Assessment of a Collaborative Milk Shed in Lamoille County, Vermont

Final report for ONE20-361

Project Type: Partnership
Funds awarded in 2020: $16,079.00
Projected End Date: 03/31/2022
Grant Recipient: Center for an Agricultural Economy
Region: Northeast
State: Vermont
Project Leader:
Silene DeCiucies
Center for an Agricultural Economy
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Project Information

Summary:

This project worked with 7 small (30-100 cows) conventional dairy farms in Northeast Vermont to create a body of data that reflects the financial and practical state of  small grass based dairies in Vermont and hoped to provide a catalyst for future collaboration and change. We chose to work with this subset of farms because they are most quickly leaving our landscape, and are largely underserved and underrepresented in terms of other similar cost of production work. Our goal was to create a good template for data collection, complete a cost of production for each farm (a powerful tool in itself), work through these data with the farmers to find areas of potential improvement in follow-up consulting, aggregate the data to gain a better understanding of the group, and communicate these data back to the farmers, to dairy stakeholders, and to the general public. We completed the COP and interview collection, and had follow up visits with an independent nutritionist and a pasture/forage expert to address immediate questions or leverage points farmers had.  We did follow up visits with each farm just going over their numbers in comparison to the group to address the things they were doing well and the key leverage points they could work on to increase profitability. We also summarized the data for journal, newsletter and fact sheet publication for fellow business planners, farmers, and the general public. The project was incredibly well received by the participating farmers most of whom we are doing follow up work with through different grant programs, and the work was well received and circulated by those who read our reports. The project helped farmers work on their profitability, but more importantly galvanized them in knowing they were not alone in a system not built for them, have support, and should be incredibly proud of what they are doing. Public reaction to the report was positive in that most people had no idea the cost of producing milk in our dairy state, and were educated on the realities of being a small farmer, how hard it is, and how important it is. We hope that the project inspired more people to care about dairy in our state and our food system as a whole, and really believe it did.    

Project Objectives:

This project assisted a group of dairy farms in looking at their enterprise more critically from a financial perspective in order to increase their bottom line. This will mean different changes in production for different farms, but with the common goal of improving systems that exist to maximize profitability of the small grass based dairy farm. The project will create a body of data that farmers can use to better understand their operation as it compares to others. With this data, the team (of farmers and consultants) will be able to better communicate with stakeholders and among themselves about the needs of a group of small farms and discuss their viability moving forward. An additional outcome that we would like to see is more communication between farmers  about their production system, pricing, successes and failures. More of these conversations will help the group collectively to get the most out of the commodity system, and create stronger relationships moving forward. We hope that this project will provide a model that can be repeated across other milk sheds across the Northeast. Along with helping farmers, we hope that the aggregation and dissemination of these data will be informative to consumers and the general population in understanding more about the industry and the systemic issues farmers face. We also hope that our templates can be used by farmers or other service providers to collect further data and assist farms outside the project with this type of work. 

Introduction:

Lamoille and Caledonia Counties are not suited to large dairy operations due to the hilly landscape and lack of large open expanses of farm land. Due to this fact, the majority of the dairy farms in this county are small and grass based and the farms and land have not been bought up by larger dairies. This group of farms represents an older tradition of farming in Vermont that has proven to be less profitable than their larger counterparts, but preserves a beautiful rural landscape and supports a more sustainable relationship with the land. The commodity market does not support the continuation of the small dairy farm, especially in the conventional market so farms need to work together to maximize their profit margins within this model, or assess alternatives moving forward.

Though financial analyses have not been completed for every farm, through informal conversations, it is clear that few farms are making a profit, and many are losing up to hundreds of dollars daily, not including debt service. Through work with small dairy farms in Lamoille and surrounding counties, it has become clear that more communication between farms concerning such topics as production systems and/or price received would be beneficial to the group of farms as a whole. The following is a recent example of how acutely communication with fellow local farmers can influence farm economics:

Silene attended the UVM Nutrient Management Plannning course at Sterling College with 2 farmers from Lamoille County this past winter, and informally asked the 2 farmers what their last milk check looked like because prices had been on the rise. Andrew Young (Young Dairy Farm) and Phillip Plante (Plante Farm) both ship conventional holstein milk to Dairy Farmers of America (DFA), and through this conversation realized that one was getting paid 2 dollars more per hundred weight due to higher components. The farmer with the lower price had no idea that he was getting a lower price until that moment, and it started a dialogue about changing feed companies and getting an outside feed consultant on board, but also about their different production volumes and how that came into play. Both farmers had something to learn from each other, and discussing the numbers catalyzed an important discussion. 

