Why is There a Michigan Dairy Farm Crisis?
With the U.S. dairy industry producing milk at a higher rate than consumer demand, the result is a worldwide surplus of milk. This surplus leaves dairy farmers in milk producing states like Michigan receiving less and less for their product. As a result of these low returns, more dairy farmers are struggling to keep up with the costs of maintaining their herd and dairy facilities.
In October of 2018, many U.S. dairy farmers were optimistic that the renegotiated trade deal with Canada would help to increase exports and raise profitability. The U.S. negotiated access to sell milk to Canada which is very protective of its dairy industry. However, the end result was far less impactful than initially anticipated. Canada opened up less than 5% of its dairy market to U.S. farmers, nowhere near enough to help stem the tide of overproduction facing the embattled U.S. dairy industry.
What are the Impacts of the Michigan Dairy Crisis?
Many dairy farmers in Michigan and the rest of the U.S. face a decision of whether to stick it out and hope things turn around for the dairy industry or cut their losses by selling their herds and dairy equipment. According to the United States Courts database (up to June 2018), there had been 251 family farm Chapter 12 bankruptcy filings in the United States. From January 2018 to June 2018 there were 26 family farm Chapter 12 bankruptcy filings in Wisconsin and 3 in Michigan. According to the Michigan Farm Bureau, Michigan has lost approximately 150 dairy farms in 2018.
What Options are Available to Michigan Dairy Farmers?
- Ride it out. Family farms have experienced supply and demand cycles in our economy. Farmers need to evaluate if they can stick it out in hopes that the market correction will come sooner rather than later.
- Sell the dairy farm. Larger milking operations are interested in acquiring smaller operations across the state to increase their market share. Michigan is now the nation’s sixth largest milk producer and growing.
- Sell assets associated with the dairy operations. The revenue obtained from the sale may create opportunities to invest in equipment to produce other commodities.
- File for bankruptcy reorganization. Chapter 12 bankruptcy provisions are specifically written to reorganize family farms.
How Can Rhoades McKee Help Dairy Farmers?
When evaluating a sale, bankruptcy, or restructuring of a dairy family farm, there are a series of difficult decisions that often impact the future of the family. The attorneys at Rhoades McKee have the experience to navigate tax, bankruptcy, real estate, and succession issues with the goal of assisting the family to make the best decisions possible. Please contact Terry Zabel, Jake Walson or another member of the Rhoades McKee Agriculture Law Practice Group with questions.More Publications