THE COLLEGE HILL INDEPENDENT


UDDERLY LOCAL

by by George Warner

illustration by by Christina Graham

Louis Escobar and Robert Pearson have a combined
146 years of dairy farming. Escobar was born the year
after his father founded Escobars’ Highland Farm in
1937 and has run the farm since 1972. Pearson has been
working at his farm, Pearson’s Elmhurst Dairy, based in
Millbury, MA, for 75 years. But Escobar and Pearson, small-
scale Northeast based dairy farmers, are members of an ever-
dwindling bunch.
“At one time Rhode Island had 400 dairy farms,” said Ar-
thur Knowlton of Knowlton Dairy Farm in North Scituate,
RI (which closed it doors 2 years ago). Even in the 1970s, it
had around 80. Rhode Island now has 16 dairy farms. And
while Pearson used to live next to three other dairy farms, all
three were sold to developers over the years as his struggling
neighbors gave up on the business. But the last year has been
especially rough for dairy farmers, with prices falling over
50 percent for earlier highs. While unrecognized by many
New Englanders, in the dairy industry the damage has been
palpable, with at least 71 New England dairy farms leaving
the business within the last year.

The problems of dairying
Even before recent price collapses, Northeast dairy farmers
had been facing a variety of pressures. Competition from
larger dairies in New York and the Midwest, the consolida-
tion of the dairy processing industry, and increased labor
costs, and the high cost of commodities like corn and alfalfa
that dairies rely on have all hurt small dairies.
In the report profits, costs, and the changing Structure of
dairy Farming published by the United States Department
of Agriculture, a team led by economist James M. McDonald
concluded that while large (meaning 500-plus cows) dairy
farms in the US “generate returns that well exceed their full
costs,” small dairy farms “mostly incur economic losses.”
The report calculates that large farms can produce milk at
around half the cost of their smaller counterparts. Unable
to compete, farms with fewer than 200 cows have dropped
market share from over two-thirds of total milk production
to 38 percent between 2000 and 2006.
Small farms and large farms are not just of different scales,
but are fundamentally different enterprises. The report notes
that small farms tend to grow their own feed, raise their own
heifers and graze their cows on pasture. In contrast, large
farms often purchase grain, “contract with other operations
to raise their heifers,” and “confine their milk cows in large
barns or drylot feedyards.”
As large-scale competition produces milk at such efficien-
cies as to challenge the viability of smaller farms, the milk
processor industry in New England (as well as in the rest of
the country) has consolidated to what many, including New
England farmers, see as a monopolistic situation during the
last decade. In October, the Justice Department Antitrust
Division reopened an investigation into Dean Foods and
Dairy Farmers of America, the largest dairy processor and
cooperative, and Northeast dairy farmers filed a class-action
lawsuit against Dean Foods, Dairy Farmers of America, and
H.P Hood LLC over what they deem monopolistic behavior.
Located in Dallas, Texas, Dean Foods has become the
largest milk processor in the country over the last 50 years,
at present controlling 70 percent of the US and Northeast
markets and 80 percent of the Boston-Providence market,
the providence Journal reports. Besides owning a major milk
brand in every regional market, Dean has bought Silk and
Horizon Organics, the largest soy and organic milk produc-
ers.
In 1997, Dean bought Garelick Farms, a formerly inde-
pendent dairy that is now their New England regional brand.
Dean has also purchased six other milk processors in the area,
effectively eliminating competition, while closing down four
processing plants, including the only large-scale plant in
Rhode Island. H.P Hood LLC, a Massachusetts-based, but
nationally-scaled milk processor, controls another 20 percent
of the Northeast market. Because both companies source
exclusively through DFA, this consolidation has meant for
many dairy farmers in the region, they either can sell through
DFA, Dean, and Hood, or go out of business.
And while new antitrust suits bring promise to belea-
guered dairies, expectations are realistic. Similar litigation
brought by Southeastern dairy farmers two years ago is still
during preliminary phases..

