The New England Milkshed Assessment is ….…New England Milkshed Assessment Summary of Policy...

New England Milkshed Assessment Summary of Policy Dimensions and Recommendations Related to Marketing

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The New England Milkshed Assessment is sponsored by American Farmland Trust, with the collaboration of Tufts University’s Agriculture, Food & Environment Program (AFE) at the Friedman School of Nutrition in Boston. This summary marketing report is part of that study, and was led by Hugh Joseph at the Friedman School. It includes input from the project’s other team members - Tim Griffin (AFE), and Cris Coffin and Julia Freedgood at American Farmland Trust - as well as significant contributions from 11 Friedman School graduate students, including several background research reports with content incorporated in this document. Input was also derived from interviews by researchers with more than 40 key informants from across the dairy sector, including academics, dairy farmers, marketers, institutional food service personnel, government officials, and others.

While the emphasis of the overall assessment is on New England’s dairy producers, the geographic focus for much of the marketing analysis was Boston and Massachusetts as the largest consumer base in the region. Not all markets were addressed; the emphasis was on those where promotional and marketing strategies were not well understood and/or showed the most potential for expansion in ways that can benefit the region’s dairy farmers. Contexts for this report: New England’s dairy farming has been in a long-term decline. For example, the New England dairy herd (or number of cows in the region) has decreased by 25% from 1992 to 2007, a decline totaling over 75 thousand cows (although increased per cow yields have maintained overall milk output). In particular, small and midsized farms, defined as owning less than 200 dairy cows, decreased by 50% during this time period (although farms with over 200 dairy cows have increased by 35%). Land owned or rented that is used for dairy farm production in the region has also decreased from 982,000 acres in 1992 to 611,879 acres in 2007. In 1920, there were 25,356 dairy farms in Vermont, and the long decline has seen the number of its dairies drop just in the past 20 years from 2,272 to 977 this year. Indeed, the long-term viability of these farms remains uncertain, as many New England dairy farmers have still been operating at a loss in many years.

The region now has about 2,100 dairy farms that play a valuable role economically, particularly in Vermont and Maine, generating more than $13,000 per cow annually in direct economic activity. They generate over $700 million annually in fluid milk sales, the largest percent of any New England agricultural commodity, and contribute more than $3 billion to the region’s economy. Vermont remains the largest milk producing state in New England. Dairy products are valued at $584 million a year, or 83 percent of all agricultural sales in the state. Dairy farms also have important health and environmental /open space benefits. Sustainability of dairy producers: Given this scenario, stabilization and potential growth opportunities for dairy producers in New England is driven by multiple factors, including on-farm costs; milk yield efficiencies; external supply forces; downstream industry integration and consolidation; and policy and regulatory factors at the regional, state and national levels, including the Federal Milk Market Order. Overall demand for, and sales of, dairy products are shaped (or constrained) by these influences. To the most part, the survival and stability of dairy producers going forward will also rest on non-marketing strategies that include farm-based cost efficiencies; diversification of activities to generate more on-farm income; and other


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economic and policy determinants. Still, the marketplace is an important element of the overall equation for producer sustainability. Within the marketplace, underlying factors include prices driven by regional, national, and global supply and policies and increasing price fluctuations and price instabilities driven varying production / supply. From a sales perspective, New England is a diverse marketplace. In particular, the different scales of local markets, and their distances from dairy producers, implies that a variety of approaches is warranted. Most dairy is produced in Vermont and Maine where the population (a. k. a. marketplace) is smaller, and thus alternatives such as direct marketing are more limited. The inverse is true for Southern New England. Dairy products similarly need differentiating. In particular, fluid milk is a very different market than products such as cheese, yogurt, and ice cream. Furthermore, the production source of New England dairy products, particularly fluid milk, is not always differentiated; it can be comingled with product from New York State in particular, and that has a particular impact on identity and branding strategies. 1. Demand for dairy products, particularly milk: Overall milk consumption continues a gradual decline extending over several decades. For example, among children ages 2-11 years, overall consumption was about 1/2 cup (3-1/2 fluid ounces) less in 2005-2006 than in 1977-1978. Most is within the whole milk category, due to, among other things, increased consumer awareness about fat consumption, substitution to other fat-containing foods, and public health campaigns about low-fat milk consumption, but milk consumption overall has fallen:

Figure 1: Servings/person/day (availability) of Different Dairy Products, 1970-2008

0.000.100.200.300.400.500.600.700.800.901.00

1968 1978 1988 1998 2008

total fluid milk

total cheese

total frozen dairy

dry, evap. & cond. milk


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Thus New England consumers overall are not getting the recommended servings of (low-fat) dairy in their diets. The recommended number of servings for children aged 2-9 is two servings (cups) per day, and for children, adolescents, teenagers and adults aged 10 and above, it is 3 servings (cups) per day. The breakdown among the different groups is given in the table below, relative to overall supply. Dairy product: Current availability per person per

day Total servings per day: Boston

Total dairy 1.680 1,029,984.5 Whole milk 0.180 110,355.5 2% milk 0.230 141,009.8 1% milk 0.080 49,046.9 Skim milk 0.100 61,308.6 Total fluid milk 0.634 388,696.5 Yoghurt 0.046 28,202.0 Cheese 0.702 430,386.4 Ice cream 0.056 34,332.8 Dry, evap., cond.

0.052 31,696.5

Dairy product:

Hypothetical availability per person per day

Total servings per day: Boston

Total dairy 2-3 1,774,404.00 Therefore, the increase in dairy product demand relative to currently recommended consumption would equal 41.95 percent. Ideally, these increases would occur in the low-fat dairy categories: 1 percent milk, skim milk, low-fat yoghurt, and low-fat cheese, for example; and come from New England producers. While these are averages, milk and dairy product consumption, especially low-fat dairy product consumption, is even lower in low-income groups.

Besides cost and nutrition factors, demand is influenced by cost factors and competition from cheaper beverage options. Household consumption is further shaped by increasing trends towards eating away from home. Government and institutional policies also influence demand; these include a reduction in the dairy proportion of the WIC benefit; lower than desirable participation in school lunch and in breakfast programs; new rules for a la carte sales in public schools in Massachusetts, and strict food budgets at schools and hospitals. Recommendations:

• Strive to maintain overall product demand and reverse current trends. In particular, support broad-based efforts to address pressures on dairy consumption among children and youth categories.


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• Focus on trends such as low fat content, premium products, and on specific sectors and demographics, such as educational institutions and children, where pressures on consumption exist and policy-related influences are common and can be effective.

• Build demand for New England dairy products: Support strategies that can expand the production and sales of dairy products with New England content. These will benefit most as part of producer-driven niche marketing.

2. Niche marketing: As with most of the food supply chain, producers are the segment that is losing money or are the least successful. The overall food sector is economically quite healthy. In dairy, farmers need alternatives to being the price takers with over-reliance on wholesaling as their main outlet. The overall direction of farming in New England is away from direct competition within an increasingly global marketplace, and toward niche marketing strategies. This is most salient in the produce sector; however, it is spreading across all commodities and products, but still weak in dairy.

Niche marketing combines multiple strategies to veer away from reliance on the mainstream marketplace. These include:

• Alternative processing - on-farm processing of milk, cheese, ice cream, and butter; • Diversified dairy animals – goats and sheep, as well as cows; • Non-dairy diversification and value added – producing other farm animals for meat;

adding other farm activities besides straight dairy production; • Moving to organic production and products; • Product differentiation from the mainstream or conventional competition via branding

and related promotion; • Direct marketing to restaurants, small stores, and via farmers’ markets, CSA, and

farmstands. To the extent that producers can continue to move in these directions will shape much of the future of dairy. Niche marketing can bring increased sales and better prices for producers who have a direct involvement or investment in developing unique or special products and markets that stand out from the conventional dairy sourcing options available to consumers. Other farms that are already producing a value-added product may look to expand or collaborate as partners with other farms.

Recommendation:

• Support “niche marketing” diversification as an essential strategy to the sustainability of many, if not most dairy producers. Better understand what models are working best, and share this information among producers.

3. Farm-sourced products: While the price of raw milk is a key barrier to the sustainability of dairy producers, there is of milk, cheese, ice cream, and butter, where demand is growing in the marketplace for products that have local identities and perceived high or better quality. Farmers that can profit directly from the production and sales of cheese, yogurt, ice cream,


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butter and other items can add considerable revenue through such value-added activities. An example here is cheese:

There are essentially two markets for cheese – one for the more generic types that are used for making popular items such as pizzas, and are sought at the lowest prices by restaurants, schools, and other large users. The other is specialty or artisanal cheeses, for which there are hundreds and brands and varieties. New England cheese producers, such as Cabot, make such cheeses that are ‘world-class’. In Vermont, demand has led to new dairy-related processing plants including Swan Valley Cheese, Commonwealth Dairy, Kingdom Creamery of Vermont, Vermont Farmstead Cheese and cheese production at the Vermont Food Venture Center. Cheese production is expanding among dairy producers and small processors across the entire region. Massachusetts now has an estimated 25+ small and artisanal cheese producers, including those made from includes sheep and goat milk. However, the marketing potential is not keeping up, particularly through direct sales. Recommendations:

• Support local cheese promotional efforts, such as the emerging yogurt and cheese makers’ Massachusetts Cheese Guild.

• Encourage and assist non-farm cheese making business to buy direct from New England producers or processors and coops that represent them.

• Encourage more local / regional cheese distribution and marketing at farmstands, farmers’ markets, and CSAs.

• Promote use of more local / regional cheese at restaurants and by food service purveyors.

4. Organic dairy: In 2010, Maine had 72 organic farms (out of 330 total) and Vermont had 200 (out of 1010 total). In 2008, the National Agricultural Statistics Service (NASS) began tracking organic farms as part of the Census of Agriculture.

State Inventory-Farms Inventory-Peak Cows

ME 64 3969 MA 8 395 NH 14 489 VT 182 13,100

Number of Organic Dairy Farms and Certified Organic milking cows in 2008. The benefit of organic production for producers is the need for higher prices for raw milk. Organic Valley pays New England producers $30 per CWT +/-; and MOO pays its members $33 per CWT – compared to the price paid for conventional raw milk hovering between $15-$18 per


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CWT during 2012. Vermont, which had only 2 certified organic dairies in 1993, had 179 organic dairies producing a combined total of over 156 million pounds of milk in 2008. Nearly 100 farms in Vermont switched to organic just in the 2006-2007 year. Organic now about 15% of Maine’s milk output, about 10% of New Hampshire’s. Maine had 25 organic dairies in 1997, and 61 in 2008 with a total production of over 47 million pounds.

