the milk we buy at the grocery store, and yet when we stroll through the dairy department, we don’t usually make the same connection.

If you read the labels on most gallon jugs of milk, there’s usually no way to learn about the farm where the milk was produced, or what was required of the dairy farmer to get the milk into the store. You won’t read about when the cow was milked or even where the farm is located (and likely, the milk in one gallon isn’t sourced from just one farm).

Also unseen by the average consumer are the challenges facing small dairy farmers. The current price of milk is making it difficult for farmers to cover their operational costs and plan ahead. A decade ago, in 2007, retail dairy prices were at record highs – around $3.87 per gallon – and they spiked again in 2014 to $3.82. The next year, they tanked to $3.31. In January, the average retail price in St. Louis was $2.82, which demonstrates the instability of milk pricing. This volatility makes it difficult for small dairy farmers to survive by milking cattle alone. So what can they do?

It’s an industry-wide question without a simple answer.

▼ What Low Prices Really Mean

Beneath the fluorescent warehouse lighting inside a large supermarket chain, like Wal-Mart or Costco, consumers push extra-large shopping carts filled with value-priced groceries, including milk priced as low as $1 to $1.50. Such rock-bottom milk prices are a loss-leading tactic designed to attract customers and stimulate sales for other products sold in the store. It’s great for retailers and consumers, but less so for dairy farmers.

Dairy farms are paid by the hundredweight (Cwt), which is equal to 100 pounds of milk. For example, a dairy farmer in Greenville, Illinois, milking 120 cows has a break-even of around $20 a Cwt. Wal-Mart’s pricing computes to paying around $15 per Cwt.

By the end of 2017, Wal-Mart will open a 250,000-square-foot milk-processing plant in Fort Wayne, Indiana. The press release announcing the facility promotes the 200 jobs it will bring to the community, but it doesn’t address the reality that Wal-Mart’s move into milk production might very well push out local businesses – and jobs – as well.

The plant will make it possible for Wal-Mart to contract directly with farmers for milk, instead of going through distributors and wholesalers like Prairie Farms or Dean Foods. This allows Wal-Mart to operate under its own private label more profitably, without the margin of distribution. It’s hard to say if pricing will decrease even more.

For small farmers to get their milk to an economical level of pricing, they’d need to operate with lower costs, and for most, that means producing a higher volume of milk – or making value-added products with their milk, like cheese or yogurt. This also means employing an entirely different business strategy, but the alternative might very well be exiting the industry altogether.

Closing the family dairy farm wasn’t an option for sisters Amy and Beth Marcoot of Marcoot Jersey Creamery in Greenville, Illinois. When they faced this same crossroad for their family’s sixth-generation farm in 2008, the sisters shifted the dairy’s focus from milk production to artisan cheesemaking.

Similarly, in the Kansas City area, Shatto Milk Co. has reignited interest and sales for its small-production milk with throwback packaging – glass bottles – and a delivery service, plus milk in fun new flavors like root beer and cotton candy. Shatto has also added ice cream, fresh butter and cheeses to its collection of fresh dairy products, sold at the farm and through retailers across the Kansas City area.

▲ Don’t Cry Over Spilt Milk

Michael Turley, owner and operator of Rolling Lawns Farms in Greenville, Illinois, wears tan work overalls and a baseball cap branded with his farm’s logo. He moves from stall to stall in the farm’s milking and feeding bar, shoveling feed into each feed bin as his cows happily chomp away. He has 120 Holsteins currently milking, and a total of 300 in his herd.

Turley gestures around the barn, which is divided into large stalls; and suggests that many farmers don’t do it this way: “It’s a very labor intensive way to take care of [feeding cows],” he says.

Turley feeds the cows individually twice a day; they each eat about 100 pounds daily. In the summer, he grows corn and alfalfa for them, but feed is only about half of his operational cost. Although he’s still operating the farm the same way his father did five years ago – and the cows are still getting milked at 3:30am and 3:30pm every day – a lot has changed.

Turley came to full-time farming a little differently than one might expect. Prior to taking ownership of Rolling Lawns after his father’s death in 2012, he enjoyed a successful career in advertising, helping his dad on weekends and evenings as needed. In 2015, after a 25-year career, Turley retired as chief executive officer and part owner of Osborn + Barr, a St. Louis-based agency touting an agriculture-heavy client list. Retirement didn’t mean slowing down, but rather, running the farm.

