Milking the Profits

Steven Judge started Vermont Milk Producers, a marketing group of struggling family farmers, to create and market a premium brand of milk and keep a greater share of the profits on the farm. One big question: Will consumers pay 49¢ more per half gallon?

Every morning at 5, Steven Judge heads down to his 200-year-old barn, on his Shoreham, Vt., farm, to start his day by milking 50 cows. Once he's finished, it's on to the daily chores: feeding the cows, cleaning out the barn, tending to the calves, spreading manure in the fields, and rotating the herd from pasture to pasture. It's a 7-day-a-week, 365-day-a-year job. And it doesn't stop there. Continually struggling to better his farm's efficiency, Judge squeezes in time to test out new electrical fencing or try out a new feed or new machinery. By 5:30 p.m., it's time to start milking, cleaning, and feeding the cows again. Around 7:30 p.m., 14 hours after the day began, Judge calls it quits and heads back to the house . . . ready to begin work on his second business.

This past spring that second business, Vermont Milk Producers Inc. (VMP), rolled out a new premium whole milk bound for northeastern metropolitan markets. Judge has planned on creating a brand name in what many consider the ultimate commodity: milk.

To the well-educated, environmentally concerned buyer -- often a parent -- Judge will offer his milk, called Vermont Family Farms (VFF), with an unusual set of promises posted boldly on the side of the carton. First, Judge promises that his milk is superior, better tasting, and usually fresher than what stores now offer. Second, he promises that the cows that produce it are humanely treated. Next, that the farmers supplying this milk "will manage the land as a living resource vital to the survival of our planet." The consumer can rest assured, knowing that the extra money paid for VFF doesn't end up lining the pockets of some corporate middleman but instead makes its way to the family farmer.

In the sea of white-on-white that is the dairy case in most grocery stores, Judge intends VFF to stand out like a beacon. The carton pictures a pastoral dairy scene with cows grazing, a red barn against rolling hills, and a clear blue sky. The red-orange logo for VFF is designed to catch the consumer's eye, and the lettering is slightly lilting, with an almost hand-drawn quality, to suggest days gone by.

To bring this milk to the consumer, Judge has formed a marketing group owned by 10 small to midsize Vermont dairy farmers. As VFF moves into more dairy cases, Judge envisions bringing more small Vermont farmers into his group -- possibly as many as 75 in six years. He thinks there are plenty of family farmers who are finding it harder to survive and yet are unwilling to call it quits. Their salvation, he believes, is in reconnecting with the consumer, becoming marketers. "Over the years, the farmer has handed marketing and his margins over to the middlemen, the milk processors who store and pasteurize the milk," Judge explains. The perception was that those middlemen added the value to the product and therefore deserved the healthy margins. Most small to midsize farmers became simply a supplier of a raw product. Judge and his fellow farmers intend to change that.

In 1950 more than 2 million dairy farms dotted the national landscape, where the average herd size was 10 cows. Today there are fewer than 150,000 farms, and the average herd size hovers around 500. What has led to the exodus of the small farm (often called the family farm) is a subject of passionate debate. Some say that it's simply a question of advanced technology allowing the larger, better-capitalized farms to compete more efficiently than the smaller ones do. Others blame government programs favoring the large farm over the smaller one. And still others say it's the result of being in a commodity business in which demand inches up a measly 1% a year while supply rises 2% to 3%. No matter what the cause is, the milk market, like the poultry and grain markets, is becoming concentrated in the hands of a relatively few "factory farmers." Those farms are so large and technologically proficient that they can make money at $10.10 per 100 pounds of milk -- a price that doesn't even come close to the typical break-even price for the family farmer, which is $17 per hundredweight.

To understand why the family farm is in trouble is to understand the economic complexities of the milk market, which has been both hurt and helped by government intervention. Back in the 1930s, under the New Deal, President Franklin Delano Roosevelt created the Farm Bill to stabilize a sector of the economy that was in crisis: agriculture. Technological innovations of the 1920s -- like the tractor -- had unleashed higher levels of production and sent the price of commodities, like milk, swirling downward. Price supports were one solution.

Under the Farm Bill the government agreed to purchase all surplus dairy products from farmers for set prices, called the "federal support price." For a while the system ensured a relatively high milk price for farmers, but beginning in the 1980s the government -- faced with an ever-increasing budget deficit and warehouses brimming with milk products -- decided it could no longer afford to support farmers. The government systematically began pushing down support prices, and farmers who'd built their businesses within the tight price constraints of the government found their businesses had been altered radically.

Hit especially hard were small farmers like Judge. But while Judge, like his fellow farmers, will engage in the debate over the viability -- and the value -- of small farms, he's not waiting around for the debate to be resolved. He's busy crafting a plan to survive, whatever the outcome.