But more recently the trend in most states has slowed because the economics are not as compelling. Many factors influencing conversion are on-farm related or are connected to contracts, both of which are beyond this report to address. But marketing also plays a role. When HP Hood stopped buying organic milk from many Maine farmers in 2009, many would have gone out of business had they not formed their own collaborative – Maine’s Own Organic Milk Company (MOO). Further pressure on prices comes large buyers such as Stonyfield Yogurt that struggle to stay competitive with the conventional yogurt marketplace. And there is similar retail consumer resistance to significantly higher organic premiums since the economic downturn in 2008. However, some of this is attributable to the perception of milk as a fungible commodity. Organic marketing should emphasize quality differences and other distinguishing characteristics that can build preferential demand, particularly where the market is affluent enough to pay a premium for this. Recommendations:

• Support a more stable organic marketplace to reduce risks for producers who convert to organic production. To decrease variable demand and price volatility for organic milk, longer-term sustainable contracts by key customers, such as yogurt and ice cream producers, other businesses using organic dairy products, and institutions, are warranted to support the producers.

• Promote more niche organic products that can sustain demand for organic producers and often bring higher revenues. These include yogurts, cheeses, and manufactured products containing organic dairy content.

• Improve promotional messages to emphasize premium qualities of organics that justify higher prices. This includes environmental and ‘buy local’ messaging.

• Have milk marketing fees applied specifically to promote organic dairy, at least proportional to sales volumes.

5. Promoting and branding of New England dairy producers: Promotion is a major aspect of marketing any product. Because there is a public interest element to dairy farming and dairy consumption, promotional campaigns fall into the realms of businesses, government, and non-profits, often working together. However, promoting New England products has complexities that provide advantages and disadvantages to scale. In particular, “buy local” messaging seems inherently on target for dairy, since most dairy consumed in New England (with some notable exceptions such as commodity cheeses and foods containing dairy content) comes from the region, or close by (e.g., New York state).

Further complicating the messaging is the use of local by large processors. Garelick, for example, displays “From Local Farms to Local Families” across its milk tanker tracks that crisscross the region. This makes it challenging for smaller operations to make distinguishing


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claims. Finally, the concept of ‘local’ varies to business and consumers depending on the product, their knowledge of its provenance, and how it is promoted. Local can be a backyard or a region. This can cause confusion where individual dairies or coops, states, processors, states and regional messages overlap with their ‘local’ terminologies. Finally, while this is an effort to support New England dairy producers, and New England has a clear regional identity, consumers generally do not care if the source of their dairy is from neighboring New York state, and still consider that within the realm of ‘local’ and ‘regional’. They also comingle the New England and the Northeast as regional identities. Large vendors, including Cabot and organic dairy companies like Stonyfield, have had to stop or limit use of New England on their packaging because some of their product is sourced from outside New England itself (typically New York). 5.a: Regional promotion and branding: New England may be a great region to have a regional brand for dairy since the geographic area is relatively small, dense, and a regional identity already exists. While desirable, multi-state efforts, like the Dairy Compact, are unlikely to be revived anytime soon. Nonetheless, there are valuable regional options that include efforts by academic institutions and by NGOs to collect and share relevant data, to develop a regional framework for dairy stabilization / support that incorporates important marketing elements; and by smaller dairy producers and businesses to share models and support each other across state lines. The Keep Local Farms (KLF) campaign provides a supportable example of regional dairy promotion. KLF is a partnership between the Vermont Dairy Promotion Council, the New England Family Dairy Farm Cooperative with Cooperative Development Institute, and the New England Dairy Promotion Board. Launched in 2009, KLF aims to bring more money directly to dairy farmers while creating stronger connections between farmers and their customers. The KLF campaign provides a supportable example of regional dairy promotion. Keep Local Farms has three core goals: • Drive dairy sales – particularly sales of “local” milk; • Educate consumers about dairy farmers as “stewards of the land” and the economic troubles they face today; • Provide contributions to the Keep Local Farms fund. They also strive for farmer sustainability, including: “help New England dairy farmers stay in business by helping them help themselves’; treat farmers fairly by helping to provide consistent and reliable income; use the “fair trade” model to offer the producer additional funding”. AN example of successes with this is Harvard University, which has contributed $0.10 to KLF with the purchase of every serving of milk sold in their retail outlets. They hang KLF banners and signs at purchasing points, and have plans to promote KLF in their student dining halls. The University of New Hampshire, the University of Vermont, and Boston Medical Center are all now working with Keep Local Farms as well. Hannaford Supermarkets promoted Keep Local Farms through their “Close to Home” campaign in January through March 2010. All four major dairy processors in New England (Garelick, Oakhurst, Guida’s, and Hood) have agreed to support Keep Local Farms. Recommendations:

• Strive for greater clarity for consumers as to the meaning of ‘local’ and ‘regional’.


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• Support and expand use of programs like Keep Local Farms to help it continue to meet its stated objectives.

• In tandem, such efforts build public awareness regionally and thus more political support for sustaining a viable dairy farming sector. Most Massachusetts residents, for example, cannot name a dairy producer in the state.

• Support use of dairy check off funds to promote state and regional dairy producers. A broadened message that explains the benefits of dairy production – economic, environmental, food security, and so on – can build consumer awareness and support for preferential purchasing. The campaign by the Massachusetts Dairy Promotion Board now is taking that approach and serves as a model for promotional awareness messaging.

5.b: Statewide promotion and branding: Since most states have farm promotion activities, dairy typically is easier to promote from a statewide geographic context. Examples come from most New England states:

• Rhody Fresh is a branded strategy to label all milk produced by its member-farms. As of 2010, the cooperative was earning $3 million in gross revenues and selling in 120 retail supermarkets and convenience stores in Rhode Island and Massachusetts. Rhode Island has not lost any dairy farms in the last five years.

• Maine’s Own Organic Milk Company (MOO Milk) is a L3C company (a low-profit, limited liability corporation) that markets and distributes organic milk that completely comes from Maine dairy farms, and similarly takes advantage of the state identity.

• Vermont cheese has a worldwide recognition; largely promoted by Cabot. But Vermont Butter & Cheese Creamery makes artisanal dairy products, mainly cheese, and takes advantage of the state’s reputation for quality dairy products.

• The Massachusetts Seal of Commonwealth Quality represents an emerging state-based effort to forge a Massachusetts identity for dairy producers.

Recommendations: • Support statewide geographic identities as part of product branding for all dairy

products. • Support use of dairy check off payments to promote the benefits of local dairy farming,

and not just the nutritional value of consuming dairy products. 5.c: Local promotion: Individual dairy operations, or small combined dairy producers and / or processors, are relying heavily on the notion of ‘local’ as marketing plus. They have no trouble being considered local, and can address more fundamental aspects of the idea, such as freshness, and supporting local dairies in one’s community. Local food campaigns are effective when they convey information about a product including freshness and quality, environmental, benefits to local communities (socially and economically) and the environment. Consumers increasingly care about the safety of their food, so accountability is important as well. All of these considerations can be effectively communicated to consumers through a well-managed local branding effort.


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Recommendations: • Include or emphasize really local dairy producers and marketers in statewide and

regional promotional efforts. Work together, not separately. • Take advantage of the momentum being generated by the USDA ‘Know Your Farmer,

Know Your Food’ campaign. • Adapt the FoodRoutes “Buy Fresh Buy Local’ campaign to increase consumer awareness

and support of local dairy producers. 6. Processing: Dairy processing is one of the most concentrated areas of regional agriculture. Dean Foods controls over 70% of all dairy processing in the New England region. While this might not in itself explain the pricing structures for raw milk sent to processors, it constrains their options to capture any of the price premiums in the downstream marketplace. Small dairy processing operations have been on the decline for decades, but there has been a resurgence of interest in the past several years.

In 2005, there are 38 on-farm processors of dairy products in Vermont. Now this has further expanded – see chart below. The product mix has expanded and now the following dairy products are produced by on-farm processors: blue cheese, Gouda cheese, Colby, cheddar cheese, Italian style hard cheeses (Parmesan and Romano), organic fluid milk, organic ice cream and yogurt. (Similarly, there was an approximate doubling of small dairy plants in New York over the last two years, to around 80 statewide. Thirty-four plant permits have been issued this year).

Having control of processing makes many types of marketing much more feasible and potentially more profitable. However, these operations can be expensive to build new, and require adequate volume to make them viable. Because of the historical economics of dairy businesses, lenders are reluctant to support them; even USDA and state agencies. Recommendation:

• State and federal agricultural financing programs should be more supportive of new efforts to develop small processing operations. More detailed assessments of the current resurgence of local dairy marketing should be carried out to help justify and make more loans and grants to new operators.

SPECIFIC MARKETS

7. Institutions and food service: Institutions – schools, hospitals, and such – purchase large amounts of dairy products and as such are desirable targets for local or regional sales. However, they also pose formidable barriers to the purchases of specialized products and use of alternative distributors. This includes:

• Mandated use by public schools of the lowest bidders is typically required by municipalities. To put this in perspective of the district budget, a 1-cent increase per carton of milk could cost the districts tens of thousands of dollars per year. This is a large challenge,


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especially in public school districts with less flexibility in spending. • Institutions rely on large purveyors that supply other products besides dairy and can deliver on a regular and predictable schedule. Vendors or purveyors must be approved in advance, and they are not always friendly to working with numbers of independent local farmers. For example, Somerville Public Schools in Massachusetts tried working with Oakhurst Dairy in Maine. They were interested in Oakhurst because of their business model, support of local farms, and a manageable price point. Unfortunately, Oakhurst was not able to meet the delivery needs of the school district in reliability and frequency, and another option had to be found. • Schools get free- or low-cost cheese through the federal commodity programs. These amounts to millions of pounds a year, but the prices paid to producers for the product are too low for small-scale operations in New England to compete as producers for the government cheese pool. • Institutions often have different serving and packaging requirements that smaller dairies can’t supply. For example, specified bulk packaging or different sizes of individual milk cartons is not standardized across different school districts and private institutions.