Although Turley took over Rolling Lawns in 2012, it wasn't until last year that he made a change he’d been thinking about for a decade. In that time, he witnessed the expenses of the farm threatening to outpace its income, and knew he would eventually either have to make big changes or dissolve the operation while he still had a say.

Turley makes it clear that he doesn’t feel victimized by the changes in the industry. He respects dairy farmers at the helm of big commercial operations, which are often also family owned and operated, and he doesn’t expect consumers to stop seeking the lowest prices available.

“Agriculture is no different from any other industry,” Turley says. “We’re consolidating… Big companies get bigger and the challenge is then, how do you create new value that doesn’t come in the form of low cost?”

At Rolling Lawns, it meant quitting the dairy cooperative Turley’s family had been part of for 30 years. Instead of shipping milk daily to Prairie Farms, where it was bottled and then put on shelves under the Prairie Farms brand name, he decided to produce, process and distribute the milk himself.

Turley stands outside the milking and feeding barn on the edge of his property, which is a total of 700 acres, and points to an old barn a few hundred yards away. It’s where he’s building a 10,000-square-foot bottling center, which he expects to be completed in late April or early May. (Rolling Lawns’ milk was previously bottled at nearby Marcoot Jersey Creamery.)

He continues to walk around his property pointing out certain details he does differently. Focusing on freshness and animal husbandry are the two important ways that Turley intends to stand out on store shelves. For him, the goal is to get milk from the farm to the vendor within 24 hours rather than the industry average of 48.

As Turley nears an area of the barn where a cow is elevated on a platform, allowing a trimmer to file its hooves – he jokingly calls it a “pedicure” – he explains another difference in his process. Because happy cows produce quality milk, he also strives to care for his cows in a way that increases their average lifespan by 50 percent.

“This is the type of stuff people don’t know about or realize [when it comes to animal care],” he says pointing to the trimmer. Turley explains that a commercial dairy cow has about four years and two or three periods of lactation before it’s usually processed for meat.

“We want 10- and 12-year-old cows on our farm,” he says. In fact, he’s got four generations of cows in one family (the eldest cow is 11 years old). This requires keeping his cows on a consistent diet of quality feed (which also helps maintain the flavor of the milk), giving them antibiotics when they get sick and taking care of them like family.

Once his bottling facility is up and running, Turley also plans to create biking and walking paths on the farm, inspired by his time training for marathons in St. Louis’ Forest Park. And following that, he also wants to open an event venue on the farm.

Turley hopes these plans will help bridge the divide between consumers and agriculture by making his farm more of a destination – one that encourages people to spend time there, learn about the cows and how the milk is made. (He thinks places like Eckert’s, with three pick-your-own orchards in southern Illinois, and local vineyards that offer tours and education about their wines, are getting this right.)

He envisions families spending afternoons at Rolling Lawns, looking at the cows, watching the milk be bottled and enjoying a picnic as they look out over the farm. And he pictures chefs hosting dinners on his land. “Education and hospitality – I think farmers are known for that, and we want to share it,” Turley says. “We want to be part of the answer.”

He explains that because he’s managing all the steps himself, chefs and restaurateurs have a direct relationship with his operation – something that didn’t previously exist under the family's former dairy cooperative. This newfound connection has proved profitable, too: Almost 90 percent of Rolling Lawns’ sales are to restaurants and the food-service industry; the other 10 percent is direct to consumers. Gallons of Rolling Lawns milk are located at 14 specialty food stores around the St. Louis area, including Straub’s, Larder & Cupboard, The Smokehouse Market, Ladue Market, Freddie’s Market, Eckert’s Belleville Country Store and DiGregorio’s Italian Market.

Turley has also worked to cultivate relationships with local chefs as another revenue stream for Rolling Lawn. He doesn’t just want restaurants or grocery stores to source his farm’s milk, he wants them to visit the farm and truly understand what sets his product apart.

Tara and Michael Gallina, owners of Vicia in St. Louis, visited Rolling Lawns last year. The couple moved to St. Louis, Michael's hometown, in the fall of 2015 after working together at James Beard Award-winning restaurant Blue Hill at Stone Barns in upstate New York. Michael was chef de cuisine at the restaurant, which was named Restaurant of the Year by Eater in 2016, and Tara led the service team as senior captain.