This instance proves that acute financial data from this proposed investigation as well as the platform for collaboration of small farms are equally important outcomes that could have large economic effects on this small milk shed. This project has the potential to make real quantifiable changes in a community of dairy farms, and this model could easily be extended further afield in the future.

Cooperators

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Research

Materials and methods:

General materials and methods:

 Questionnaires were created for initial interviews to collect qualitative data about farm enterprises,  and a cost of production (COP) data collection template was designed that would best suit the majority of the farms in the study. These were both created by the PI, and checked over and edited by Sarah Flack and Rose Wilson, dairy financial and financial experts. Creating the template to be as universal as possible while also being granular enough to capture nuances and differences between the farms took time, but the template produced will keep being used and worked very well for this group. Along with the importance of creating a template for accurate and complete data collection, a lot of thought was also put into the formulas and COP calculations to provide farmers with the most useful data possible.  Each farm had a meeting with the PI in which they went though the interview questions and the financial template to import all 2020 numbers. Almost all of the farms had follow-up meetings to track down all the data and create the complete picture. It was originally planned that the data would be compiled and then the farmers would get follow up services, but many wanted to start work immediately with our project nutritionist or dive deeper into their numbers, so we spent several months following up with farmers and making small changes as the rest of the data rolled in. Bill Kipp worked with all farms but 2 to go over their ration and assess their production systems and each farm received a recommendation document from him post consulting. All of the farms data were compiled, and for each farm a packet was created including their COP data, the rest of the farm's COP data with critical identifying information removed, a comparison of their farm's data to the average, and a summary page that went over their key successes and key leverage points.  Each farm had another visit where they went over this packet, asked any questions, and had the opportunity to engage with our consultants again if they hadn't already. At this point the majority of the farms also decided to continue this work with their 2021 data which is ongoing. 

Post data collection, consolidation, and farm visits and follow-ups we wrote up several reports for different audiences. One was mostly the data, summary, and process and was sent out to the Farm Viability network of business planners in the state, one was for Agriview and other agricultural publications, and one was created more for the general public for the CAE newsletter which was very widely distributed, shared, and well received. 

An unforeseen positive outcome that has come out of the project was our work with Jasper Hill Farm (JHF). As it ended up, 3 of the farms in this study happen to ship milk to JHF, and in Jasper Hill's conversations with these farmers, they found out about the cost of production project so approached us to collaborate with them on a cost plus investigation. With the farmers consent, we aggregated their data to show JHF the true cost of the milk produced for them, and to build in production changes that JHF would like their farmers to adhere to such as higher milk quality specific to cheese production (increase expenses feed, milk testing, sanitation equipment etc), GMO free grain, and dry hay only feeding.  JHF is interested in a cost plus payment program to equalize payment for new farmers with high debt load versus older farmers with fewer expenses, and also to ensure that their farmers are getting adequately compensated for their product. This project is ongoing but our COP work with each farm has already been very useful for the farmers and for JHF who really needed a reminder of the cost burden of their requirements on farmers.  Stemming from this work, we applied for and were awarded a DBIC grant with JHF to help them develop fair pricing schemes for their milk and develop contracts with farmers. This work just started and will continue for 2 years. 

 

 

 

Research results and discussion:

SARE_tablesandfigures

Average number of cows was 54 milking per farm with an average of 241 acres in production (combined hay land and grazing land). Each farm supplied their 2020 financials, and answered a list of interview questions to help provide a better understanding of their production system. The data were compiled and brought back to the farms so that they could compare their numbers to the group (all data kept anonymous), and discuss outliers.  Each farm then had the opportunity to work with a private nutritionist, and/or grazing consultant to address grain and forage management as feed has the largest impact on variable farm expense, and/or work with a business planner to address other leverage points for reducing COP.