Farm-to-school sales of produce have grown rapidly in recent years, and the opportunity to include milk or other dairy products is attractive. But few dairies have their own processing facilities. Nonetheless, for those that can supply milk or products, such as yogurt, cheese and ice cream, the prices offered and logistics remain barriers. Even hospitals that pay top dollar for their facilities and professional staffs are reluctant to increase budgets for better quality foods. This is beginning to change, but on a case-by-case basis. Nonetheless, some institutions can and do try to buy organic and other products that support dairy famers. However, the price premiums allowable are typically narrow. Many now do buy Stonyfield yogurt, but that has come as a result of years of work by Stonyfield to get the serving sizes, packaging and pricing suitable to the marketplace. Private schools provide an interesting market for a New England regional brands of milk and dairy products, although they typically purchase less milk than do public school districts. Private schools and universities may be the best avenue for increasing regional milk consumption in New England, as they have slightly greater flexibility in their budgets and purchasing. They are capable of purchasing milk at a higher price point and purchasing by their ‘values’ instead of being governed solely by the bottom line. An important point to recognize with schools is that their milk demand is predictable and steady, but seasonal. Schools are only purchasing milk when students are in session, usually September through May, with a two to four week vacation in December. This could play as a positive or a challenge in the marketing of a New England regional milk product. High Lawn Dairy in the Berkshires has been selling to private institutions. Currently, 10 percent of High Lawn’s milk production supplies four schools – Williams College, Wellesley, Phillips Academy and Buxton School. On average, High Lawn submits 10-20 bids per year to schools. However, it received no new contracts in the past three years. High Lawn also lost 2 contracts - Smith College and Springfield College - to larger dairies due to competition in price. Recommendations:


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• Despite the success of “Farm to School,” in the region, there are no similar support mechanisms for local dairies to follow the suit. The premise of “Dairy Farm to School” is still quite new, and there is no existing research that assesses the opportunities for local dairies to sell directly to schools. More research of existing models is needed to determine what options exist or need to develop in order to expand opportunities for small and independent dairy producers and processors to sell to institutions.

• Schools and state education departments should better address constraints to dairy consumption in schools, such as new nutritional guidelines for competitive foods and beverages that are likely to reduce dairy sales. This policy focus can be at the state agency level.

• Some institutions, notably private schools or public schools in well-off communities, have an interest in local foods and sustainability, and are incorporating local or regional independent dairy, including organic dairy, into their purchases. This could be more widely promoted to other districts and universities. More documentation of procedures and sharing results from those who have tried it would be helpful to other schools and universities. Hospitals are in a similar situation. State-funded colleges and universities have also been cutting back dairy alternatives due to budget cuts, but it make take efforts targeting state governments or legislatures to overcome such impediments.

• Schools could try to increase participation in the School Breakfast and School Lunch programs, where a lot of milk in particular is consumed.

8. Retail food stores: We did not focus on larger supermarket, package stores, and other retail locations where most milk is sold to retail shoppers. Specialty stores and coops do preferentially stock local and regional independent dairy products, and organic products. For example, Harvest Co-op in Boston currently sells milk from a large variety of companies such as Stonyfield, Organic Valley, and MOO, and they ran many campaigns to encourage the purchase of this product. Whole foods also stocks High Lawn Farms Crescent Ridge Dairy, Shaw Farm, New England Organic Creamery, and MOO Milk, depending on the store. Products from these individual farms are delivered directly to the store either by the farm or through a local distributor. Recommendation:

• Coops and Whole Foods exemplify the options available in retail grocery stores. Opportunities for smaller grocery stores and package stores to carry such products are not well studied except via the experiences of individual dairies to market their products in such locations. More shared information on their experiences would be helpful to other, particularly newer, independent dairy distributors.

9. Restaurants: Chefs and restaurant food buyers have significant expertise in purchasing local food, and many are willing to purchasing products directly from the farmer. While restaurants have many reasons for buying locally produced foods, there is less focus on dairy.


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The obstacles that restaurants face when buying local foods include inconsistent availability and quality, difficulty identifying reliable local producers, difficulty in making purchases due to lack of procedures with many farmers, and dealing with multiple suppliers ordering and delivery schedules. Small local producers sometimes can overcome these limitations by pooling resources and aggregating their product. Additionally, producers can use an intermediary aggregator to distribute or ship local products to consumers through restaurant markets. Such intermediaries could allow growers to spend more time managing the farm and less time marketing their goods. However, there are successful models such as Henrietta’s Table in Cambridge, MA. Fluid milk products are delivered directly from Oakhurst Dairy in Maine. A local distributor delivers butter, yogurt, and other milk products multiple times a week. Henrietta’s Table consumes 300 pints of butter each week, and purchases Stonyfield brand yogurt and purchases specialty butters from Vermont Butter and Cheese Company, which are procured through the local distributor. Many higher-end restaurants use similar volumes of dairy products, and are very focused on quality and sourcing, but have focused more on produce than on dairy. Recommendations:

• There is an untapped market for local farm branded milk in the Boston restaurant scene. The importance of a farm name to the consumer is high when buying local produce or dairy products. Local distributors may be key in getting local milk into restaurants by keeping distribution costs low for farms, and allowing restaurants time savings with one-stop shopping.

• Many more higher-end restaurants could be purchasing greater amounts of products, particularly cheese, but also ice creams, butter, and cream for New England independent distribute from farmers directly. This may be a potentially strong growth area for producers or independent dairy processors with specialty products.

Direct marketing: A large majority of dairy farmers, particularly in Vermont and Maine, are only set up to wholesale their milk. It would take a substantial amount of capital and labor to restructure their businesses to retailing milk. Currently, there are only a few dairy farms in the area that are set up to directly sell their milk, an most of these are filled to capacity. Direct-to-consumer sales by dairy producers are well established at farmstands they operate, and at other farmstands where regular deliveries are possible. Two other direct markets do not have a lot of dairy marketing, however: 10. Consumer Supported Agriculture (CSA): CSA dairy is scarce; Massachusetts has one dairy-focused operation based in Framingham that includes a raw milk option as a niche product. Almost no CSAs include dairy, in part because they mainly produce fresh vegetables and have not thought about dairy, except cheeses in a few instances. There are a handful of dairy-only CSAs in the Northeast, but opportunities seems somewhat limited; home delivery is often a preferred option for farms that could offer a CSA model.


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Recommendations: • As CSAs increasingly diversity by adding products from other local farms, the

opportunity to add cheese shares is ripe for expansion. • Diversifying CSAs should also investigate other dairy products from local producers to

incorporate into a CSA share. 11. Farmers’ Markets: Fluid milk sales at farmers’ markets appear impractical for many reasons, even where there is a niche product with a price premium. High Lawn Farm in the Berkshires sold milk at farmers markets, but experienced great resistance from wholesale accounts, which said they would stop selling High Lawn Farm milk if they continued selling at farmers’ markets.

Local cheeses are still a small component of total farmers’ market sales (e.g., about 10 vendors in Massachusetts), limited in part by the number of on-farm producers with the capacity to sell at these venues. However, there is expansion potential if markets are more flexible to allow other farmers to market the cheese. Farmers markets have some opportunities to offer other products, such as yogurt and ice cream, but face practical challenges (although ice cream is sold, particular for immediate consumption, at some markets). Recommendation:

• Diary expansion at farmers’ markets has greater potential than with CSAs. But as with most direct marketing, there is limited data on current vendors and research on potential for expansion. More assessment is recommended given the size of this marketplace.

12. Incentive voucher programs: As with fruits and vegetables, dairy consumption is lower in lower-income communities. These incentive programs, such as the Farmers’ Market Promotion Program, and Wholesome Wave’s double vouchers, are primarily targeting fresh produce at farmers’ markets. Some programs can include CSAs, deliveries to senior community centers, and other locations. The use of incentives to promote dairy consumption has not been investigated in any depth. While there is skepticism, more information and one or two pilot efforts seem worthwhile to determine the feasibility of a dairy promotional program, especially for products (cheese, yogurt, etc.) from local producers. Recommendation:

• There has been little if any research on expanded opportunities for using incentive programs; more is warranted given the need and potential for this to apply to dairy. Pilot programs could determine their viability.

13. Dairy Home Delivery: Home delivery of dairy products is an iconic image of earlier decades in our country’s history, and is often thought of as an outdated practice. However,


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there has been a recent resurgence in the dairy home delivery model as consumers seek out new ways of connecting with their food and the people who produce it. Massachusetts is home to multiple home dairy delivery companies, with three operating in the greater Boston area. These home delivery ‘dairies’ were once producers of milk on their own farms, but have moved out of production and remain solely with the distribution of milk purchased from local farms. Dairy home delivery is a niche market targeting a consumer who is in search of a high quality milk or dairy product, convenience, appreciates the source of their food, and is willing to pay a higher price for the product. Although a smaller market, this outlet can still have great impact on the New England dairy industry. Recommendation:

• As with other direct marketing, more information is needed on the practicalities; more background best practices, challenges, and overall potential for home delivery is worth gathering and sharing.

Summary conclusions: New England’s dairy producers need to continue to adapt to more creative marketing as part of overall diversification if they are to be sustainable over the long term. Marketing is a diverse component of dairy industry. Creative marketing-related strategies will be needed by more producers, in combination with other programs and policies by dairy producers and by all those who support their continued existence in New England. More research and information sharing has been emphasized. The critical need to promote such transitions on a timely basis requires that producers, customers, policy advocates, and policymakers better understand the specifics of what works, how it works, and the challenges that have to be dealt with. Interested parties could do more to fund and carry out marketing-oriented case studies of promising strategies. Initiatives like Rhody Fresh (RI) and The Farmers’ Cow (CT) are still emerging models, but already offer best practices and lessons learned to benefit others considering multi-producer models. Similarly, marketing case studies are warranted for unique individual businesses to discern success factors and challenges they overcame.


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Tufts papers cited: Appelman, J., Bardot Lewis, C., Simons, J., & Tung, A. Boston Milkshed Assessment: Setting the Framework for a Comprehensive Analysis of the Dairy Supply Chain to New England's Largest Urban Center". Tufts University, Friedman School of Nutrition Science and Policy, Agriculture, Food and Environment Program. May 2010.

Eliza Bemis, Vanessa Herald, Rachael Kirk. Greater Boston Area Milkshed Marketing Assessment: An Explanation of Existing Opportunities to Increase Economic Viability of New England Dairy Farms. Friedman School of Nutrition, Tufts University. May 7, 2011.

Amelia B. Fischer. The New England Dairy System and Consumer Demand. Tufts University, Friedman School of Nutrition Science and Policy, Agriculture, Food and Environment Program. December, 2010.


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APPENDIX TABLES

Consumption Trend Graphs

Figure 2: Total Fluid Milk Availability: Servings per person per day

Figure 3: Frozen Dairy Product Consumption, servings per person per day

0.00

0.20

0.40

0.60

0.80

1.00

1968 1978 1988 1998 2008

Total fluid milk availability: servings/capita/day

0.000

0.020

0.040

0.060

0.080

0.100

0.120

0.140

1960 1970 1980 1990 2000 2010

ice cream

other frozen dairy

total frozen dairy


17

Figure 4: Yoghurt and Cottage Cheese consumption, servings per person per day

Figure 5: Cheese consumption, servings per person per day

0.000

0.005

0.010

0.015

0.020

0.025

0.030

0.035

0.040

0.045

0.050

1968 1978 1988 1998 2008

yoghurt

cottage cheese

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

1960 1970 1980 1990 2000 2010

American cheese

Italian cheese

miscellaneous cheese


18

Figure 1. Number of on-farm dairy processors in state of Maine between 1995-Feb 2012 (low is eleven, high is eighty-three). Eleven more on-farm processors are in the process of getting


19

set up, but are not included in this data. Also, the 2012 number does not include frozen desserts processors or any interstate milk shippers.

