The bootstraps approach

As we have discussed in a number of articles and editorials, one of the biggest problems facing dairy farmers today—aside from an incomprehensible pricing system that locks in losses—is the fact that the dairy coops that supposedly represent farmers have become totally divorced from their interests. Coops like Dairy Farmers of America (DFA), which has a virtual monopoly in the Northeast, have taken steps like importing large quantities of milk powder to compete with domestic products, and are cozier with the big processing firms to which they sell milk than they are with the farmers from whom they obtain it. The result is that when retail milk prices go up, it is the middlemen, and not the farmer, who get the lion’s share of the increase.

Farmer and Wayne County Commissioner Brian Smith has taken one constructive approach to solving this problem by obtaining a seat on the DFA board. Perhaps with more genuine farm voices on the board, the policies of the coop will swing in a more farmer-friendly direction.

But an email that recently dropped into our inbox from the Sullivan County Partnership for Economic Development carried an attachment that suggests another approach: an article printed in the Hudson Valley Business Journal. It reported on a small regional coop called Hudson Valley Farm Fresh in Dutchess County, currently consisting of just five farms, that was started by retired orthopedist and current dairy farmer Sam Simon.

The coop sells about one third of the milk under its own label, contracting with a firm in Kingston to do its bottling and then selling directly to stores as well as schools and other end-user organizations. It produces particularly high-quality milk, with an average somatic cell count (a count of white blood cells, reflecting the presence of pathogens) of less than 200,000 per ml., compared with the 750,000 allowable for regular Grade A milk in New York. Studies show that in addition to being healthier, lower somatic cell counts slows the speed at which milk goes bad and improves the taste.

The high quality of the milk, plus some savvy marketing, allow Hudson Valley Farm Fresh to sell its product at a premium price. And administrative overhead—unlike that for a giant coop like DFA—is minimal. Between the higher prices and lower coop costs, Hudson Valley Farm Fresh—again unlike DFA—is able to hand over revenues to its members that actually cover costs, and guarantees a minimum of $1.85 per gallon to its members.

Hudson Valley Farm Fresh milk retails about $1.50 a gallon above the price for standard milk, according to Simon. Obviously, customers need some persuading to pay that extra amount. The “savvy marketing” we mention above is not done by a big firm, but by Simon, who told us he goes literally door to door to find customers, helped out by his wife and volunteers from other coop families who also engage in retail-level efforts like in-store taste testings.

Obviously, all this is easier said than done. Hudson Valley Farm Fresh has not yet found enough customers to absorb all of its production, and winds up selling about two thirds of its raw milk to a larger coop at lower prices. But Simon said his customer base is growing.

In addition to staff hours, setting up a small local coop would require seed money. Simon told us that he personally provided an initial $25,000 for Hudson Valley Farm Fresh, and that Patrick Manning, then assemblyman for Northern Dutchess and Columbia counties, helped secure a matching grant from the FDA. The grant was obtained through Dutchess County’s Cornell Cooperative Extension, which took care of the paperwork and retained 10 percent of the total for its administrative work. Also essential to getting the project off the ground was a $60,000 grant provided by the Dutchess County IDA to buy a refrigerated truck.

The effort and money involved in setting up a local dairy coop admittedly pose formidable obstacles, but they are perhaps not insurmountable. The Sullivan County Division of Planning and Environmental Management has already done some thinking in this general direction, kicking around the idea of a local creamery that could process the products of local farmers; possibly that could be integrated into the coop idea. But even if that project does not come to fruition, we have been particularly struck by the ingenuity and entrepreneurship of some of our local dairy farmers who have, for example, undertaken the difficult process of acquiring raw milk licenses or established artisan cheese facilities. If the will is out there to try something similar to Hudson Valley Farm Fresh in the Upper Delaware region, we bet there’s a way.

Also in this issue:

• Restore home rule now

Dr. Punnybone

Taking It to the Next Level