A bipartisan proposal gaining traction on Beacon Hill would double the state’s dairy farm tax credit to $8 million, which supporters say would prevent more farms from going bust. The measure, which was cleared two weeks ago by the Legislature’s Revenue Committee, has support from dozens of lawmakers.
“Dairy farms are struggling,” said Rep. Brad Hill, R-Ipswich, who supports expanding the tax credit. “We need to do whatever we can to help them persevere.”
Hill, whose district includes Herrick Farm in Rowley, the last commercial dairy farm in Essex County, said expanding the credit is vital to preserving a dwindling number of farms in the north of Boston region and statewide.
“These dairy farms are part of the fabric of our communities,” he said. “And people need to understand that if we don’t have farms, we don’t eat.”
Massachusetts has lost a number of dairy farms and is down to about 160. That compared to more than 800 three decades ago, according to agriculture officials.
While there are smaller dairy operations that bottle their own milk and make ice cream, cheese and other products, such as Richardson’s Dairy in Middleton, large-scale operations that provide milk for the regional market are rapidly disappearing from the landscape, dairy farmers say.
“There’s been a dramatic decline,” said Brad Mitchell, policy director at the Massachusetts Farm Bureau Federation. “Unfortunately it gets lower every year.”
Catherine de Ronde, an economist with the Agri-Mark Dairy Cooperative in Andover, which works with about 1,100 dairy farmers in New England and New York, previously oversaw the tax credit program that helps dairy farmers recover losses in years when it costs more to produce milk than they get in sales.
“It helps them pay their bills, whether its feed or fertilizer,” she said. “And the best part is that the money is being directly reinvested in the dairy farms.”
Currently the average paid to a diary farmer for milk is about $17.50 per hundred pounds, while the average cost of production is around $22 per hundred pounds, according to the state Department of Agriculture and the farm bureau.
Meanwhile, retailers price milk at nearly $4 per gallon or more.
“There’s a pretty big margin between what it costs to produce milk and what farmers are getting paid,” de Ronde said.
The tax credit was signed into law by then-Gov. Deval Patrick in 2008 as part of a farm preservation bill and is currently capped at $4 million a year.
Eligible farmers get an income tax credit for producing milk in any month when milk prices fall below a “trigger” set by the state to reflect production costs. Any monthly losses by farmers are totaled at the end of the tax year.
For last year, reimbursements through the program ranged from $180 to $182,133 per farm, according to Department of Revenue figures. Locally Herrick Farm in Rowley received $73,625 through the program, while Richardson’s Dairy in Middleton got $65,859.
Dairy farmers say demand has sagged in recent years, mostly because of reduced purchases of their products by China and Russia.
System needing reform
Meanwhile, a rise in milk production led to a supply imbalance, sinking prices for farmers around the world.
In New England, a drought that affected the region for several years has intensified the financial burdens that were already gripping dairy farms.
Besides the tax credit, the state provides other kinds of assistance such as low-interest loans and grants to help dairy farmers.
Many farmers blame their straits on a highly complex federal pricing system that’s failed to adjust for changing costs.
The system, which dates to the 1930s, sets a national floor for what farmers get paid. It adjusts the rate to respond to supply and demand, and different costs faced by farmers in different regions.
The system’s critics say it does not do enough to account for higher costs for farmers in the New England, who face long supply lines for feed and fuel, cold winters and a shorter feed-growing season than dairy farmers elsewhere.
Dairy farmers said they doubt the problem will change until the federal government adjusts its pricing system to give them a larger share of profits. Some have talked of a quota system, similar to Canada’s, to stabilize prices. They’re pushing for that in Congress with a renewal of the farm bill, which expires next year.
Mark Duffy, of Great Brook Farm in Carlisle, called the state tax credit a “safety net” for beleaguered dairy farmers, but it needs to be increased.
His dairy operation, which has about 80 cows, was reimbursed about $30,000 last year through the tax credit program, according to DOR figures.
“If we want to preserve dairy farms and keep our milk local, we need programs like this,” he said.