A CLOSER LOOK

The Agriculture Committee has scheduled a public forum on cuts to milk subsidies for 10 a.m. on Wednesday, Feb. 18, in Room 208 of the Cross Building at the state house in Augusta.

Alan Rust carried a ladder into the milking parlor at Rusty Knoll Farm in Gorham and climbed to replace an electronic component in the heart of the automated system before the afternoon milking.

The farm’s 140 Holstein cows file in to the parlor from a barn to be milked at 3 a.m. and 3 p.m. daily. The milk flows from cows through stainless steel pipes into a 2,000-gallon, stainless steel milk cooler in an adjacent room.

Dairy farmers, who must work 365 days a year, are paid by the pound for their milk pumped out of coolers. But now, as the economy declines, they are almost certain to see a decrease in what they are paid.

Rust, 47, and his brother, Richard Rust, 42, are among 331 dairy Maine farmers facing a record decline in farm milk prices. At the same time, the state subsidy for milk is dwindling, compounding the problem.

The dairy industry represents $570 million a year in the state’s economy and employs 4,000 people, including workers at farms, processing plants and in distribution.

This legislative session could prove to be critical for dairy farmers. They are facing cuts in state subsidies, which have been drained as they are tapped to help farmers stay afloat with record-low prices. Those prices are determined by a federal pricing structure.

Farmers are expected to pack a public hearing this month before the Agricultural, Conservation and Forestry Committee, which will make a recommendation to the Appropriations Committee about proposed cuts to subsidies that would help the state avoid a $5 million shortfall in its milk subsidy fund.

“All farms will be under stress with a huge price drop,” said Sen. John Nutting, D-Androscoggin County, Senate chairman of the Agriculture, Conservation and Forestry Committee.

The price of milk

A U.S. Department of Agriculture market administrator establishes each month’s minimum milk price paid to farmers. Tim Drake, executive director of the Maine Milk Commission, said in December the federal minimum set for the Maine region was $15.06, a drop from $21.59 in December 2007, for each 100 pounds of milk pumped from farmers’ coolers.

The latest indicator on Jan. 12 projected the price of milk dropping in March to as low as $11.50 for 100 pounds, which equals 99 cents per gallon to farmers.

“It looks like a sharp downturn,” Rust said last week in the milk room, where milk is pumped from the milk parlor. Framed certificates for milk quality lined a wall behind the cooler.

Drake said a study in progress by the University of Maine pegs the average cost of production for Maine farms now at $24.51 cents per 100 pounds of milk.

To help keep dairy farmers in business, Maine has paid them a subsidy to ensure the prices farmers receive remain at certain levels. For December, regardless of the federal prices, state subsidies ensured small Maine farmers received $20.70 per 100 pounds of milk; larger farmers, $18.07; and the largest farmers, $17.29.

Julie-Marie Bickford of Topsham, executive director of Maine Dairy Industry Association, said last week that few Maine dairy farms are profitable, but market other products like hay for extra revenue.

Rust said he and his brother have income from a couple of apartment rentals, but, “We rely mostly on the milk income,” Rust said.

Jenn Grant at Fineview Farm in Gorham milks 40 cows and she markets beef, vegetables and hay at the farm. “I couldn’t keep going if I weren’t diversified,” Grant said.

Exports down

Leroy Wormell of Westbrook, who produces organic milk at his farm in Cumberland, said the downturn in the world economy is impacting U.S. dairy exports, including dried milk, cheese and butter.

“One of the reasons for the lower prices is that exports have fallen off,” said Wormell, also a cattle dealer who has imported and exported cows.

A U.S. Dairy Council report bears out Wormell’s assessment. According to the report, dairy export volumes were down “sharply” in November, and cited a “worldwide financial crisis.”

Bickford said the industry recognized in early January that farmers would see milk prices hit historic lows. That drains the state’s subsidy account as the gap widens between price paid to farmers and the amount the state has guaranteed them.

The state faces an estimated milk subsidy shortfall projected last week at $5 million for the fiscal year ending June 30.

Cutting subsidies

Drake said 90 farmers packed a meeting of the Agricultural, Conservation and Forestry Committee meeting last week in Augusta.

“They’re scared,” Drake said.

Farmers heard two proposals. One proposed an across-the-board subsidy cut of 29 percent for all Maine dairy farmers, while the other would be a 23 percent subsidy cut, and farmers shipping more than 7 million pounds annually wouldn’t receive any subsidy money.

Don Marean of Hollis, a former legislator who served on the Agricultural Committee, attended last week’s meeting and said farmers didn’t want the cap.

“It was a blood bath,” Marean said.

But Nutting, whose Leeds farm milks 47 cows, said without a cap, six large farms would receive $1.5 million between now and May. Nutting favored the second proposal, fearing the loss of small farms “by the droves.”

The Agriculture Committee sent its proposals to the Legislature’s Appropriations and Financial Affairs Committee, which sent the measures back last week. Sen. Bill Diamond, D-Cumberland County, Senate chairman of the Appropriations Committee, said Tuesday the Agricultural Committee has been given more time.

“They need a public hearing so all the facts can come out,” Diamond said, and he hopes to hear from the Agricultural Committee with a proposed solution by March 1.

The Agriculture Committee has scheduled a public forum for 10 a.m. on Wednesday, Feb. 18, in Room 208 of the Cross Building at the state house in Augusta.

Meanwhile, Bickford is organizing industry-wide dairy meetings to brainstorm. The industry leaders met for two hours Monday.

Bickford is seeking federal help to relieve the pressure on the state budget. Bickford participated recently in a conference call with farmers around the country. She sensed a “panic” among the dairy farmers on the national level.

“Maine farmers are equally concerned,” Bickford said.

Survivors

Surviving tough times isn’t new for Rusty Knoll Farm. On June 25, 1975, a disastrous fire claimed the lives of 80 cows and 13 baby calves.

“The cows were dead in 20 minutes from smoke inhalation,” said Bill Rust, 75, the father of Alan and Richard Rust, who lost cattle, hay and barn. “Everything.”

But, Rusty Knoll Farm built back, with a herd now numbering 340, counting calves. It’s an automated, family-run farm that doesn’t need to hire outside help.

Alan Rust has two sons Ryan, 23, and Dan Rust, 13, representing the fourth generation on the farm, also filling roles in the operation. Ryan Rust, who graduated Gorham High School in 2004, travels around the sprawling farm these days on a snowmobile to his daily chores. Monday afternoon, he jumped from a seat on a snowmobile to a seat on a tractor hauling a wagon loaded with food for the cows. He drove through the barn auguring a mix of grain, chopped grass and corn into feed mangers.

Much of that feed is home-grown, which requires a lot of land, The farm owns 650 acres, with 130 acres for cultivating corn and 250 in grass.

For Maine farmers, the dairy industry is laden with uncertainty.

“We’ve never seen this type of financial collapse,” said Dale Cole of Sidney, who milks a herd of 80.