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Turning Sour: Falling prices for milk leave N.C. dairy farmers struggling for survival
AP Photo
Dairy cows at the Hockett family dairy farm in Level Cross have been tagged for slaughter and await shipping.
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Published: August 27, 2009
LEVEL CROSS - Don't ask Keith Hockett if he's "got milk?"
Not today. Not after he just hauled another trailer load of his family's prized dairy herd to a slaughterhouse in South Carolina.
By late August, all 473 cows will be gone -- chopped up into steaks, roasts and hamburger.
That makes for sad times along Hockett Dairy Road. For the first time in nearly 65 years, the family will be out of the milking business.
"Here we are moping over cows, but they are just like family," Hockett, 50, said recently. "It's awful. That barn looks like a ghost town."
During the past several months, a growing financial crisis has forced the Hocketts and other North Carolina milk producers out of business.
The culprits: rising production costs and falling milk prices.
"The tightness in the economy is putting a lot of stress on these operators," said Chester Lowder, the director of livestock programs with the N.C. Farm Bureau. "We are about nine months into this, and we're not seeing any turnaround.... I'm scratching my head trying to figure out what the answer is."
One answer: Bring the nation's milk supply in line with demand.
When that happens, producers should begin to see prices rise.
In 2007 and 2008, milk prices spiked because of production problems in the European Union and New Zealand, two of the world's major suppliers. That, in turn, benefited U.S. dairy farmers, who found foreign markets for their milk. Then, the global financial crisis hit.
"Everything that helped the U.S. become a significant milk producer went away," said Geoff Benson, an economist with the N.C. Cooperative Extension Service and a professor at N.C. State University. "The production backed up in the pipeline, and there was nowhere for it to go."
In January, milk prices began to drop. While that benefited consumers, dairy farmers began to suffer.
"In 64 years in the dairy business, I seen hard times," said Keith's father Stanton Hockett, 75, who helped start the family business. "But I've never seen anything like this."
Producers who had received as much as $25 for 100 pounds of milk in 2007 saw the price drop to about $11 this year. To break even, farmers say they needed to get about $17 a hundred.
As Keith Hockett and his brother, Herschel, watched their debts rise, they figured they had three options: declare bankruptcy, which they quickly ruled out; borrow $500,000 to pay off their creditors, but lenders wouldn't give them any money; or get out of the business.
An organization called Cooperatives Working Together gave them a way to take the last option and also hang onto their 500-acre farm, parts of which have been in the Hockett family for more than 200 years.
The CWT is a nongovernment organization financed by dairy cooperatives and individual farmers, who contribute an assessment of 10 cents for every 100 pounds of milk produced. Then, using the assessments, the CWT will periodically buy up dairy herds in an effort to cut production and increase milk prices.
The Hocketts were one of a handful of North Carolina dairy farmers accepted for the program. Specific numbers have not been released.
Experts cannot predict how many of the state's dairy farms could be lost during the current crisis. But numbers have fallen dramatically in recent years. In 1997, the state had more than 1,200 dairies. Now, the number is below 300.
Eventually, the Hocketts want to get back in the dairy business. They still have 475 cows that are too young to milk.
But they want to wait for the economy to improve, figure out how to reduce production costs and save some money.
"We're trying to put our lives back together," Keith Hockett said.
"We love milking cows."
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