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MailTribune.com
  • GETTING BY ON FAITH ALONE

    For small Oregon dairies, hard times abound

    Plunging milk prices and the recession are hurting dairy farmers
  • In a place where country roads slice through fields that seem to go on forever, dairy farmer Jack Gourley does what he can to survive.
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  • In a place where country roads slice through fields that seem to go on forever, dairy farmer Jack Gourley does what he can to survive.
    Though a crumbling economy continues to suck his savings dry, and years of early mornings nudging cows have left his body aching, he pushes forward.
    He has faith, he says. He has family.
    These days, that's about all he has.
    Across the nation, dairy families like the Gourleys are watching their life savings disappear as they try to survive an economic slump that has crippled the dairy industry for the past year.
    Jack Gourley can remember another, easier time, before a wrenching recession stripped him and countless others of their financial security.
    A time when people wanted his milk, when international demand for dairy products soared and people spent their paychecks on meals out — buying the cheeseburgers and pizzas that keep dairy farms like this one in business.
    In 2007 and early 2008, many dairy farmers were riding a wave of high bulk-milk prices.
    But the sense of security turned to dust as the market dried up. The economy crashed, U.S. milk production began to outpace consumption, bulk milk prices plunged to levels they were at 18 years earlier, and farmers were left with too many cows and too much milk. A spike in the price of fuel and feed only compounded the problem.
    Now, many farmers aren't even making what it costs them to produce the milk they sell.
    "It can't stay this way," said David Konyn, whose family runs the Konyn Dairy in Coburg. "Dairies won't be able to stay in business at these prices."
    Today, the average cost of a gallon of whole milk at the grocery store is $3.01, down 20 percent from $3.77 a year ago, according to the national Consumer Price Index.
    That decrease, and the surplus of cows behind it, has spelled trouble for dairy farmers like David Konyn and his family, who have been running their dairy since 1976.
    "Basically the price we are getting for our milk is the same as it was then," Konyn said, shaking his head. "But the costs to produce it keep going up."
    When his father, Jack Konyn, started the dairy decades ago, Lane County had more than 50 dairies, he estimates.
    Now just a handful survive and that number continues to shrink.
    This year, two dairies — one in Cottage Grove and one in Triangle Lake — were forced out of business, local dairymen say.
    To pay bills, some farmers have resorted to selling their cows for slaughter. Most are staying afloat by leaning heavily on banks to give them loans on close to everything they own. Others are leaving the business. And if milk prices don't rise in the next few months, experts say some dairy farmers will be forced into foreclosure or bankruptcy.
    The Konyns — who sell their milk to a co-op that supplies Springfield Creamery and Umpqua Dairy — already are seeing that day come for other families.
    "We have many dairy friends who, the bank has cut them off," said David Konyn. "They are surviving by selling cows ... selling land. They are barely getting by."
    Part of the problem is the aftershock from last year's exceptionally high cost of fuel and feed. Some farmers said they have never before had such high production costs followed by such low prices. Last year, for example, the Gourleys spent an extra $100,000 on feed and fuel in just 12 months.
    "Right now, it's just a hope and a prayer that the market will recover quick enough for dairymen to recover their losses," said Oregon Dairy Farmers Association Executive Director Jim Krahn. "For many people, the day when the bank says, 'I can't lend anymore,' is when this starts to tumble."
    Despite the faith that things will improve, milk prices remain stubbornly low.
    In 2008, the average price for raw milk hovered around $18 per 100 pounds produced.
    Now, U.S. Department of Agriculture data show national prices for raw milk at about $12, the lowest they have been since 1978.
    Dairy families are losing between $100 to $150 per cow, per month, said University of Idaho agricultural economist Wilson Gray.
    As a result, many farmers are trying to sell their cattle but can't find buyers. Because of the surplus of milk, the price of cattle has dropped dramatically, making getting out of the business nearly impossible because farmers can't make enough to repay their debts.
    And with milk supply already outstripping demand, buying more cows is the last thing anyone wants to do.
    More and more dairy farmers are opting to turn milk cows into hamburger — dairy cow slaughter through mid-June was 15 percent above a year ago, according to the Livestock Marketing Information Center.
    Gray and other experts estimate that U.S. farmers need to cut milk production by about 5 percent to bring supply back into balance with demand.
    In an effort to reduce the nation's milk supply, one group, Cooperative Working Together, is buying out farmers and slaughtering their cows.
    As the number of cows slowly decreases, farmers hold their breath, waiting for supply to realign with demand.
    Gray says he expects milk prices to begin rebounding by spring.
    "The question is, 'Will (dairy farmers) last that long?' " Gray said. "We've had a few dairies looking at foreclosure and bankruptcy, and in a couple three months we're going to see more of that ... people are out of equity."
    The area's main milk producer, Lochmead Dairy in Junction City, says it is holding on.
    Jock Gibson, president of Lochmead, says because the family also operates the Dari-Mart stores, which provide a retail outlet for their products, and has other crops, such as peppermint, wheat and blueberries, it is more financially stable than other small dairies.
    "We're doing just fine," he said. "We'll be here when we come out the other side."
    He isn't sure about the fate of other dairy families.
    "The little dairy farmer is in deep trouble," Gibson said. "I don't know even why they've survived as long as they have."
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