“[We] believe that the value of the relationship with the producer is paramount to the overall quality of the restaurant,” Tara says.

During the visit, Connie Turley, Michael’s mother and the matriarch of the farm since she married into the family at 19, treated the Gallinas to berry cobbler and freshly churned ice cream, which they enjoyed over conversation with the Turleys. They discussed, among many things, the struggles Rolling Lawns faces in the wake of Wal-Mart pricing. Tara, who received a culinary education with her hands in the dirt at Blue Hill, is very familiar with the challenges facing small farmers.

“But that part of the conversation, [how milk prices are set in general], was something I had never been exposed to,” she says. “It kind of stuck with me that someone with a huge buying power [like Wal-Mart] can say, ‘We’re only going to buy it for this price.’”

Tara understands having to buy the cheapest milk for your family, but believes that if people can truly afford to spend a little more, that it can help make a real impact in the lives – and livelihoods – of local farmers. “Knowing we’re supporting a farm that’s doing the right thing is something [we’re proud of],” she says. “Doing it the right way makes us feel good about using it.”

Max Crask, co-owner of Ices Plain & Fancy in St. Louis’ Shaw neighborhood, says when you’re working with four primary ingredients – milk, heavy cream, sugar and vanilla – that the quality of each is something you can taste. He says there’s a subtle but very distinct difference in flavor and texture when it comes to fresh, quality milk like Rolling Lawns’, particularly when you whip it with heavy cream. He says Rolling Lawns’ milk whips in half the time compared to others he’s used.

Last summer, Crask visited Rolling Lawns and took a tour of the entire operation.

“I like to be able to see the product through from the beginning to when we serve it, and make sure it’s being taken care of to a standard we can be proud of,” he says.

Crask appreciated the freshness of Rolling Lawns’ feed and how Turley treats his animals. He says the milk is a little more expensive, but the superior quality enhances the nitro ice cream served at Ices, so it’s well worth it.

“They’re the nicest people and they make you feel bad that you’re not as good at what you do because they are so good at what they do,” Crask says with a laugh.

Turley has bet big in the hopes that Crask is right – and that many other chefs and consumers will agree with him. “There’s not a fiber in my being that doubts this was [the] right decision for us and that it’s going to sustain the farm,” Turley says.

He hopes to also grow specific produce for chefs like Michael Gallina on his expansive plot of land.

It’s too early to say if Turley’s plan will be financially successful, though, as Rolling Lawns is still in the first year of its new operation.

“There are a lot of farms already doing what we’re doing,” he says. “Having those friends in the industry [serve] as a great example of what’s possible.”

▲ The Land of Milk and Money

One thing Turley would like to see change is support of the dairy industry at the state level. He praises Indiana for supporting its dairy farmers through state leadership. In fact, in 2015, the state of Indiana announced a dairy strategy to focus on expanding processors, attracting new processing facilities and adopting policies that support dairy farmers.

Turley says Indiana has a “pure sense of identity” and hasn’t lost sight of its agricultural roots, which is a $31 billion industry for the state. It’s likely the key reason why Wal-Mart selected Indiana for its processing center (a benefit for the chain of superstores that ironically might hurt the farmers it's intended to protect). He thinks Illinois doesn’t value agriculture as much because of the divide between Chicago and the rest of the state, especially considering agriculture is around $20 billion of its industry, with farms covering 76 percent of the state’s total land area.

Turley doesn’t point to specific examples of how he doesn’t feel supported by Illinois, but rather says it’s a lack of support for agriculture generally. He says if you look at a comparison of state fairs, of how fairgrounds are maintained and how well attended the events are from state to state, you’ll get a good idea of the state’s commitment to the industry. And in Illinois, he sees condemned buildings and fairgrounds in disrepair.

“I think because of political ambitions and the pursuit of the urban vote [that politicians in Illinois have] lost a sense of where they come from,” he says.

He points to Missouri as an example of a state that works to support its small dairy industry, although some Show-Me State dairy farmers might disagree.

Since David Drennan became executive director of the Missouri Dairy Association (MDA) in 1995, he’s seen a declining number of dairy farmers in the state.