Figure 2. Number of on-farm dairy processors in state of Vermont between 1995-2012 (low is nine, high is forty-eight).

New England States’ Dairy Policies

1

NEW ENGLAND MILKSHED ASSESSMENT: STATE-LEVEL PROGRAMS AND POLICIES HELPING TO SUSTAIN THE REGION’S DAIRY FARMS

AND STATE AND FEDERAL POLICY RECOMMENDATIONS THE CONTEXT

Dairy farms manage most of the cropland in five of the six New England states and represent the largest market value of any agricultural commodity in the region.

o The region’s 17,000 licensed dairy herds generate more than $700 million annually1 in fluid milk sales.

The average mature milk cow has an annual economic impact of about $14,000,2 and the region’s dairy herd contributes more than $3 billion to the New England economy.3

The average dairy farmer in New England owns or manages over 300 acres of cropland, pasture and woodland; this land is more vulnerable to development if it is not being actively used for agriculture.4

Severe prices swings and rising costs of production continue to impact the region’s dairy sector

o At $11.79 per hundredweight (cwt.), the June 2009 all-milk price was 10 cents less than what farmers received for milk in 1979 (real dollars).5 Many producers suffered financial losses of $350 to more than $700 per cow in 2009.6

o Though profitability has since improved, with average milk prices in the Northeast of $21.53 per cwt. in 2011 covering average net costs of production of $18.10,7 prices are already beginning to drop again in 2012, following the cyclical pattern below.8

1 United States Department of Agriculture, New England Agricultural Statistics 2010. June 2011.

2 Statement of Vermont Dairy Industry Representatives to Secretary Vilsack, Burlington, VT February 13, 2010.

http://www.vermontagriculture.com/news/2010/Dairy_Principles_Agreement_Vilsack_Visit.pdf; see also American

Farmland Trust in collaboration with Community Involved in Sustaining Agriculture, Increasing Local Milk

Processing Capacity: Benefits to Pioneer Valley Consumers and Communities, January 2011. 3 In 2010, there were 213,100 milk cows in New England. New England Agricultural Statistics Service, Annual

Bulletin 2011, page 80. 4 2007 Census of Agriculture

5 Parsons, Bob. “Vermont’s Dairy Sector: Is there a Sustainable Future for the 800 Lb. Gorilla?” Food System

Research Collaborative at the University of Vermont Center for Rural Studies Opportunities for Agriculture

Working Paper Series, Volume 1, Number 4. 6 Ibid. Quoting 2010 Northeast Dairy Farm Summary, produced by Farm Credit East, Farm Credit of Maine, and

Yankee Farm Credit. 7 Lidback, Joanna and Laughton, Chris. 2011 Northeast Dairy Farm Summary, May 2012. Farm Credit East, Farm

Credit of Maine, and Yankee Farm Credit. 8 Farm Credit East, Knowledge Exchange Partner, Volume 6, Issue 2, February, 2012.


2

U.S. All-Milk Price, 1979-2009

Source: U.S. Department of Agriculture 2010b

o Rising production costs show no sign of slowing. Feed, the largest single yearly expense for most dairies, rose more than $300

per cow in 2011, to $1,578.9 Gas, fuel and oil costs rose by 35%, and crop inputs were up by 15%.10 Drought conditions and continued high demand for U.S. feed stocks are likely

to push feed prices higher Milk production costs in the first six months of 2012 are already up by

an estimated $1.40 per cwt.11

Given these trends, it is not surprising that the region is losing dairy farms at an alarming rate: In just the last 10 years, nearly 1/3 of the region’s licensed dairy herds have gone out of business.12

9 Lidback, Laughton, 2011 Northeast Dairy Farm Summary, May 2012

10 Ibid.

11 Farm Credit East, Knowledge Exchange Report. July, 2012.

12 New England Agricultural Statistics, 2011.


3

Policy Conditions Current federal dairy policy is widely regarded as insufficient in providing price stability and

income support to New England milk producers.

Relevant federal dairy income and price support mechanisms include: o Dairy Product Price Support Program: This program indirectly supports the farm

price of milk through government purchases of surplus dairy products from dairy processors. It sets a national milk price floor of about $9.90 per hundredweight—which is the equivalent of half the current cost of milk production in the region.13

o Milk Income Contract Loss Program (MILC): This program pays dairy farmers when milk prices fall below an established target price. It is similar to crop subsidy programs which pay farmers only when farm prices drop below certain levels. Eligible farmers receive a payment equal to 45% of the difference between the target price and the lower market price. In 2009, the program was amended to include a feed adjuster, which increases the target price when feed costs are high.

The MILC program is extremely important to New England dairy farmers. In 2009, during the last price trough, MILC payments to the region were over $31 million. [In contrast, MILC payments were under $2 million in 2010, reflecting rising milk prices.]14 However, MILC alone is an insufficient income safety net during severe price troughs, especially since there is a payment cap affecting dairy herds of over 160 cows.

Congress is currently debating reauthorization of the federal Farm Bill. In both the Senate-passed and House Agriculture Committee versions of the bill, the Dairy Product Price Support Program and MILC are replaced with a dairy margin protection program. This new program would provide subsidized insurance coverage for dairy farmers when margins15 are low or negative. It would also provide a market stabilization, or supply management, program to scale down production when the market is oversupplied. While too soon to know if these changes will be implemented and how they will affect the region, these policy reforms have been embraced by a number of dairy organizations and Members of Congress from New England.16

NEW ENGLAND STATE POLICIES AND PROGRAMS Recognizing the importance of dairy to its agricultural sector, economy and land base, every state in New England has taken steps to help retain and sustain its dairy farms. These steps range from programs that provide direct support to dairy farms when federal milk prices do not cover the costs of milk production—in essence, supplementing the federal Milk Income Loss Contract program—to those aimed at dairy herd health and dairy product promotion. Additionally, most of the New England states have programs that, while serving a broader farming constituency, have been extremely important to dairy farm viability. This latter

13

See 2011 Northeast Dairy Farm Summary. 14

See Farm Credit East Knowledge Exchange Partner, Volume 5, Issue 9, September 2011. 15

Margins equal the all-milk price minus feed costs 16

See Northeast State Departments of Agriculture (NEASDA) Farm Bill Funding Priorities Summary, March 2012.


4

category includes programs aimed at increasing farm profitability through business planning, on-farm processing and value-added product development; on-farm energy programs focused on both efficiency and renewable energy production; conservation cost-share programs helping offset the costs of environmental compliance; and farmland protection programs which provide farms with the capital for reinvestment, expansion and/or farm transition while protecting land in perpetuity. Others include programs that provide some degree of tax relief to farm businesses, some at the option of municipalities, and those that provide a state procurement preference for foods grown within the state. Below is a summary of the type of state-level programs and policies that are helping to support and sustain dairy farming in New England, and recommendations for additional policy actions. A more detailed inventory of each state’s relevant programs follows. State-level Dairy Stabilization Programs: Three of the six New England states have ongoing programs that provide direct assistance to dairy farmers when federal milk prices do not cover the cost of production. These programs use two different approaches. In Maine and Connecticut, the state makes direct payments to milk producers; in Massachusetts, the state offers a refundable income tax credit. Each state has a different mechanism for funding its program. In Connecticut, the funding mechanism is a deed recording fee that is collected for a variety of purposes, including the dairy program. In Massachusetts and Maine, funding is through the General Fund, though in Maine, milk handling fees are collected and deposited into the General Fund, in part for this purpose. In both states, the Legislature has capped, either through the yearly budget process (Maine) or as part of the authorizing legislation (Massachusetts), total spending on the program. Two other states have made one-time-only emergency payments to dairy farmers in the past decade. In 2007, addressing the cumulative impact of poor weather, low prices and high production costs and concerned about dairy farm attrition, the Vermont Legislature made $3 million available for interim dairy assistance. New Hampshire did likewise in 2008, providing $2.1 million to dairy farmers through an Emergency Dairy Assistance Program. At the time, New Hampshire also created a permanent dairy Emergency Relief Fund; however, no state resources have been dedicated to the Fund since its creation. Little analysis has been done of the impact of these programs or one-time emergency payments on farm viability. However, some evidence suggests that these programs are helping to slow the rate of dairy farm attrition. According to Tim Drake, Executive Director of the Maine Milk Commission, since implementation of Maine’s Dairy Relief Program, dairy farm attrition rates are significantly less than comparable rates in Vermont and New Hampshire.17 Dairy Herd Health: State and federal herd health testing and vaccination programs are vital to milk safety and quality, in addition to protecting the economic sustainability of the dairy industry. To differing

17

Drake, Tim. “Maine’s Dairy Relief Program,” Maine Policy Review. Winter/Spring 2012, pages 77-78


5

degrees, state Departments or Agencies of Agriculture provide services in this area. New Hampshire has some of the most comprehensive services in this regard, offering free Johne’s testing (a service that the state continued after federal funding was cut). Additionally, the NH Veterinary Diagnostic Laboratory operated jointly by the state Department of Agriculture, Markets & Food and the University of New Hampshire, offers mastitis testing/culturing and pregnancy blood-tests directly to farmers, as well as other pathological and microbiological diagnostic services in cooperation with herd veterinarians. State and federal funding is often augmented with milk producer fees or contributions. Dairy Promotion: Five New England states have created a state-level Dairy Promotion Board or Council to educate consumers about both dairy products and dairy farms, and all New England states are represented through the New England Dairy Promotion Board. These Boards and Councils are funded primarily through milk producer contributions. The New England Dairy Promotion Board is also funded through a producer “check-off,” and the New England Board has been instrumental in the creation of the regional Keep Local Farms program (described below). Farm Viability Programs: As a region, New England has 14 million consumers. Direct marketing and value-added product development are two key means of improving farm profitability for dairy, as well as for other farm types. Five of the states have established programs to help farmers with business planning and market and product development. A Rhode Island Farm Viability grant, for example, provided instrumental seed funding for Rhody Fresh, a RI milk branding effort developed by nine of the state’s dairy farms. As of 2010, the Rhody Fresh cooperative was earning $3 million in gross revenues and selling in 120 retail supermarkets and convenience stores in Rhode Island and Massachusetts.18 Maine, Massachusetts, Vermont and Connecticut all have Farm Viability programs that offer business planning assistance and grants to implement elements of the business plan. Dairy farmers have participated in these programs in each of the states, helping them develop on-farm processing for specialty cheeses, yogurts, puddings, or ice cream, or new marketing ventures, such as a farm store, ice cream parlor, home delivery service, or internet sales. Farm Energy Programs: Dairy farms are not only significant energy consumers, but significant generators of animal waste. Several New England states have programs that are helping farmers both reduce energy consumption and costs, and find economic uses for their manure. The Massachusetts Farm Energy Program, for example, has helped participants realize an average of $12,000 in annual energy savings. In Vermont, the Agency of Agriculture, Food and Markets’ Renewable Energy for Agriculture grant program offers funding for planning, feasibility analysis, and business plan development, while the Vermont Clean Energy Development Fund supports the purchase and installation of methane digesters with low-interest loans and competitive grants.

