New York Convenience Store Chain Sees Drop in Local Milk Suppliers

1/12/2013 7:00 AM
By Paul Post New York Correspondent

GANSEVOORT, N.Y. — Ed Smith is one of the 40 dairy farmers that still sells milk to Stewart’s Shops, a chain of 324 convenience stores whose sales top $1 billion per year.

However, four years ago, the Saratoga Springs company had a network of 56 milk suppliers, a reflection of the recession’s toll on small- to mid-size dairy producers.

Heading into 2013, the economic pressure that farmers face keeps mounting.

“This is going to be a tight year,” said Smith, 57, who runs the farm with his 30-year-old son, Travis. “It doesn’t look good because of high feed costs. A 56-year drought raised the price of commodities, grain and soy.”

Smith said he’s paying $500-per-ton for feed compared to $260 in 2009, a nearly 100 percent increase.

“If you raise your own grain that’s a big advantage,” he said. “We don’t. We purchase all our concentrate.”

Plus, he’s currently netting $22 per hundredweight for Class III milk — fluid and cheese products. But Smith said he wouldn’t be surprised to see that blended price drop $2 to $3 in coming months.

To combat such trends, he continually strives to be more efficient and recently put a new addition on his barn, which he hopes will result in a 20 percent increase in production. Previously, he had 170 milk cows and 120 stalls. Young stock are boarded out to another farm.

“We added 80 more free stalls,” he said. “We were kind of overcrowded. Every cow has a stall now. It’s all about cow comfort.”

Eventually, he’d like to build the herd up to a maximum of 200 milkers.

So far, having fewer farms hasn’t hurt Stewart’s because the ones left standing are producing the same amount of milk by doing things like Smith — herd expansion and efficiency improvements. However, it’s definitely a source of concern because Stewart’s prides itself on selling fresh, high-quality milk, which Cornell has rated as one of the best in the state each of the past few years.

“If I lost local farms I would lose my quality advantage,” company President Gary Dake said. “I’d become just another dairy at that point. We try to stay in close contact with farms and try to figure out who’s on the fence.”

At one time, 40 farms in Saratoga County alone sold milk to Stewarts. Now, Smith’s is one of five. Most milk comes from farms in neighboring Washington County, and Stewart’s might have to expand its reach if more farms cease operations.

In contrast to large cooperatives, Stewart’s is one of the dairy industry’s last vertically integrated companies that controls milk from farm to consumer. Milk and ice cream, which Stewart’s was founded on, now represent about 15 percent of annual sales and its bottling plant alone employs 30 people.

Smith is just as concerned about farms going out of business, because if Stewart’s stops selling milk, Smith would have to join a cooperative, which would probably pay less.

“I don’t see that happening,” Dake said. “We’re a long way from that point.”

“We’re picky,” he added. “We only want excellent farms supplying to us. They’re fantastic people, making a fantastic product. Unfortunately, not many farmers are covering their costs.”

Smith weathered the recession that began in 2008 because he’s been in business a long time and doesn’t have the same debt load as some similar-sized farms.

Stewart’s prefers dealing with smaller farms, such as Smiths, because if one goes out there’s less of a hole to fill. Dake said the company does whatever it can to help farms, such as lobbying for farm-friendly legislation or to a lesser degree, offering business advice.

“You have to remember, farmers are a very independent bunch,” he said. “They are not my employees.”

Ed is grooming his son, Travis, to eventually take over some day.

“I like everything about it — the cows, equipment repairs,” Travis said. “I really can’t see better work out there.”

Ed hopes that Travis can spend the rest of his life doing what he likes best — farming. However, he also understands practical reality.

“He’s not going to farm if he can’t make a living,” he said. “It’s a business. If he decides to get out, I won’t hold it against him. We’re still here not just because we love it. We still want to make a good living.”

Does milk have a lot of untapped potential in today’s competitive beverage market?

  • Yes
  • No
  • Unsure

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