 

 

Average

Range

# Cows Milking

54.14

28-88

Acres in Hay

182.71

75-280

Acres in Grazing

59.57

22-100

Total acres/cow

4.48

3.4-6.4

Lb grain fed/cow/day

17.57

10-21.5

Grain: Milk Ratio

0.33

0.21-0.45

Avg Cell Count

101K

50K-150K

 

Average COP including all fixed and variable expenses, farm debt service, and depreciation (assigned value of $10K/50 cows) was $23.37/cwt which does not include owner labor, owner’s draw or family living. The average price received for milk in 2020 was $18.51/cwt, which is $4.86 less than COP, or represents the average dollar amount lost per cwt of milk in this study. This discrepancy equates to $53,853.66 over the 1.1million pound average milk production per farm which has to be made up for via other income streams on or off the farm, additional debt, or savings loss. There was a wide range of profitability among the farms included, and many of them are able to add in other enterprises to maintain positive cash flow or could make management changes to decrease COP, but if we look at the numbers at face value, the message is clear: small farms in Vermont are not at all supported by the commodity dairy industry.

 

 

Average 

Range

Cwt milk shipped

11081.51

5140 - 23081

Rolling herd average (lb)

19783.17

16233 - 26228

#milk/cow/day

54.20

44 - 72

Average price received

$18.51

$17.00 - $19.53

COP/cwt fixed and variable expenses only

$20.44

$15.15-$26.62

COP/cow fixed and variable

$3998.84

$2827-$5112

COP/cwt including debt service and depreciation*

$23.37

$18.98- $27.71

COP/cwt including family living allocation

$24.89

$19.02 -$27.85

*Depreciation assigned at $10,000/50 cows/ year  for the purpose of this study

*Fixed expenses include: Utilities, electricity, insurance, land rental, equipment rental, property tax, auto and truck expense, office supplies, trash, phone, and tax prep. 

 

 

Average

Range

COP/cow fixed and variable

$3998.84

$2827-$5112

Feed cost/cow/day inc. minerals, no hay production cost

$3.87

$1.87- $5.14

Feed cost/cow/day including seed and fertilizer to add corn silage production expense

$4.01

$2.25- $5.14

Income over feed cost (IOFC)*

$6.12

$4.77- $7.07

*US National average for IOFC in 2020 was $9.33

 

Key leverage points identified/used in this study to reduce COP on farms:

  • Ration changes
    • Balancing starch and protein
    • Looking at alternative mixes from feed companies
    • Routing grain through coop
    • Changing graining timing to match forage consumption
    • Changes to hay feeding management to manage varying quality while not disrupting rumen
    • Sourcing corn silage if available to replace some grain
    • Switching to higher forage ration to reduce grain costs
  • Forage management
    • Planning for optimization of forage NDF and protein via harvest time, time between mowing and bailing, fiber length
    • Planning for manure and fertilizer additions to optimize land base
    • Cost/benefit analysis of up front fertilizer/manure spreading cost versus higher grain payments over the winter based on forage tests.
    • Discussion of grazing practices to maximize DMI from pasture in grazing season
  • Water access
    • In barn, in pasture
    • Smooth barn flow and water access
  • Free choice salt and minerals in barn and on pasture
  • Increasing barn ventilation 
  • Exploration of alternative bedding sources and products
  • Reduction of young stock for farms carrying too many
  • Bulk tank size discussion for farms with abnormally high freight- usually due to every day pick-ups due to small bulk tank size, and new tank quickly pays for itself given increased hauling and stop charge rates
  • Utilization of IBA to track down PI issues in milking system
  • Discussion of production management of other nearby farms
  • Electricity costs- in most cases farms have already worked with efficiency vermont to replace light bulbs, pumps, and fans, but not always, so is worth looking into.  
    • Recycling warm water from the plate cooler can be a tactic to save water, and in the winter helps cows consume more water which can increase milk production.
    • We were largely disappointed with efficiency Vermont’s programs for farms right now and their staff knowledge of farms. 
  • Hauling-this is a massive expense for these small farms. Any changes made to decrease hauling costs for small farms would make a significant impact on COP and thus farm profitability.

 

We found that this study was a great “ice breaker” for working with farms that may not otherwise enroll in FV, and was very well received by all the farms involved. We are working with the majority on 2021 numbers and hope to expand the work to include more farms and create a more robust data set. This COP work was a very straightforward way to engage with these small dairies through a financial lens, and quickly opened the door to larger management discussions. It was incredibly helpful to have Bill Kipp on board for farm visits and consultations, and farmers were generally grateful for his perspective. 

