Study praises farmers’ cost cuts

WATERVILLE – Dozens of dairy farmers earned high praise Thursday as the results of a new cost-of-production survey revealed that they had tightened their belts, cut their costs and become more efficient over the past four years.

But with prices dropping quickly this spring, Maine’s dairy leaders need to turn to the federal pricing system for further solutions, experts agreed.

It costs Maine’s dairy farmers, depending on the size of their farms, between $14 and $17 per hundredweight to produce milk. The February price paid by milk dealers ranged from $11.10 to $16.63, depending on various components in the milk.

“We have a tiered price support system. We have the Maine Milk Commission. We have the MILC [Maine Income Loss Contract],” the federal support system, Julie Marie Bickford of the Maine Dairy Industry Association said. “There is only so much we can do on the state level. It’s time we got involved in a federal level.”

Milk is the only commodity regulated by the federal government, and the complicated formula puts Northeast producers at a disadvantage, primarily because the farms are smaller.

“The federal pricing system we have is broken beyond anyone’s comprehension,” MDIA President Dale Cole said.

When Gov. John Baldacci instituted a three-tiered price support system to help Maine’s dairy farmers several years ago, he directed them to find new ways to make their operations efficient.

“This study revealed that changes were made,” Dr. Tim Dalton, University of Maine professor of economics, said Wednesday. “It’s no longer business as usual.”

Dalton told the dairy industry members gathered for the annual Maine Dairy Seminar that their efforts were successful despite increases in the costs associated with labor, fuel, fertilizer, seeds, breeding and veterinary charges and machinery.

Even with those increases, the cost to produce a hundred pounds of milk rose, for large farmers, from $13.12 per hundredweight in 2001 to $14.14. For small farms, it rose from $16.18 to $17.14.

National estimates indicated that the cost should have risen by 4.1 percent, said Dalton, but Maine’s farmers kept that rise to 2.5 percent for large farms and 1.9 percent for small farms.

“This is directly due to the increase in efficiencies,” Dalton said.

Dalton also revealed the results of a second study, the first of its kind in the United States, that compared organic and nonorganic operating costs.

The higher bonus that organic producers get – $4.90 per hundredweight – is quickly eaten up by higher feed costs and higher costs for hired labor, Dalton said.

“Almost 80 percent of their premium went to those two cost centers,” he said. His study also revealed that the amount of milk produced was nearly identical, at 14,060 pounds per cow as an average for organic farms in the study, as compared with 14,857 pounds per cow on nonorganic farms.

The study also concluded that after all other expenses, figuring in the family’s hours of direct work on the farm, family labor was worth $4.34 per hour.

“I was struck by the result that profitability of organic dairy farming is not as large as many thought,” he said.

“This study provides a snapshot, and there will be a second year of study which will more accurately reflect the shocking fuel prices of the last year,” Dalton said.

Throughout Thursday’s program, farmers heard a series of animal health lectures and an update from Ned Porter, interim agriculture commissioner, and MDIA held their annual meeting.

Winners of the state’s Dairy Shrine Awards that were presented at the annual seminar include:

. The late Alton Bell of Tide Mill Farms in Edmunds, Maine Dairy Pioneer Award.

. Mary and Stephen Briggs of Brigeen Farms Inc. of Turner, 2006 Farm Family of the Year and Distinguished Dairy Cattle Breeder of 2006.

. Adrian Wadsworth of River Rise Farm of North Turner, Maine Dairy Leader Award.