Char Mar Dairy Farm’s upcoming sale at auction evidence of dried-up milk market

Milk prices have been low since 2015, and there is no sign of prices rebounding in 2018, said Dale Johnson, a University of Maryland extension dairy educator who holds a master’s degree in agricultural economics from Cornell University.

Johnson works at the Western Maryland Research and Education Center in Keedysville and visits between 50 and 60 dairy farms across the state each year. He started analyzing dairy farms in 1994 and looks at the average profitability of Maryland’s dairy farms over three-year periods.

It cost Maryland dairymen $20.88 to produce a little less than 12 gallons of milk between 2014 and 2016. That milk sold for less than what it cost to produce it, $19.82, but most farms were still able to break even or turn a small profit, $2.98 per 12 gallons, through other activities such as selling cows or growing crops. Because 2014 was a record-high year for milk prices, however, as Johnson prepared to start his analysis of 2015 to 2017, he was pessimistic about what the numbers would show.

“It’s going to be difficult for small farms to survive,” Johnson said.
Tightening the belt

In times of low milk prices, Maryland dairy farmers have historically cut costs. They delay buying new equipment and feed their animals the optimal amount to get the most milk for the littlest feed.

“They can’t cut their costs too much. There’s not much to cut,” Johnson said.

The size of the industry regulates the price, said Bob Peters, a dairy extension specialist for the University of Maryland who grew up on a Minnesota dairy farm. In Maryland, that size is dominated by two pressures its dairymen have no control over: land and people.

Relative to other dairy states, Maryland is small and has large population centers near its dairy farms. The population puts development pressures on the available land for homes, businesses, roads and public amenities, which makes the land worth more than the dairy herds.

Based on surveys conducted by the university, the cost of land is the top reason why farms don’t expand in Maryland, according to Peters.

The best way to dilute costs, however, is to scale up production over the fixed costs of running an operation. In Maryland, farmers don’t have that opportunity, Peters said.

Development pressure is also greater than the cost of feeding the cows.

“Feed prices are OK,” Johnson said. “They’re not great. They can always be lower. The main problem is the milk price.”

Milk prices took a dive in 2015 and stayed low in 2016. Prices, as with all commodities, are cyclical, so the drop in 2015 wasn’t a surprise, Peters said. When milk prices didn’t pick back up in 2017, however, alarms started to go off.

In 2018, milk prices are still low, and there is little expectation that they will go up, Johnson said. In the wake of three bad years of milk prices is a trail of dairy farms that couldn’t stay afloat.
Char Mar Dairy Farm

Char Mar Dairy Farm near Burkittsville, run by the Brandenburg family for more than 50 years, is the latest dairy farm to stop milking in Frederick County.

The Brandenburg family spoke with The Frederick News-Post in 2012 when nearly 40 percent of the county’s dairy farms had gone out of business in the previous 10 years.

Mark Brandenburg, a family member involved with Char Mar Dairy Farm, was in contact with The News-Post during the past week, but was not available for comment before publication.

Neither Johnson nor Peters could comment specifically on the circumstances that led to the closing of Char Mar Dairy Farm, but prolonged low milk prices in general are pushing dairy farms out of business.

Stephen Karbelk, owner of Auction Markets LLC, will manage the auction on Friday.

“I’ve had multiple people tell me that the low dairy prices have made it hard for other operators to even break even,” said Karbelk, who in his career has been the auctioneer for more than 50 farms that were each more than 100 acres.

Char Mar Dairy Farm currently encompasses six tax parcels, Karbelk said. The property is being divided into three offerings for the auction, but buyers will have the option to purchase one, two or all three of the properties.

The first and largest of the offerings is nearly 200 acres with 144 tillable acres, 27 acres of pasture, milking parlors, a milk house, a holding area and assorted farm structures. A 1,232-square-foot ranch-style house and a 3,430-square-foot, two-story house also occupy the property.

The second offering is approximately 152 acres with 133 tillable acres and additional wooded areas. The parcel has a 2,916-square-foot, two-unit house and assorted farm buildings.

The final offering is the smallest of the three, consisting of 18 acres — nearly 17 of which are tillable — with the remainder occupied by a 1,904-square-foot, two-story house.

Despite the sale, the property will remain farmland. A permanent conservation easement over 95 percent of the sum of the property will prevent the farmland from being developed.

As of Monday, individuals had expressed interest in each of the parcels and the property as a whole, said Karbelk, who said he saw the property as a chance for a person with available cash to buy a dairy operation and turn a profit when milk prices increase.

“This presents a good opportunity when prices do go up,” Karbelk said.

When that will be, however, is still uncertain.

“We don’t expect them to go up” in 2018, Johnson said.
A glimmer of hope

The national dairy story is not all negative, Peters said.

Consumption of dairy products as a whole is improving with cheese “leading the charge.” Sales of yogurt, cheese and butter have all gone up, Peters said. Where there has been a steady decrease is in the consumption of fluid milk.

“In light of all that, we still have more product in parts of the country than we can process,” Peters said.

In the Northeast, milk is being dumped because there is too much to process.

Through better management and herd genetics, cows are producing more milk each year, but the country’s processing plants have not kept up to match the volume of milk coming in.

“When you have more product than you can use, the price doesn’t hold up,” Peters said.

In California — the largest dairy-producing state in the country — farmers are transitioning their milking herds from Holsteins to Jerseys, which produce less milk. But the milk they produce has higher concentrations of protein and butter fat, which in turn increases the value of the milk, Peters said.

There is a separate possible solution for Maryland dairymen, which is to go organic.

“Right now, demand for organic milk is growing slightly,” Johnson said.

Organic milk cooperatives are managing their supplies well by creating wait lists to join. Demand for organic milk is not growing much, so the cooperatives are taking on new farms slowly, but it could be worth the wait, he said.

Organic Valley and Horizon are the two main organic cooperatives in the Northeast. Trickling Springs Creamery is another making a name for itself in the Mid-Atlantic.

But organic milk still makes up only about 5 percent of the entire dairy market, Peters said. And organic nut- and plant-based milks are doing better in the dairy aisle than organic cow’s milk.

Diversification on dairy farms is also a good idea but has its own limitations.

Each county can support only a certain number of creameries, ice cream shops and farmers market stands. If too many of each emerge, they undercut one another, Johnson said.

For all these reasons, Johnson predicted that more small dairy farms would be headed out of business in 2018. Peters concurred that there would be a slow exit of dairy farms from Maryland.

“In general, there’s going to be a gradual decline,” Peters said.

On Friday, Char Mar Dairy Farm will make its exit. A minimum sale price for each of the three properties may be set, but that will not be announced until the day of the auction, Karbelk said.

Tours will be offered from 10 a.m. to noon on the day of the auction. People seeking more information on the offerings should contact Karbelk directly at stephen@auctionmarkets.com.

 

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