The changes we made along the way such as switching to only conventional (non-organic) farms helped turn the work into a more useful comparison study, and narrowed the focus of the work in a way that made it more impactful to talk about. Just working with the farms and supporting them in this way was incredibly informative to the farmer, to us, and to the general public when they were able to read about the study. We simplified the methods a bit, but still feel that we have incredibly powerful data coming out, and will use the methods we built in future work. 

 

 

 

Research conclusions:

We feel that we absolutely answered our query and met our objective in that we engaged with 7 farms, they all got something from the process and followed through with the work, and we have a data set we can share with other service providers, farmers, and consumers that paints a realistic picture of small scale dairy in our state. Though our sample size is low, it is truly profound that the average cost of production is so much higher than current milk prices, and this data is proving that current pricing structures simply do not support small family dairy farms in this state. Through this project we were able to assist a group of farms in getting a true snapshot of their cost of production and help them on their way to tackling the key leverage points that can make their farm more profitable, but overall the data present a more systemic issue, in that no matter how hard farmers work to tighten up their operation, the true cost of running a small conventional dairy farm is not considered by large dairy cooperatives, and is not supported by the state of Vermont.

Participation Summary
7 Farmers participating in research

Education & Outreach Activities and Participation Summary

18 Consultations
16 Curricula, factsheets or educational tools
1 Journal articles
2 Published press articles, newsletters
1 Webinars / talks / presentations

Participation Summary:

9 Farmers
20 Number of agricultural educator or service providers reached through education and outreach activities
Education/outreach description:

The immediate results were distributed to all of the farmers involved for use in their farm operations along with recommendation sheets for each farm. The study was written up as a report and distributed to local dairy stakeholders, dairy farmers, service providers, and interested public via several channels including CAE's newsletter, the local paper, and Agriview.  Center for an Agricultural Economy is already part of the Farm Viability Program, so it was easily distributed to the farm business planning network across the state. The Farm Viability Network is a hub for the majority of farm business planners in Vermont, so this network in itself will bring the report and the model to many farmers and farm financial experts in Vermont. CAE is also part of a project series with farm business planners in New Hampshire, which would enable the work to easily move beyond state boarders. Though not published yet, the article was sent to Graze and Milkweed magazine, and we were asked to share our results via UVM Northwestern Crop and Soils series and potentially at NODPA field days this year.  Proposals will be put forth to the NOFA, Grassfarmers, and Organic Dairy Producers Conferences for presentation opportunities, or at least avenues to distribute the report. CAE recently published their newsletter about the project and it was incredibly well received and re-shared across multiple platforms. CAE is currently in conversation with the Seven Days as they were interested in running the article as well. Agriview has not yet published the article, but we have followed all of their guidelines for submission. We will continue to submit the work to relevant publications. 

Dairy_COP_Newsletter

FV Factsheet

SARE COP Spreadsheets.xlsx - Baker

Letter to Farm1

 

 

Learning Outcomes

8 Farmers reported changes in knowledge, attitudes, skills and/or awareness as a result of their participation
Key areas in which farmers reported changes in knowledge, attitude, skills and/or awareness:

We brought our cost of production template to the 7 farmers in the study, but also several that are CAE clients but not specifically in the study because they are organic and thus could not be accurately compared to the conventional farms.  All of the farms involved enjoyed getting their data back and comparing to the other farms, but the ones who found it most useful were the farms with the higher costs of production that have more work to do to tighten their operations. With the data, each farm was also given a summary of their data highlighting the things they were doing well in comparison to the other farms, and also the areas they could work on or "leverage points" where they are falling further from the average. Using the data provided or just the conversation around their cost of production, the majority of the farms immediately identified areas they wanted to look into or work on, and even for the farms with relatively low COP, smaller details such as a parcel of land not yet being in current use and so driving up their taxes was brought to their attention and was a good reminder. 

5 of the 7 conventional farms did not have any knowledge of their true cost of production, especially including their loan payments and depreciation costs, so this project opened their eyes to generally a higher cost than they had anticipated, but also a sense that there were areas they could easily work on. Several of the farms chose to work with a nutritionist right away to try and lower grain costs and address production goals and all of these interactions were positive for the farmers involved. With consent from farmers we were able to or facilitate conversations about sourcing resources such as sawdust or farm insurance in order to find a more affordable option or about feed companies and the pros and cons of one or another. 

