NORWICH – Increased costs associated with picking up milk from small dairy farms resulted in operations with 80 or fewer cows paying a higher percentage of hauling charges, reports a state study released last week.
Some farmers argue if they should have to pay to have their product shipped away at all.
According to the study, conducted by New York State Agriculture and Markets, hauling costs ate into 3.1 to 4.4 percent of farm milk’s total value between 1991 and 2006.
When broken down, large farms were charged 2.7 to 3.6 percent of the price of the milk they sent off, while small farms paid anywhere from 4.2 to 6.8 percent, the data states. Most business aren’t charged at all to have their product shipped to a processor after it’s been purchased.
“This might suggest that small herds are burdened with a greater percentage share of hauling costs,” the study states. “However, there are increased costs involved in servicing smaller farms compared to larger farms. A milk hauler has relatively fixed times and costs involved in each farm pick-up stop, where the bulk milk tank must be agitated, samples taken, and milk transfer hoses sanitized.”
In dollars, hauling charges from 2001-2006 averaged $0.73 per hundred pounds of milk for the small producers (80 or fewer cows) and $0.46 per hundred pounds for large producers (300 or more cows), based on data from Cornell University’s Dairy Farm Business Summary Series cited in the study. That’s compared to the base payments made to farmers, between 2003-2006, which averaged $12.72 per hundred pounds. During that same time, it cost farmers $14.12 per hundred pounds to produce the milk, according to figures in the study.
Ultimately, hauling charges are determined by the number of stops a hauler has to make and the number of miles it travels in a day on route to a milk plant. A call to a local hauler was not returned.
Essentially, its cheaper for larger farms because they can provide more volume – meaning it requires less work on the part of haulers to get more milk in one stop, compared to multiple stops at small farms where they get less product, says Guilford farmer Terry Ives, who distributed the study at a county Farm Land Protection Board meeting Friday.
“You knew there would be a difference because of volume,” said Ives. “That much you already know.”
However Ives and others, Like Afton Supervisor Robert Briggs, say there shouldn’t be a disparity between small and large operations; they think hauling costs should be born by processors and milk dealers, not farms – of any size.
“Once they sample the milk, weigh the milk and pump the milk from your tank, it’s their product,” said Briggs, a former dairy farmer, pointing that other businesses don’t pay to have their products shipped once purchased. “Dealers should be responsible for paying for hauling the milk.”
Ag and Markets studied the question of milk ownership once it leaves the farm tank, and concluded that since there are no laws defining it, more information needs to be gathered before a final determination can be made.
“Dairy farms are one of the few businesses that are charged a portion of the hauling costs when their product is purchased and shipped to a processing plant,” said Ag and Markets Director Patrick Hooker. “That issue was raised numerous times during this study, questioning the ownership of milk in relation to hauling charges. While there are no state laws or regulations on milk hauling charges, we need to approach this topic carefully to be sure any attempt to help our producers does not have unintended negative consequences.”
Milk needs to be shipped off the farm every day or every other day, or else its quality deteriorates, Ives said, meaning hauling is crucial for individual farmers. That’s why, unlike other businesses, they’re charged, Ives said.
“The charges should be picked up by the processor and passed on to the consumer,” Ives said. However, he also believes shifting costs onto processors and consumers could lower the milk prices dairy farmers get.
“It becomes kind of a shuffle,” he said. “It all washes out in the end.”
Organizations like The New York State Dairy Foods Inc., a trade association representing processors, manufacturers and purchasers of raw milk, say changing how hauling costs are allocated to help farmers would create an unfair system beyond the current federal pricing system that determines what producers get paid.
“Our association is vehemently opposed to any changes on a state by state basis to pass hauling costs from producers to processors,” said Bruce Krupke, Executive Vice President of New York State Dairy Food, located in Syracuse. “Passing along costs from producers to processors will make processors less competitive and eventually force processors and manufacturers to find other sources of raw milk in different regions of the country.”
Krupke said creating a state law that other dairy states aren’t subject to, like California, will give them an advantage in the country’s milk market. He believes producers should seek changes in the federal pricing system, rather than create state laws that add what amounts to a second pricing system.
The study, pushed by state Senators Darrel Aubertine and Betty Little, was meant to assess the impact of hauling charges on farmers, and possibly lead to reform legislation, such as that passed in Vermont. Ag and Markets determined that more data needed to be collected on the effects such regulations would have on the state’s dairy industry and economy.
The milk hauling industry has been credited with being more efficient in light of fuel costs, thus reducing the costs of milk assembly and transportation, Ag and Markets added. Haulers have also shifted a third of their costs off of farmers and onto milk dealers or processors to lessen the blow.
“Milk is a pure and nutritious food, but milk marketing is complex,” Hooker said. “Because milk is produced daily, is a perishable product, and is in great demand, milk must be picked up from farms frequently and delivered to processing plants. Hauling is a critical component of the milk marketing system and this study focused on the costs associated with it, and we will continue to analyze those costs in order to be sure farmers are treated fairly.”