18

RI Rural Development Council and Farm Fresh Rhode Island 2010 Report to Senators Reed and Whitehouse,

retrieved March 5, 2012.

http://www.rhodyfresh.com/

http://www.ruralri.org/2010_Final_Report_to_SBA.pdf


6

Farmland Protection Programs: With intense real estate development pressure and high land values, New England states were early adopters of “Purchase of Agricultural Conservation Easement” (PACE) programs.19 PACE programs (often known as purchase of development rights programs) compensate property owners for restricting development and other future use of their land so that it remains available for agriculture. Massachusetts boasts the nation’s first state-level PACE program. Called the Agricultural Preservation Restriction program, it began as an act of the Legislature in 1979. Since then the other five New England states have established programs. Together they have saved more than 260,000 acres, or 6% of the region’s total land in farms.20 Vermont’s Housing and Conservation Board alone has protected 139,000 acres on 567 farms and has offered on-farm business planning, financial and technical assistance services to 336 farmers, many of whom are dairy farmers. By allowing farmers to cash in a percentage of the equity in their land, PACE programs create a financially competitive alternative to selling land for development. PACE programs provide capital for farmers to invest in and expand their farm businesses, retire debt, purchase land, finance retirement, settle estates and help transition the farm to a new generation. The benefits of PACE are especially important to the region’s dairies because they are highly capitalized. Tax Policies: All six New England states have a form of agricultural use assessment, allowing eligible farmland to be taxed at its agricultural value. Additionally, a number of states provide additional property tax relief to farmers. Some, such as Connecticut, Maine, Rhode Island and Vermont, exempt certain farm animals, buildings or equipment outright from local property taxes. Massachusetts allows towns the option of exempting farm animals and equipment, while Connecticut allows towns to exempt a portion of the value of agricultural buildings. Maine has a program that links property tax relief and farmland protection; its Voluntary Municipal Farm Support Program creates a mechanism by which towns can effectively waive local property taxes for farmland owners in exchange for a limited 30-year easement protecting the farmland from development. These state-level tax policies are especially important to dairy farms, given the significant investment these farms typically have in animals, land, equipment and farm infrastructure. Procurement Preferences: In recent years, several New England states have taken steps to require that state entities, such as state universities, colleges and agencies, preferentially purchase foods produced in state. Some states have gone further to also enable towns to preferentially purchase local foods through a number of mechanisms, such as no-bid contracts and bids within 10% of the lowest

19

Note that these have different names in different states but are all the same kind of program. For example, in

Massachusetts, the program is called the Agricultural Preservation Restriction or APR program. 20

New England Farm and Food Security Initiative to Keep Farmland in Farming, farmland protection fact sheet

prepared by American Farmland Trust, November 2010.


7

bid. Specific policy tools are presented in the six New England state policy memos that are part of this report. A Regional Approach: Keep Local Farms Inspired by the “Fair Trade” concept, and launched in 2009, the Keep Local Farms program is an important new regional effort to bring more money directly to dairy farmers while creating stronger connections between farmers and their customers. KLF is a partnership between the Vermont Dairy Promotion Council, the New England Family Dairy Farm Cooperative with Cooperative Development Institute, and the New England Dairy Promotion Board. While individuals can make contributions to dairy farmers directly online, the avenue with more potential is building collaborative relationships with grocery stores. Research completed for the program indicates that consumers are willing to pay more at retail if they know the proceeds are being returned to the farmer. Early results are promising. In one year, four Hannover grocery stores raised $40,000 through the program, showing the potential for success if more retailers participate throughout the region.21 In addition to stores, KLF is growing its institutional partners, especially the region’s colleges and universities.

21

Details about the KLF program are gleaned from their website and personal communication with Diane Bothfeld at the VT Agency of Agriculture, March 15, 2012.

http://www.keeplocalfarms.org/


8

POLICY RECOMMENDATIONS: Given the unique circumstances of each state in New England and the diversity of challenges facing the region’s milk producers, there is no one-size-fits-all approach or single policy or program that will ensure the sustainability of the region’s dairy farms. Clearly a suite of programs and policies are needed —both to help milk producers address the primary challenges of price instability and rising production costs and to encourage new marketing approaches and value-added product development to capture a higher share of the retail food dollar. These programs and policies are needed at both the state and the federal level.22 Federal policies and programs: At the federal level, the current Dairy Price Support Program and Milk Income Loss Contract (MILC) Program appear likely to be replaced in the pending Farm Bill reauthorization with a dairy margin protection program, and with a market stabilization, or supply management, program to scale down production when the market is oversupplied. Whatever the program(s) that Congress adopts, it is critical that any program reduce price instability and provide a means for dairy farmers to bridge periods of low milk prices. Federal policy also can play an important role in building demand for regional dairy products. The following changes to federal nutrition programs could have a beneficial impact for New England dairy farmers:

o Through the USDA Foods Program, public schools participating in the National School Lunch Program receive “commodity” foods purchased by USDA. These foods include fresh, frozen or processed meats, dairy and nut products, and fruits and vegetables. According to USDA, the value of commodities purchased and distributed through the program is somewhere in the vicinity of $1.2 billion.23 Cheese is a significant commodity that public schools in New England rely on for their lunch programs. Indeed, in the 2011-12 academic year, public schools in New England received more than 1.6 million pounds of cheese through the USDA Foods Program.24 Providing schools with cash in lieu of commodities would allow school districts that choose to do so to buy cheese and other dairy products directly from farmers and processors in New England. Recently, a collaborative of state Farm to Institution programs in the region, Farm to Institution in New England (FINE), proposed such a policy change to the USDA Foods Program. The FINE proposal would allow public school districts with an annual commodity food entitlement of $50,000 or less to opt for cash in lieu of commodities.25 Piloting such

22

Municipalities can also play an important role in supporting local dairy farms—especially through supportive tax

and land use policies. These recommendations, however, are limited to state and federal policy. 23

Brayley, Dorothy and Winston, Amy, 2012 Farm Bill Position Paper: USDA Foods Program, Farm to Institution

New England, April 2012. 24

Based on interviews with state coordinators for USDA Food Program distribution in Maine, New Hampshire,

Vermont and Rhode Island. Cheese was provided either directly to the schools or purchased on their behalf and sent

directly to a processor for 25

Brayley and Winston, 2012 Farm Bill Position Paper: USDA Foods Program, Farm to institution New England,

April 2012.


9

an approach, as has been proposed in the Farm Bill reauthorization recently reported out by the House Agriculture Committee, would allow analysis of its potential impact on demand for New England dairy products.

o A regulatory change in the National School Lunch and Breakfast Programs could increase demand for Greek yogurt, which in turn could fuel demand for both milk and Greek yogurt produced in New England. Current USDA regulations for public schools consider Greek yogurt to be the same as regular yogurt despite its higher protein content. By creating new guidelines for Greek yogurt that recognize its dense nutritional and high protein value, schools would find it more economical to use Greek yogurt as a high-protein meat alternative.26

Addressing rising production costs will require continued support for federal programs that are helping milk producers reduce energy use, comply with federal and state environmental regulations, and maintain herd health. Some important federal programs for dairy farmers include: .

o The Farm and Ranch Lands Protection Program (FRPP) is leveraging about $2 in state, local, philanthropic and landowner contributions for every dollar it provides for permanent farmland protection in the region while helping dairy farmers expand their farm operations, reduce debt, finance retirement and transition their land to a next generation;

o The Environmental Quality Incentives Program (EQIP) is widely used by dairy farmers for nutrient, manure and pasture management, and, increasingly, for energy efficiency improvements and renewable energy development to reduce rising on-farm energy costs;

o The Conservation Stewardship Program (CSP) has the potential, if properly tailored for the region, to compensate dairy farmers for some of the important environmental benefits they provide through their land stewardship. Changes to the program are needed to make it more attractive to New England farmers, and less burdensome to USDA staff to administer

State Policies and Programs: As the above narrative describes, many of the region’s current state-level farm programs and policies are having a positive impact on dairy farms. However, little has been done to measure that success: farm numbers do not tell the whole story, nor do program participation numbers. More evaluation and documentation of program impact on dairy farms will help sustain popular and political support for these programs. As importantly, our study found little research around the profitability of specific value-added dairy products or direct-to-consumer marketing approaches. While an increasing number of milk producers are gravitating to on-farm processing--bottling milk for home delivery and/or producing value-added products such as cheese, yogurt, and ice cream--and most of those producers are selling those products direct to consumer, there is scant information about which products and which marketing models offer the greatest return on investment. Developing

26

Press release from Office of Senator Charles Schumer, June 18, 2012

http://www.schumer.senate.gov/Newsroom/record.cfm?id=337037


10

such information could help state policymakers determine what type of public investments and policies could be most advantageous to dairy farmers. As noted in the section above, dairy farmers rely on a wide variety of state-level programs and policies. Continued support from lawmakers for these programs is critical. These include:

State-level dairy stabilization programs Programs that are supporting dairy herd health Dairy promotion and state branding programs Programs that are helping farmers develop renewable energy and reduce farm input

costs

Purchase of Agricultural Conservation Easement (PACE) Programs Procurement preference policies Farm business planning programs Supportive tax policies

Additional policy recommendations can be found in the Marketing Recommendations report, which can also be found on the webpage.

