US dairy farmers battle extinction Trump trade wars lower milk prices

US dairy farmers battle extinction Trump trade wars lower milk prices

Nathan Chittenden carries a newborn calf at Dutch Hollow Farm in Schodack Landing, New York. “The last five years have been extremely rough for us dairy farmers,” he told CNBC.

Emma Newburger / CNBC

SCHODACK, N.Y. — Nathan Chittenden carefully slung a newborn calf over his shoulders and marched her over to his dairy barn to join a dozen other babies.

“Sometimes I feel like a school principal trying to remember everyone’s names,” Chittenden, 41, said of his dairy cows.

Chittenden’s herd is in good health, but the dairy farm his family runs here in Rensselaer County, about two hours north of New York City, is under immense pressure.

Milk makers in the United States are disappearing as consolidation in the industry and changing consumer tastes have made it tougher for small farms to survive. In November, U.S. dairy giant Dean Foods filed for bankruptcy protection, blaming the fact that Americans are drinking less traditional cow’s milk and switching to non-dairy alternatives. The company is considering selling itself to the milk cooperative Dairy Farmers of America.

Meanwhile, falling milk prices and President Donald Trump‘s trade wars have sent scores of farmers out of business. Overall, the U.S. has lost nearly 20,000 licensed dairy farms, a roughly 30% decline, over the past decade, according to the U.S. Department of Agriculture. It’s in line with a long-term trend: Between 1992 to 2018, over 94,000 family dairy farms closed their operations at a rate of 10 per day, according to the National Farmers Union.

Chittenden has watched his farming neighbors disappear one by one, including five farms on his father’s side of the family over the course of 20 years.

“It crushes me,” said Chittenden, a third-generation farmer at Dutch Hollow Farm. “We’ve lost a lot of farms in the Northeast. Every single one of those farmers was a neighbor and a friend to us.”

“We knew them, and now they aren’t there. Their history is gone and will never be back,” he added.

A group of female Jersey cows at Dutch Hollow Farm.

Emma Newburger / CNBC

‘Everyone was stressed’

Chittenden said his family started the farm in 1976 with 55 Jersey cows and has a herd of about 800 today. He farms alongside his two brothers and parents.

In the 1990s, Chittenden’s family made the decision to take on more debt to expand operations. They bought more cows, hired more people and worked longer hours to keep up production. That type of capital investment would be impossible for family dairies to take on today because of surplus milk and lower prices, Chittenden said.

“The stress on my family was palpable. Everyone was stressed, and they took that stress home into their personal lives,” he recalled.

The farm eventually became profitable after several years, but it came at a cost. “We were not working human hours. The family unit was no longer operating — day in and day out we were working and doing everything we could to get out of debt,” Chittenden said. “It was not a happy time.”

The family saw more success after the expansion. Chittenden became a director on the Cornell Cooperative Extension board for 12 years starting in 2007. His family also hired more people to work in the barns and help grow crops for cattle feed.

The family would contend with other problems in the 2010s. For one thing, falling milk prices made it harder to maintain profits. Milk prices have declined about 23% over the past five years as milk becomes easier to produce and state regulations have increased production, according to the USDA.

It’s an industry-wide problem for smaller scale dairy farmers. The margin between the cost of production and selling price has not been enough to make a living, especially when dairy farms consolidate into larger operations that end up dominating the industry.

Chittenden with the oldest cow on his farm in New York. Trump’s trade wars, plummeting milk prices and climate change threaten his business.

Emma Newburger / CNBC

Consolidation in the dairy sector has led to larger farms with more cows with a high level of productivity. For instance, there was a 13% increase in milk produced per cow from 2009 to 2018 across the country.

Trade war threatens dairy markets

Chittenden’s challenges grew exponentially in 2018. The U.S. was near a record year for the first five months of dairy exports to China for whey, protein concentrate and cheese. But that changed in June when China placed tariffs on U.S. exports in response to Trump’s tariffs. China is a major market for the dairy industry, as Chinese consumers are buying more dairy products in general.

“China trusts our dairy products more than their own domestic product. We can’t afford to lose that market,” Chittenden said.

Exports of U.S. dairy products to China have declined over 50% in 2019. The U.S. and China announced a phase-one agreement in December, with Trump saying that the Chinese would buy $50 billion in agricultural purchases “pretty soon.”

A Jersey calf wears a jacket to stay warm in November.

Emma Newburger /CNBC

The president has argued that his trade war will help American producers in the long-term, and announced a billion dollar aid program for farmers hurt by the trade war. But the dairy industry was especially critical of that aid, arguing that the subsidies weren’t nearly enough to compensate farmers and that the USDA didn’t use up to date production data for determining aid.

“We’ve expressed concerns regarding the inadequacy of those payments,” said Paul Bleiberg, vice president of government relations at the National Milk Producers Federation. “The round that the USDA did in 2019 was stronger than 2018 — there was better payment for dairy farmers — but we still felt that it felt short of where the damages were.”

As farms continue to shutter across the country, dairy farmers like Chittenden are wondering how they will maintain their businesses given the uncertainty of international trade.

“We can’t just close the door on our trading partners and expect there not to be negative repercussions to the farmers who depend on those economies,” Chittenden said. “I don’t have a year to wait out a trade war. I don’t have the reserve to be under siege that long.”

Chittenden’s farm isn’t growing anymore due to declining prices pressuring margins and the slowdown in international demand. But the farm has remained viable, due in part to being a member of a cooperative, Chittenden said.

Climate change is a risk multiplier

Climate change presents another risk for Chittenden and other farmers. Higher temperatures and humidity can stress out cows and reduce reproduction rates and milk yields if the cows eat less.

Some dairy farmers have switched to lighter equipment to reduce soil compaction and have installed tile drainage systems. They’ve also changed the type of crops they grow and when they plant them.

“All this technology costs money. It’s a big game of business,” said David Lane, an author of a 2019 study on climate change and dairy farms in New York and Wisconsin.

“The farmers that can afford technology to mitigate all these climate risks are the largest dairies, and the smaller dairies that can’t will go out of business.”

Robotic milking can extract milk from the cow without human labor. The technology can also monitor the health status of cows.

Emma Newburger / CNBC

Chittenden has implemented climate-controlled barns with air conditioning and cooling fans on his farm. Robotics in the milking parlors has also helped him reduce labor costs.

Despite the hardships, Chittenden intends on passing down a successful business to the next generation of dairy farmers.

“I could sell the farm tomorrow, but that would be shutting three generations of work,” he said.

“We’ve always persevered through adversity and we’ll do it again,” he added. “We just want to continue to care for our animals and produce milk and do what we love to do.”

— Charts by CNBC’s Nate Rattner

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