“Missouri was the 14th largest [state] in milk production [in 1995],” he says. “Today, we’re the 25th.”

Drennan thinks the primary reason for the decline in dairy farming in Missouri is farmers closing operations due to diminished profits. Other causes include farmers relocating to more dairy farming-friendly states and the lack of available labor, or young people entering the industry. Drennan believes the state has a responsibility to help keep the industry thriving “if it wants to maintain a local milk supply and the economic activity generated by the dairy industry.”

“When the price of milk you get doesn’t cover your feed bill, then you aren’t going to last that long,” Drennan says, echoing the challenges Turley faces in Illinois.

In 2015, the Missouri state legislature passed the Missouri Dairy Revitalization Act, an effort to help support dairy farmers. It made Missouri the first state to pass a bill that enhances the dairy title provisions of the federal farm bill. And although the $2.5 million funding was passed, and former Gov. Jeremiah “Jay” Nixon signed it, approving $1.3 million – he later ended up withholding all but $200,000.

The bill would have served three priorities: The first priority, and one of the most important components, was to establish a dairy producer insurance-premium assistance program to producers who participate in the federal margin protection program for dairy farmers. This means farmers can buy insurance, or margin protection, to protect themselves from volatility. So when there’s a bad year, farmers are insured at a certain price to help protect their farms against catastrophic losses.

The second priority was to give 80 $5,000 scholarships to students studying agriculture to help increase and develop the number of dairy laborers. The shortage of qualified dairy managers is a significant reason for the diminishing number of dairy farms. Gov. Nixon did follow through with partial funding for scholarships, but according to Drennan, there wasn’t enough money, or more importantly, time, to promote the scholarships to agriculture students. Only six applications were submitted for the 80 scholarships (all of which were accepted). The entire $200,000 allocated by Gov. Nixon was for funding these scholarships, but since only six applications totaling $30,000 was used, it’s possible that much less will be granted in the future. (The application period has since been reopened and submissions are due this month.)

The third priority required the University of Missouri’s Commercial Agriculture program to conduct an annual study of the state’s dairy industry and develop a plan to grow it. The university released its first study in 2015, funded by the Missouri Agricultural and Small Business Development Authority. The first line of the executive summary of the study should come as no surprise:

“The number of Missouri’s dairy farms and processing plants are declining slowly… Unless reversed, the state will lose thousands of milk production and processing jobs.” It addresses the most critical dairy-producer need as higher milk prices and profit margins, and the top challenge as labor.

Drennan says representatives of the MDA visited with key figures at the state capitol in Jefferson City to keep funding for the Missouri Dairy Revitalization Act in the state budget, which will be finalized in May. Drennan says they’ve had positive support from legislators, but he doesn’t know what or when, if anything, might happen for sure.

“We have hope that new Gov. Eric Greitens will release the dairy money that Nixon allocated in the current budget cycle."

▼ Dairy Farmers Make Butter Cheese

Charles Fletcher knows the Missouri Dairy Revitalization Act well. Gov. Nixon signed it back in 2015 on Fletcher’s property in Purdy, Missouri, where he owns and operates Edgewood Dairy. The signing was enthusiastically attended by local dairy farmers, producers and kids on behalf of Future Farmers of America from across the state.

“We were very excited the government decided to sign the bill and make an effort to recognize the dairy industry in Missouri,” says Fletcher, who is also a member of the MDA. “We expected [Nixon would fully fund it], but he didn’t, which was a huge disappointment to dairy farmers in Missouri.”

Fletcher says the biggest letdown was in not funding the margin protection plan. When the first farm bill was passed in 1933 – officially called the Agriculture Adjustment Act – it was to give farmers financial assistance to survive during the Great Depression. Over the years, Fletcher says the farm bill has acted as a safety net for American farmers. The Milk Income Loss Contract (MILC) was introduced in the 2002 farm bill to help compensate farmers when prices fell below a certain number, but it expired in 2014. Today, volatility in milk pricing has increased to the point that margin protection is a necessary replacement for MILC, Fletcher explains.

“Can you imagine your salary being $50,000, and one year you get $20,000, and then $80,000?” Fletcher says. “How hard would it be for you to set your budget?”