New England States’ Dairy Policies Connecticut

Connecticut Facts • In 1990, Connecticut had 500 dairy farms on 136,000 acres with 27,000 milking cows. In

2007, this dropped to 210 farms on 72,000 acres, and 19,000 milking cows.1 • The economic impact of the Connecticut dairy industry, including processing, is estimated

between $832 million and $1.1 billion in new output (sales). In turn, this generates an estimated 2,465–4,242 jobs and $145–$208 million in additional personal income. Dairy farming is the second most valuable component of Connecticut’s agricultural sector.1

• Connecticut dairy farms produced 366 million pounds of milk in 2010.2 State-Level Policies and Programs That Directly Benefit Dairy Farmers The establishment of a dairy stabilization program through Connecticut’s Community Investment Act (CIA) has had the greatest impact of recent state-level policy changes. The CIA provides a dedicated funding stream to the CT Department of Agriculture for programs important to dairy farmers, including a dairy safety net, agriculture viability grants for producers and farm cooperatives, and the CT Farm Link, CT Grown and CT Farmland Preservation programs. The original CIA, enacted in 2005, established a $30 fee to be collected by town and city clerks for the recording of all documents into municipal land records. Documents subject to this fee include: deeds, mortgages, mechanics’ liens, judgment liens, notices of lease, releases of mortgages and liens, name change certificates, notices of variances and condominium declarations. On July 1, 2009, the Act was amended (PA 09-229), raising this fee to $40 per deed recording and adding an Agricultural Sustainability Account, which provides grants to milk producers determined by a formula based on the difference between the federal pay price and 82percent of the cost of production. This $10 increase was made permanent in 2011, under PA 11-249. A new Farmland Restoration Program established through PA 11-1, while not limited to dairy farmers, is helping milk producers reclaim land for feed production and pasture. The primary objective of the program is to increase the state’s resource base for food and fiber production, focusing on prime and important farmland soils. Other important state-level programs and initiatives for dairy producers in the last decade include the establishment of a Milk Promotion Board, changes to the Milk Regulation Board, as well as laws intended to promote Connecticut’s local agriculture at farmers markets and other retail venues. Innovative institutional purchasing requirements and state-level tax exemptions have also proven beneficial to farmers. When contracting for “the purchase of dairy products, poultry, eggs…” for state agencies, the Commissioner of Administrative Services must give preference to

1 Department of Economic and Community Development, Connecticut Department of Agriculture, and University of Connecticut, Department of Agricultural and Resource Economics. The Economic and Fiscal Impacts of Connecticut's Dairy Industry. 2009. 2 United States Department of Agriculture, National Agricultural Statistics Service, New England Agricultural Statistics Service. New England Agricultural Statistics 2010: Annual Milk Production (p.77). June 2011.


products produced in-state if they are “comparable” in cost to those produced out of state. Conn. Gen. Stat. § 4a-51(b). Buildings, animals, and produce are exempt from personal property taxation. Farm tools are exempt up to $500, and farm machinery up to $100,000. Conn. Gen. Stat. §§ 12-81, 12-91. Some of the more prominent Acts are noted and linked below (the first two digits of the Act number indicate the year enacted). Public Act 05-228: Community Investment Act (An Act Concerning Farmland Preservation, Land Protection, Affordable Housing and Historic Preservation) Public Act 09-229: An Act Concerning Milk Producers, M ilk and Milk Products, Agricultural Not-For-Profit Organizations and the Modernization of Connecticut Fertil izer Law This Act raised the land use recording fee established under the CIA from $30 to $40 and created an account to assist milk producers through producer grants. The law imposes a formula for making grants to milk producers based on the federally set milk price and the amount needed to sustain dairy operations, as the U. S. Secretary of Agriculture determines. Specifically, when that price falls below the minimum sustainable monthly cost to produce milk, a milk producer qualifies for a grant equal to the difference between these two figures. Public Act 11-48: An Act Implementing Provisions of the Budget Concerning General Government. This legislation made permanent the $10 increase in the land use document recording fee and rearranged the distribution formula. It credits $10 of each fee to the Agricultural Sustainability Account, which PA 09-229 established to assist milk producers. Public Act 05-175: An Act Concerning the Revision and Modernization of M ilk Regulation Statutes and the Licensing of Poultry Dealers This Act updated antiquated statutes by making changes to the Milk Regulation Board and the regulation of milk and milk products. It requires the Commissioner to regulate raw milk producers. Public Act 05-130 - An Act Concerning the Milk Regulation Board and A Study of the Connecticut Dairy Industry This law added two appointees to the Milk Regulation Board one of whom must be actively engaged in milk processing, and one of whom represents retailers. The Act required the Board to conduct a comprehensive study of Connecticut's dairy industry and submit a report to the Environment Committee by January 1, 2006.

http://www.cga.ct.gov/current/pub/chap058.htm#Sec4a-51.htm

http://www.cga.ct.gov/2011/pub/chap203.htm#Sec12-81.htm

http://www.cga.ct.gov/2011/pub/chap203.htm#Sec12-91.htm

http://www.cga.ct.gov/2005/act/Pa/2005PA-00228-R00SB-00410-PA.htm

http://www.cga.ct.gov/2009/ACT/PA/2009PA-00229-R00SB-00891-PA.htm

http://www.cga.ct.gov/2011/act/pa/2011PA-00048-R00HB-06651-PA.htm

http://www.ct.gov/doag/lib/doag/commish_and_gov/2011_legislative_report.pdf

http://www.cga.ct.gov/2005/act/Pa/2005PA-00175-R00HB-06907-PA.htm

http://www.cga.ct.gov/2005/act/Pa/2005PA-00130-R00HB-05573-PA.htm


Public Act 08–164: An Act Concerning Assistance to Dairy Farmers The Act established a Connecticut Milk Promotion Board within the Department of Agriculture to develop, coordinate and implement promotional, research and other programs designed to promote Connecticut dairy farms and milk consumption; the Board reports annually to the Legislature. Public Act 10-103: An Act Concerning Farms, Food and Jobs This Act specifies that money collected by the Connecticut Milk Promotion Board is not considered state funds and that the Board is within the state Department of Agriculture for administrative purposes only. Public Act 11-249: An Act Concerning The Performance Of Certain Federal Requirements By The Connecticut Milk Promotion Board This Act required the Connecticut Milk Promotion Board to assess a fee of 10 cents per hundredweight of milk delivered by Connecticut milk producers or a fee commensurate with the credit allowed for producer contributions to state qualified programs under the federal law. Additional Research Resources Department of Economic and Community Development, Connecticut Department of Agriculture, and University of Connecticut, Department of Agricultural and Resource Economics. The Economic and Fiscal Impacts of Connecticut's Dairy Industry. 2009. Additional Resources for Farmers The University of Connecticut College of Agriculture and Natural Resources and the Cooperative Extension System offer the following services to farmers:

CT Veterinary Medical Diagnostic Lab - http://cvmdl.uconn.edu/. The Diagnostic Testing Services Laboratory performs all State testing programs(Brucellosis, Salmonella Pullorum, Mycoplasma, Mastitis, Avian Influenza, Johne's Disease) as well as many other tests (equine infectious anemia, Salmonella, leptospirosis, Lyme disease, Rabies, etc.).

Our poultry and mammalian extension veterinarians maintain daily contact with animal and poultry owners, veterinary practitioners, as well as State and Federal regulatory officials. Department of Plant Science – Soil and plant tissue testing, Integrated Pest Management - http://www.cag.uconn.edu/plsc/plsc/ipm.html, http://www.cag.uconn.edu/plsc/soiltest/.

http://www.cga.ct.gov/2008/ACT/PA/2008PA-00164-R00SB-00632-PA.htm

http://cga.ct.gov/2010/ACT/PA/2010PA-00103-R00HB-05419-PA.htm

http://www.cga.ct.gov/2011/ACT/PA/2011PA-00249-R00HB-06262-PA.htm

https://mail.farmland.org/exchweb/bin/redir.asp?URL=http://cvmdl.uconn.edu/

https://mail.farmland.org/exchweb/bin/redir.asp?URL=http://www.cag.uconn.edu/plsc/plsc/ipm.html

https://mail.farmland.org/exchweb/bin/redir.asp?URL=http://www.cag.uconn.edu/plsc/soiltest/


The Soil Nutrient Analysis Laboratory has three major objectives. First is to provide an inexpensive means for both agricultural producers and home owners to test their soil fertility and receive environmentally sound limestone and fertilizer recommendations. The second major focus of the Laboratory is education. Through our analyses as well as outreach efforts, clients and the public are being informed about wise soil management and fertility practices. CES Land Use Resources - http://www.extension.uconn.edu/documents/CT_Farmland_Connections_FINAL.pdf. This guide is intended to help make these farmland “connections” by walking through the legal and practical considerations involved in leasing farmland and providing information and case studies of successful community farms that have been established aroundthe state. We hope that this guide is a useful resource for both those seeking land to grow food and other agricultural products and those seeking to ensure that the farmland they own is put to productive and sustainable agricultural use. CES Farm Risk Management - http://www.canr.uconn.edu/ces/frm/. The mission of the Connecticut Farm Risk Management and Crop Insurance Program is to provide farmers and agribusinesses with information to improve farm financial management and reduce risk. CES – Dairy Nutrition, milk quality and mastitis – http://animalscience.uconn.edu/faculty/Sheila%20Andrew.php. Cutting-edge dairy research at the University of Connecticut is also available to farmers to aid in decision-making and farm planning. Department of Agriculture and Resource Economics – http://are.uconn.edu/outreach.php. Extensive research on Connecticut production for dairy producers and well as other related projects.

https://mail.farmland.org/exchweb/bin/redir.asp?URL=http://www.extension.uconn.edu/documents/CT_Farmland_Connections_FINAL.pdf

https://mail.farmland.org/exchweb/bin/redir.asp?URL=http://www.canr.uconn.edu/ces/frm/

https://mail.farmland.org/exchweb/bin/redir.asp?URL=http://animalscience.uconn.edu/faculty/Sheila%2520Andrew.php

https://mail.farmland.org/exchweb/bin/redir.asp?URL=http://are.uconn.edu/outreach.php

New England States’ Dairy Policies Maine

Maine Facts1 • In 2010, Maine had 304 dairy farms, ranging in size from 10 to 1,700 milking cows. • Maine’s dairy industry generates more than $570 million dollars each year for the state’s

economy, contributes more than $25 million dollars to the state and municipal government in taxes and provides more than 4,000 jobs.

• In 2012, there are close to 32,000 cows in Maine making 590 million pounds of milk per year (69 million gallons), a decline of 1.4 percent since 2004.

State-Level Programs and Policies That Help Sustain Dairy Farms The centerpiece of Maine’s dairy policies is the Tiered Dairy Stabilization Program, which was established in 2004. The program provides economic relief to Maine dairy farmers in times of low milk prices, paying farmers directly from the state’s General Fund when the marketplace price received for milk falls below their cost of production. The target price for a producer depends on which of four production range “tiers” the producer is in. Originally organized into three tiers, the program was amended in 2009 to establish a fourth tier. All producers begin in the first tier at the beginning of the year; some move into the second, third and fourth levels of production fairly quickly, while others never get out of the first tier. Since the program is funded from the General Fund, it is subject to the state budget process. Milk handling fees, collected by the Maine Revenue Service, are sent to the General Fund. Since 2007, at least $30 million has been paid to milk producers through this program. The Legislature has frequently imposed an annual cap on program expenditures; in 2010 and 2011, the program was capped annually at $13.3 million1. In 2009, a statewide Task Force on the Sustainability of the Dairy Industry developed a number of recommendations that were signed into law. Several recommendations related to the Tiered Program. Another required the Maine Milk Commission to improve data collection for a statewide cost-of-production study. According to Tim Drake, Executive Director of the Maine Milk Commission, the Tiered Program has helped slow the loss of dairy farms in the state. In the six years between 2004 and 2010, Maine lost only two-thirds (78) of the number of dairy farms it had lost in the previous four years (106). Walt Whitcomb, Maine’s Commissioner of Agriculture, believes the program is possible because the state has a functioning Milk Commission that reviews and establishes milk prices, and policymakers along with milk processors, retailers and consumers who are willing to support a local supply of food. Whitcomb credits the program in helping retain Maine’s three major dairy processing plants, with their associated jobs, and a significant number of active dairy farms that are now, many with a next generation, making long-range capital investments. Because Maine has showed a willingness to make funds available to stabilize erratic national milk prices, Whitcomb sees that Maine’s dairy industry has the potential to grow.