Overall, the farmers were very grateful for the data and resources we were able to provide, and we are in the process of using the same templates to import 2021 numbers and keep the avenues of conversation open between the farmers, us, and other service providers they might find useful. 

Project Outcomes

7 Farmers changed or adopted a practice
2 Grants applied for that built upon this project
2 Grants received that built upon this project
$75,000.00 Dollar amount of grants received that built upon this project
2 New working collaborations
Project outcomes:

Every farm in the study made some change based on their involvement with this work which is exciting, and shows the need for this type of work and specialized attention to small dairy farms. All of the farms were interested in hearing new ideas and suggestions including some of the following in order to decrease COP:

  • Ration changes
    • Balancing starch and protein
    • Looking at alternative mixes from feed companies
    • Routing grain through coop
    • Changing graining timing to match forage consumption
    • Changes to hay feeding management to manage varying quality while not disrupting rumen
    • Sourcing corn silage if available to replace some grain
    • Switching to higher forage ration to reduce grain costs
  • Forage management
    • Planning for optimization of forage NDF and protein via harvest time, time between mowing and bailing, fiber length
    • Planning for manure and fertilizer additions to optimize land base
    • Cost/benefit analysis of up front fertilizer/manure spreading cost versus higher grain payments over the winter based on forage tests.
    • Discussion of grazing practices to maximize DMI from pasture in grazing season
  • Water access
    • In barn, in pasture
    • Smooth barn flow and water access
  • Free choice salt and minerals in barn and on pasture
  • Increasing barn ventilation 
  • Exploration of alternative bedding sources and products
  • Reduction of young stock for farms carrying too many
  • Bulk tank size discussion for farms with abnormally high freight- usually due to every day pick-ups due to small bulk tank size, and new tank quickly pays for itself given increased hauling and stop charge rates
  • Utilization of IBA to track down PI issues in milking system
  • Discussion of production management of other nearby farms
  • Electricity costs- in most cases farms have already worked with efficiency vermont to replace light bulbs, pumps, and fans, but not always, so is worth looking into.  
    • Recycling warm water from the plate cooler can be a tactic to save water, and in the winter helps cows consume more water which can increase milk production.
    • We were largely disappointed with efficiency Vermont’s programs for farms right now and their staff knowledge of farms. 

We are still working with every farm involved in this project via our work with JHF, with CAE's new DBIC grant or our Farm Viability work and so are using the same templates to input 2021 numbers and continue the planning work and/or consulting work with Bill and Sarah. This project built a strong foundation for strong relationships with these farmers, and we have received inquiries from other farms in the are interested in working through their COP with us as well which feels like a great success. 

Assessment of Project Approach and Areas of Further Study:

The key to the project's success was taking the time to build our data entry system to the point where it was very smooth and streamlined by the time it got to farmers, and by taking time to build relationships with each farm. Challenges came in standardizing certain financial metrics such as depreciation, but this is quite a standard challenge across the board and we believe that the approach we did was quite sound and enabled valid comparison across data. In the future we would have liked to include more farms, but we had difficulty at the onset of this organizing a large number once we switched to only conventional. We believe that the regional aspect of this study makes the data stronger, and that it would be very interesting to do similar studies with conventional and organic farms in different regions of the state. Having more farms involved would help to make stronger inferences about different management styles as well which would be helpful to farms. If we were to do this again, we would try to have a farm field trip be a part of the program, because over the course of this work, it became clear that farmers are very interested in how other farms do things, but are often too timid to call up someone with a different management strategy and get a tour or an explanation- so this program could provide that catalyst. 

We really wish that there were funds through DBIC or VHCB or otherwise to do this initial triage with a farm and then directly supply them with the technical assistance they need with less hoops to jump through, it felt very good to have a more narrow focus and immediately see data and results that the farmers could use and learn from, which isn't always the case with many programs available through the state or even the business planning process at times. We would love to expand on this work to include more small farms, over multiple years and create a very powerful data set that could be taken to state representatives and dairy stakeholders in the state to confirm what we already know- the systems in place are not supporting small farms. These data are powerful, and if our state cares about keeping small farms alive, something needs to be done to protect them and support them. We hope that this work pushes that movement and we will continue to build the dataset and disseminate the results. 

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Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.