He continues the analogy, suggesting it would be a lot easier if you could give your boss a little money to hold your salary at $50,000 per year. “That’s what margin protection does,” he says. Fletcher knows the need for such consistency firsthand.

In 1997, he and his family were running their dairy as a family partnership with his father, brother and brother-in-law. Together, they invested in equipment and machinery to grow and harvest feed for cows, and they ran the dairy together. They kept a careful budget and balanced books, but there was a down cycle in the milk industry, where prices became too low to cover operational costs.

“All of the sudden, we couldn’t pay the feed bill,” he says.

The Fletchers had to look at ways to change the cost structure.

“That was my first moment [seeing] how devastating low prices can be,” he says. “We all know if we can ride the ups and downs in the market, that we can take the good and live through the bad. The trouble is that the bad is just long and hard enough that we can’t make it to the good.”

His solution back then was to move to a pasture-based operation, which meant the Fletchers divided their land into paddocks and systematically rotated the cows to fresh patches of grass as an alternative to feed, which accounts for nearly half of most farms' operational costs. The switch proved successful; the Fletchers noticed lower feed costs and vet bills, and cows living longer.

Since then, Fletcher has continued to notice the squeeze on margins and volatile milk pricing. He says the gross income for cattle from 2014 to 2015 has varied more than $1,000 per cow.

“That’s pretty huge.”

In 2001, Fletcher moved Edgewood Dairy 30 miles north of its original location, where he built what he calls a “purpose-built pasture dairy.” Divided into 52 5-acre paddocks with a water system, the farm is built to rotate cows to a fresh area of grass every 12 hours during the growing season, and in the winter they are fed alfalfa and hay.

In 2013, Fletcher’s son and daughter-in-law were getting ready to graduate from college. He planned to have them join the family dairy farm, but that meant having to incorporate two additional salaries. However, the fluctuating dairy prices were making it difficult to predict his revenue year over year with existing costs. Fletcher needed to figure out how to grow while also working within the changing industry.

“[The constantly changing price of milk] makes it extremely difficult to predict what kind of income [you’ll have, and to] keep good help because you don’t know what your pay and salary is – so what can you do to stabilize your price?” Fletcher asks.

He couldn’t expand because there wasn’t additional land available near his farm, and growing the dairy herd with the existing land meant confining the cows, which he didn’t consider an option. (After all, letting them freely graze on pasture was important to their quality of life and of the milk they produce.)

His wife, Melissa, came up with the perfect solution. She taught herself to make cheese, and with that basis of knowledge she could build a family creamery. By pricing the cheese consistently and absorbing the variation caused by ever-fluctuating milk prices, they could stabilize a portion of their business.

The Fletchers did build a creamery, and they built it with enough room to expand in the future. (They continue to sell some of their milk to a dairy cooperative.) Today, Fletcher and his son Tyler operate Edgewood Dairy, and his wife, Melissa, and daughter-in-law Aubrey run Edgewood Creamery.

The women make Edgewood Cheddar, Ozark Mountain Blue, Farmhouse Original and a couple of varieties of fromage blanc, plus cheese curds. They’re currently producing 2,500 pounds of cheese a month – about half of what they’re capable of making.

Edgewood Creamery cheese can be found online, as well as at 30 different restaurants in and around Springfield, Missouri, including Farmers Gastropub, Metropolitan Farmer and The Order. Consumers can purchase cheese at retailers in Springfield such as Hy-Vee, Brown Derby International Wine Center (where Edgewood’s milk is also sold) and Hörrmann Meat Co.

“We’d like to continue to grow the creamery and see where the markets take us,” Fletcher says. “I think the sky’s the limit there.”

For small dairy farms like Rolling Lawns and Edgewood, and for others who have found their niche in a fast-changing industry, looking toward the future is easier today – and will hopefully be even easier tomorrow.

Edgewood Creamery, 5888 Farm Road 1090, Purdy, Missouri, 417.442.3010, edgewoodcreamery.com

Rolling Lawns Farm, 385 Falcon Road, Greenville, Illinois, 618.664.3240, facebook.com/rollinglawns

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Mallory Gnaegy is a part-time journalist, full-time publicist and wannabe chef who takes food-inspired adventures, often on bike, and she never lives by the motto, "Don't write with food in your mouth."

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