1 All statistics in the section are from Drake, Tim. “Maine’s Dairy Relief Program.” Maine Policy Review. Winter/Spring 2012, pages 77-78. Accessed March 13, 2012.

http://www.mainelegislature.org/ros/LOM/LOM121st/14Pub601-650/Pub601-650-54.htm#P2704_520732

http://www.mainelegislature.org/legis/bills/bills_125th/billtexts/HP051401.asp

http://www.mainelegislature.org/ros/LOM/LOM124th/124R2/PUBLIC467.asp

http://mcspolicycenter.umaine.edu/?q=maine-policy-review-current-issue-farming

http://mcspolicycenter.umaine.edu/?q=maine-policy-review-current-issue-farming

New England States’ Dairy Policies Maine

In Maine, farm produce and forest products are exempt from personal property taxation. Cattle, fowl, and other farm animals are also exempt. Me. Rev. Stat. tit. 36, § 655. The Farmland Property Tax Program supports the education of municipalities, farmers and the general public about farmland and open space tax programs. ME. Rev. Stat. tit. 36 §1120-1121 Additionally, coordination with the Commissioner of Agriculture, Food and Natural resources with regard to nutrient management plans may make farmers eligible for additional tax exemptions. Me. Rev. Stat. tit. 36 § 656, tit. 7 § 6 Other Programs and Policies 2011: An Act Regarding the Milk Handling Fee This statutory change allows only one milk handling fee to be assessed on any particular container of packaged milk and imposes a handling fee on 20-quart containers of packaged milk, which formerly were exempt from handling fees. 2007: An Act to Support Farms and Limit Sprawl This legislation established a Voluntary Municipal Farm Support Program that creates a mechanism for municipalities to support local farms and preserve farmland by making farm support payments equal to property taxes to farmland owners in exchange for a limited 30-year easement protecting the farmland from development. 2005: An Act To Create a Property Tax Reimbursement for Commercial Dairy Farms. This policy allows an eligible commercial dairy farm, which must produce and sell at least 10,000 pounds of milk products in each of six months in one year, to receive a 50 percent reimbursement for property taxes paid on real estate that was necessary to support the farm’s production of milk products in the year for which reimbursement is sought.

http://www.mainelegislature.org/legis/statutes/36/title36sec655.html

http://www.mainelegislature.org/legis/statutes/36/title36.pdf

http://www.mainelegislature.org/legis/statutes/36/title36.pdf

http://www.mainelegislature.org/legis/statutes/7/title7ch6sec0.html

http://www.mainelegislature.org/legis/bills/bills_125th/billtexts/HP051401.asp

http://www.mainelegislature.org/ros/LOM/LOM123rd/PUBLIC301.asp

http://www.mainelegislature.org/legis/bills/bills_122nd/billtexts/LD118001-1.asp

New England States’ Dairy Policies Massachusetts

Massachusetts Facts • There were nearly 5,000 dairy farms in Massachusetts in 1950 and only 180 licensed dairy

herds in 2007. • The Massachusetts dairy industry (including fluid milk processing and manufactured dairy

products like ice cream and butter) generates over $500 million for the state’s economy. • Milk receipts rank third in value of agricultural production behind cranberries and nursery

and greenhouse production. • The state’s 180 dairy herds generate nearly $50 million in sales and an estimated

$120-$150 million in economic activity through the purchase of goods and services. • Dairy farms directly maintain approximately 92,000 acres in active agricultural production,

equaling about 20 percent of land in farms in the Commonwealth. • Nearly 227 million pounds of milk (or more than 26 million gallons) were produced in 2010

by dairy farmers eligible for the state dairy tax credit.1 State-Level Policies and Programs that Help Sustain Dairy Farms After a crisis in the dairy industry was declared in May 2007, Massachusetts Governor Deval Patrick and the state Legislature established a Dairy Revitalization Task Force and Emergency Relief Fund. These actions provided $3.6 million in emergency relief for dairy farmers in June of that year. Total production for 2006 from eligible farms was just over 272.7 million pounds, yielding a payment rate of about $1.32 per hundredweight of milk. The average payment to those 180 farmers was $19,565.2 The Task Force was charged with investigating both short- and long-term solutions to support and preserve the dairy farm industry in the Commonwealth. The report was submitted to the Legislature in November 2007, and the resulting Dairy Farm Preservation Act was signed into law in 2008. Some of the Act’s provisions are directed solely to dairy farmers, while others more broadly support agriculture in the state. Dairy Farm Preservation Act Provisions

Specific to Dairy: • Dairy Farm Income Tax Credit: Established to offset the cyclical downturns in milk prices

paid to dairy farmers, the refundable income tax credit is triggered every month the Federal Milk Marketing Order’s price drops below a “trigger” price established by the Massachusetts Department of Agricultural Resources (MDAR). This trigger price is calculated from monthly costs-of-production figures, including hired labor and some portion of the value of unpaid labor; the amount of credit is based upon volume of milk production. The credit is received when farmers’ annual taxes are filed, and the pool of available credit is capped at $4 million a year.

1 The 2010 statistic is from http://www.mass.gov/eea/pr-2011/111206-pr-dairy-tax-credit.html, all other data in this paragraph is from the 2007 Dairy Revitalization Task Force Report. 2 http://www.mass.gov/agr/dairy/preservation_history.htm

http://www.mass.gov/agr/dairy/preservation.htm

http://www.mass.gov/agr/dairy/docs/preservation/Chapter310Acts_2008.pdf

http://www.mass.gov/eea/pr-2011/111206-pr-dairy-tax-credit.html

http://www.mass.gov/agr/dairy/preservation_history.htm


• Dairy Promotion Board: Established to promote the consumption of milk and milk

products with programs and policies like paid advertising, sales promotion, publicity, research studies testing effectiveness of market development as well as nutritional studies, the Board is funded through a 10 cents-per-hundredweight producer assessment. Producers are able to receive credit for the 10 cents from the National Promotion assessment if they choose.

• Fluid Milk Couponing: Gives the MDAR the authority under certain conditions to allow

and to regulate the use of fluid milk couponing to promote consumption (prior to this couponing was illegal). The MDAR must protect local producer dealers from predatory pricing.

General Agricultural Provisions • Farm Linked Loan Program: Established a low-interest farm loan program in the MDAR

that offers low-interest four-year loans of up to $500,000 to eligible farms. This program has not been funded since its authorization.

• Local Option to Exempt from Personal Property Tax: Under state law, farm animals,

machinery, and equipment are subject to a local excise tax. This tax is equal to $5 per $1,000 of assessed value. The Dairy Farm Preservation Act gives towns the option to exempt farm animals (such as dairy cows) and equipment from local excise taxes. This exemption must be adopted by the town by a two-thirds vote.

• Extension of Farm Viability Funds to Agricultural Preservation Restriction (APR) Farms:

The state Agricultural Preservation Restriction (APR) Program pays farmland owners the difference between the “fair market value” and the “agricultural value” of their farmland in exchange for a permanent deed restriction precluding any use of the property that negatively impacts its agricultural viability. A separate Farm Viability Enhancement Program provides business assistance and implementation grants to participating farmers, requiring a non-development covenant in exchange for grants.

Recognizing that many APR farms have transitioned to new owners, this provision authorized eligible owners of APR farmland to receive business planning and implementation grants. Farmers must show that the grant improves the economic viability of the farm, retains or creates private sector jobs and tax revenue either directly or indirectly, improves farm productivity and competitiveness, supports renewable energy or environmental remediation projects on farms, or expands and supports markets and infrastructure to strengthen the farming industry. The amount of funding is dependent on the size of the farm in both acreage and gross farm income.

• Extended the number of miles a farm vehicle may travel on the Commonwealth’s roads

from two miles to 10 miles.


• Established a Commission to study the legal barriers to the adoption of new farm

technology, especially energy (including energy conservation, collaborative purchasing, purchasing and selling of energy, energy saving technology and alternative options for sustainability and growth). The Commission, to include three dairy farmers, the Commissioner of the Department of Agricultural Resources, the Commissioner of the Department of Environmental Protection, the Commissioner of the Department of Revenue, the Commissioner of the Department of Public Health, and a member of the Massachusetts Technology Collaborative, was to make recommendations to the legislature.

State Procurement Preference Recognizing consumer interest in seeing more Massachusetts-grown foods in schools and state institutions, the state Legislature has enacted legislation to facilitate the purchase of locally grown foods, including dairy products. State law enables municipalities, by majority vote, to establish a preference for procuring agricultural products directly from a Massachusetts farm operation. Once established, schools and other town entities may contract directly with a farmer for purchases of Massachusetts-grown agricultural products up to $25,000 without putting the contract out to bid. For contracts that are put out to bid, entities may pay up to 10 percent more for agricultural products produced in Massachusetts than products produced elsewhere. State law also requires state agencies as well as public colleges and universities to make reasonable efforts in contracting for foods to buy Massachusetts-grown products; purchasing agents are required to purchase the products of agriculture grown in Massachusetts if they are within 10 percent of the cost of comparable products produced out of state.

Agriculture Innovation Center In 2008, the Massachusetts Legislature provided funding for an Agricultural Innovations Center. This virtual center, which has never been funded, was intended to provide grants and technical assistance to farmers, the University of Massachusetts, and other organizations to fund land improvement efforts and innovative pilot projects focused on marketing, environmental stewardship and new technology.

http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleIII/Chapter30B/Section20

http://www.cranberries.org/pdf/2007_05_18_ma_ag_innovation_pr.pdf

New England States’ Dairy Policies New Hampshire

New Hampshire Facts • New Hampshire currently has 118 licensed wholesale milk producers and another 80–100

farms with one or more milk cows. • There are about 14,000 mature milking cows on New Hampshire farms, and the industry

generates about $62 million a year in revenue from the sale of milk. These farms maintain close to 50,000 acres for forage crop production1.