Dollars and cents
Pearson, Escobar and other local dairy farmers noted that
while consolidation has challenged dairy farms, low whole-
sale prices over the last year have caused a crisis situation. In
June, the price of wholesale milk was around $10 per hun-
dredweight (the dairy term for a hundred pounds of milk);
Pearson noted, “[this] is the same price as in the 1970s.”
Escobar explained that the small drop in dairy consump-
tion—two to five percent because of the recession—has
meant prices have dropped 40 to 50 percent. All the while,
grain prices have remained high in comparison, making the
financial strain on dairy farmers even greater.
Hoard’s Dairyman, an industry publication, claimed that
during the market low in June, a successful farmer would at
best be losing $100 a month per milking cow. To under-
stand scale, Escobar’s farm is a 70-milk-cow operation, while
Pearson’s is around 100. And while the crisis has put a lot of
small operators out of business, Escobar noted that folding
is not a viable option for many farmers, because even after
selling off their equipment, they would still be saddled with
the debts incurred in a normal business cycle.
During this same time period, Dean Foods has reported
record profits, hovering just under $50 million for the third
quarter of 2009.

With a little help from Rhody
With wholesale milk prices so low as to make profitable
wholesale production impossible, small-scale farmers rely on
more involved business models and secondary farm activities
to make a living. Escobar’s Highland Dairy and Pearson’s
Elmhurst Dairy practice two of the common models that
small scale New England farmers have used to remain viable
in this economic climate: regional brand cooperatives and
self-processing.
In collaboration with eight of the other 16 dairy farms
in Rhode Island, Escobar’s Highland Dairy belongs to the
Rhody Fresh cooperative. Almost all dairy farmers that sell
wholesale belong to farmer-owned cooperatives, which vary
in function from managing price negotiations between milk-
processors and milk transporters, to additionally running
their own brands of cheese, butter, milk and other dairy
products. Cabot cheese is one of the more prominent co-
operative-owned brands, run by Agri-Mark, New England’s
cooperative with the most members.
Rhody Fresh differs from many cooperatives in that all
of its members are also Agri-Mark members. Rather than
providing for the transportation and pricing of the member’s
milk, Rhody Fresh is a processing and brand cooperative,
giving each member a share of the retail profits made by the
brand.
Escobar credits the cooperatives’ success in large part to
regional cooperation. Rhody Fresh farmers transport their
milk using tankers owned and operated by a Rhody Fresh
dairy, while Little Rhody Inc. manages the co-distribution
of Rhody Fresh milk and their eggs, as Escobar explained,
eliminating the need to develop a new distribution system.
Most integrally, Guida Dairy of Connecticut, owner of one
of the last large-scale processing facilities not owned by Dean
Food or Hood in the region, processes for the Rhody Fresh
and two other regional brand cooperatives. Escobar proudly
notes that Rhody Fresh “has the longest shelf life on the mar-
ket,” crediting Guida’s processing facility.

Selling trees just to get by
Pearson has followed a different survival path. He sells
around half of his milk to Dean, but, in his words, “If we
were living on what we are getting for milk shipping, you
could not survive, just hang on, that’s all.”
The other half of his milk is processed on site, in a small
plant visible through a window in the one-room farm store.
With a double refrigerator and a chest freezer full of farm-
made ice cream—which Pearson says is made with basic
ingredients and not pre-made flavor packets—the store pro-
vides Peterson Elmhurst Dairy with a means of selling milk
at retail prices.
Besides selling on-site, Pearson said that his dairy also sells
“very locally,” meaning to a few restaurants and groceries in
the Millbury area.
But even with the retail store and processing facilities,
Pearson says things are hard. He credits the farm’s survival to
his family’s multi-generational involvement; two of his sons
live and work on the farm and his granddaughter is currently
at the Cornell School of Agriculture. Family involvement
at Pearson Elmhurst Dairy means the farm does not have
to worry about healthcare and worker’s compensation. This
cost-saving strategy is common among small dairies; the
USDA calculates that for every hundredweight, small dairies
put in between $3-$10 of unpaid labor, in contrast to $0.17
for large dairies.
Pearson and Escobar both have secondary businesses that
help their dairies survive. Both operate Christmas tree farms,
while, in addition, Escobar runs a pick-your-own pumpkin
patch and a corn maze, and Peterson produces maple syrup.
The upcoming holiday season is bringing some hope to
local farmers, and not just those who sell trees. Dairy prices
have continued to rise since August, and The National Milk
Producers Federation predicts that milk prices will equal the
cost of production in December for the first time since the
summer of 2008.
But the current price crisis and the industry pressures
on smaller-scale New England farms will hopefully not be
forgotten with the seemingly inevitable rise of dairy prices
on the Chicago Mercantile Exchange. Escobar, Pearson and
others in the dairy industry all think that for small dairies to
survive in New England, commodity prices need to go up,
but so do community buy-in and support.
_________________________________
GEORGE WARNER B’10.5 is a staff writer for the
Independent.