• The New Hampshire dairy industry impacts state and local economies with more than $141 million in total output, 3,717 jobs and more than $19 million in labor income2.

State-Level Policies and Programs That Help Sustain Dairy Farms While New Hampshire has a Milk Producers Emergency Relief Fund on the books, no state resources have ever been dedicated to the Fund and it has never been used. The Fund was created when milk prices stayed well below cost of production over a protracted period in 2006-07 and was intended as a long-term stabilizer for the state’s dairy industry after the Emergency Dairy Assistance Program, which made nearly $2 million in one-time state payments to dairy farmers. According to Lorraine Merrill, NH Commissioner of Agriculture and a dairy farmer, these two legislative efforts reflected a strong bipartisan coalition of support for keeping dairy farming viable in the state. However, the global financial crisis and severe recession that began in 2008 changed the political climate as the state entered a period of budget reductions and retrenchment. Dairy-Related State Tax Exemptions While not limited to dairy farms, the state’s Current Use assessment for open space lands including farmland is of particular importance to dairy farmers, who manage a significant portion of the state’s farmland. In order to provide sufficient feed and pasture for their herds, many dairy farmers rely on leased farmland owned by other landowners, and the Current Use program encourages landowners to maintain open lands. Under NH Current Use Taxation law RSA79-A the assessed valuation per acre of open space land is based upon the income-producing capability of the land in its current use solely for growing forest or agricultural crops, and not its real estate market value. A Land Use Change Tax of 10 percent of the full market value of the property when land enrolled in the Current Use Taxation program is converted to a use that does not qualify for Current Use assessment. N.H. Rev. Stat. Ann. §§ 79-F:4. In 2008 the legislature created an option for municipalities to adopt a limited provision for farm buildings to be appraised at the cost of replacement minus depreciation, and the land under them at no more than 10 percent of full market value. RSA 79-F also provides for change of use tax on farm structures and the land under them when the use changes from the qualifying uses specified under RSA 79-F. In 2002 the legislature established a discretionary easement program for historic farm structures, which municipalities may also vote to adopt if they choose. RSA 79-

1 United States Department of Agriculture, National Agricultural Statistics Service, New England Agricultural Statistics, 2011, 2012 2 According to the Granite State Dairy Promotion

http://www.gencourt.state.nh.us/rsa/html/V/79-F/79-F-mrg.htm

http://www.nhdairypromo.org/


D allows participating communities to write specific easements for qualifying structures that can reduce assessed evaluation of the structure by a range from 25 percent to 75 percent. 2007 Emergency Dairy Assistance Program To help stabilize the state’s dairy sector during the dairy crisis of 2006—a time of extremely low milk prices—the New Hampshire Legislature in 2007 enacted the Emergency Dairy Assistance Program, a one-time payment to dairy farmers with an appropriation of $2.1 million for the 2008 fiscal year. Milk producers could apply for payments based on actual production for four months, and assistance was calculated by multiplying milk production by the difference between the Boston blend price for those four months and a base price of $16.94 per hundredweight. Butterfat content was also taken into account for calculations. The enacting legislation created an Advisory Board to make decisions and hear appeals. The program was repealed in 2008 and replaced with the Milk Producers Emergency Relief Fund (MPERF). 2008 Milk Producers Emergency Relief Fund Intended to be a permanent emergency assistance fund for milk producers, the Relief Fund established in 2008 has never been activated, as no resources have been appropriated for it. As authorized, the Fund is managed by a Board, which is charged with developing eligibility criteria, procedures for calculating payments, and setting and adjusting the target price. If funded, eligible milk producers would receive payments equal to their month’s milk production multiplied by the difference between the set target price and the actual Federal Order 1 blend price at Concord, NH for the month. In 2008, the target price was initially set at the old Northeast Dairy Compact price of $16.94 per hundredweight. The MPERF board meets each year and has set the target price based on USDA NASS cost of production numbers for the neighboring states of Maine and Vermont, since NASS does not calculate a New Hampshire cost of production. The law provides for payments to be made on a quarterly basis. Dairy Herd Health New Hampshire, like several other New England states, has programs that help farmers maintain healthy dairy herds. The NH Veterinary Diagnostic Laboratory is operated jointly by the state Department of Agriculture, Markets & Food and University of New Hampshire, and offers mastitis testing/culturing and pregnancy blood-tests directly to farmers, as well as other pathological and microbiological diagnostic services in cooperation with herd veterinarians. In 1964 New Hampshire became the first state to be accredited free of bovine tuberculosis. The Department continues to provide testing and vaccination programs to protect the dairy industry from infectious diseases, including testing for Johne’s disease—a service that the state continued after the federal government cut funding for the program. Additional Resources: Title XIV: Milk And Milk Products Chapter 184-B Emergency Dairy Assistance Program Sections 184-B:1—184-B:5 Emergency Dairy Assistance Program

http://www.nhliberty.org/bills/view/2007/HB407


Title XIV: Milk And Milk Products Chapter 184 Inspection And Sale Of Dairy Products Section 184:107 Milk Producers Emergency Relief Fund Established Section 184:108 Target Price Section 184:109 Milk Producers Emergency Relief Fund Board Established; Membership Section 184:110 Board Powers and Duties

http://www.gencourt.state.nh.us/rsa/html/XIV/184/184-107.htm




New England States’ Dairy Policies Vermont

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Vermont Facts1 • Vermont is the largest dairy producing state in New England, and dairy products account for

upwards of 83 percent (≈ $584 million, adjusted for inflation to 2010 dollars) of the state’s agricultural products’ sales, and as much as 90 percent depending on market prices.2

• Dairy farms generate more than $68 million per year in state and local government tax revenue.

• Dairy products sold directly from Vermont farms generate more than $560 million of income and 7,500 jobs.

• Vermont dairy farmers purchase 98 percent of their supplies locally. • The sale of milk from Vermont dairy farms contributes about $1 million a day to the state

economy. • Gross sales of cheese, ice cream, dips, cream cheese, yogurt, fluid milk and milk powder

total about $1.2 billion per year. • The average Vermont dairy farm has 138 cows. State-Level Policies and Programs That Help Sustain Dairy Farms Dairy production in Vermont is unique in the region, at least in part because the state’s supply of fluid milk far exceeds its demand from the state population—at least half the milk produced goes to processing or leaves the state.3 The growth of dairy processing in Vermont has provided markets for dairy farmers’ bulk milk as well as the explosion of on-farm processing and direct marketing of dairy products. The Dairy Section of the Agency of Agriculture, Foods and Markets works closely with dairy farmers considering value added production—assisting with design, through put and first day of processing as well as regulatory support. While a one-time direct payment to dairy farmers in 2007 was vitally important, Diane Bothfeld, Deputy Secretary at the Vermont Agency of Agriculture, Food and Markets, believes that, in addition to the marketing and regulatory support the Agency provides, some of the most beneficial state-level programs and policies for dairy farmers are those relating to conservation and business development that are implemented by the Vermont Housing and Conservation Board (VHCB). Farmland Conservation and Farm Viability Since 1987, 567 farms comprising 139,000 acres of agricultural land have been conserved through VHCB’s Farmland Preservation Program. According to VHCB, the purchase of development rights has contributed to renewed vitality in agriculture by enabling young farmers to purchase farms at an affordable price and by helping established farmers to reduce long-term debt, to invest in infrastructure, and to make operations more profitable and efficient. By

1 Unless otherwise noted, dairy industry statistics are taken from the Vermont Agency of Agriculture, Food and Markets’ Dairy Industry website. Accessed March 15, 2012. 2 Vermont Sustainable Jobs Fund Press Release, “Farm to Plate Release: Revitalizing Vermont’s Dairy Industry.” March 1, 2012. 3 Personal communication with Diane Bothfeld, Deputy Secretary of Agriculture, Vermont Agency of Agriculture, Food and Markets. March 15, 2012.

http://www.leg.state.vt.us/docs/legdoc.cfm?URL=/docs/2008/acts/ACT002.htm

http://www.vermontdairy.com/learn/facts-and-figures/

New England States’ Dairy Policies Vermont

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focusing on conserving contiguous blocks of farmland in traditional farming communities, the program helps to ensure that farms are not isolated by residential development and communities can continue to support a healthy range of businesses that serve and rely on neighboring farms.

The VHCB also administers the Farm Viability Program, which was authorized by the Legislature in 2004. Since 2004, this program has provided on-farm business planning, financial and technical assistance services to 336 farmers and awarded 99 grants totaling $405,000, leveraging more than $1.1 million in farm investments through loans, other grants and private funds.4 In 2011, 13 percent of enrolled participants in VHCB’s business programs were dairy farmers, with many embarking on value-added processing ventures.

According to Agency of Agriculture, Food and Markets Secretary Chuck Ross, the Farm Viability Program is making a real difference for farmers across the spectrum—from dairy to beef to vegetable farms and for value-added producers like cheese makers. It gives farmers the benefit of an inside look at business planning decisions that can increase profits. As a result, Ross says farms are expanding, diversifying and hiring help, which are good indicators for the industry and for Vermont’s economy.

Working Landscape Enterprise FundIn 2012, The Vermont Legislature established a Working Landscape Enterprise Fund (and a Board to oversee it) to stimulate a concerted economic development effort on behalf of Vermont’s agriculture and forest products sectors. With an initial appropriation of $1.175 million, the Fund will focus on three key areas: enterprise grants and loans to land-based and value-added businesses that are new or want to grow; wrap-around services to working lands enterprise including technical assistance, business planning, financial packaging, and other services required by companies ready to transition to the next stage of growth; and infrastructure for creative diversification projects, value-added manufacturing, processing, storage, distribution and collaborative ventures. The Agency of Agriculture, Food and Markets’ Diane Bothfeld believes this fund will enhance Vermont’s working landscape by increasing the bond between agriculture and forestry and helping landowners and entrepreneurs add value to farm and forest products and grow markets for these products within and outside of Vermont.

Property Tax Treatment Unlike some other New England states that require farmers to pay property taxes on farm animals and machinery, Vermont exempts farm animals, manure storage facilities, and agricultural tools and equipment from personal property taxation. Vt. Stat. tit. 32, § 3802(8).

4 Vermont Farm Viability Program Annual Report 2011. Retrieved from http://www.vhcb.org/viability.html on March 16, 2012.

http://www.leg.state.vt.us/docs/legdoc.cfm?URL=/docs/2004/acts/ACT143.HTM

http://www.leg.state.vt.us/docs/legdoc.cfm?URL=/docs/2004/acts/ACT143.HTM

http://vtworkinglands.org/programs/policy-councils/working-landscape/sites/default/files/library/files/working%20landscape/ACT142.pdf

http://www.vhcb.org/viability.html

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