How A Vermont Family Dairy Farm Makes Ends Meet

Steve Zind Vermont Public Radio

From Vermont Public Radio. For full audio click here.

The number of dairy farms in Vermont continues to decline, with around 805 in business this spring.

John Silloway, David Silloway and Paul Lambert all have a hand in running their family’s farm. Photo from SILLOWAY FARMS

While large farms, with more than 700 cows, are a growing sector of the dairy economy, small operations with fewer than 200 animals still make up 80 percent of the state’s dairy farms.

It’s challenging for small farms to stay in business as costs increase and the price of fluid, non-organic milk fluctuates, but some have found a way, including Silloway Farms in Randolph Center.

“Boss! Boss! Boss! You’re going the wrong way!” John Silloway calls to the  straggling Holsteins that plod through a thick soup of spring mud, returning to the barn for the afternoon milking.

According to the Agency of Agriculture, the average Vermont dairy farm milks about 160 cows. Silloway Farms, with 65 milkers, is small by comparison. But the farm’s numbers are impressive.

Their cows produce about 1.5 million pounds of milk every year. The milk, sold to Booth Brothers, brings in $300,000 – 400,000 annually, depending on where milk prices are.

David Silloway took over the farm from his parents, who purchased it in 1940.

“Three farmers had gone out of business here before my parents moved in,” Silloway explained over coffee one recent morning.

 

Now in his early 70s, he’s handed the responsibility to another generation; his son John and nephew Paul Lambert.

John and his family live on the farm.

“We all work together to make major decisions on the farm, but I’m the one that lives here and the check book is here at this house and all the bills come to this house. So I hardly ever leave this place,” John says.

In its 77-year history, Silloway Farms has never really faced a financial crisis.

That’s due partly to circumstance.

“Our farm is not a normal farm in that respect because for years we’ve gone without any mortgage, without any debt load at all,” says David.

The Silloways have also been careful about the decisions they’ve made.

“My dad’s theory was if we didn’t have the money don’t buy it.”

 

As other farms grew in size and took on more debt, the Silloways decided it was better to maintain the same size herd they’ve had since the 1970s.

They figured expanding would mean expenses. They’d have to build a bigger barn and milk house, which would add up to long-term debt.

Instead, they found other ways to grow the  business. Just up the road from the farm, logs are loaded onto a machine that cuts and splits them. The chunks of firewood rattle up a conveyor and into a waiting truck.

In the most recent year the family’s firewood business added another $140,000 to the bottom line and it’s still growing.

“At some point we decided we did not want to expand the size of the herd. We would expand sugaring or firewood,” says David.

A sugaring business is separate from the farm, but the two help each other by loaning money back and forth when each needs it.

John Silloway says the biggest challenge to running the farm is juggling finances to compensate for the two big variables in dairy farming: the weather and roller-coaster non-organic milk prices.

Silloway says the toughest year in recent memory was 2009, when prices bottomed out and the farm had to take out a short-term operating loan. It was paid off within a month.

When the milk price is low, news stories often point out that it’s below the cost of production. John Silloway says he’s not sure exactly what his cost of production is, but he knows when he’s above or below it.

“We’re always able to pay our bills, but if we have a real good year, we’re able to either pre-buy grain or buy equipment. Whereas in a bad year we would just tighten our belts and just get by,” he says.

The family farm covers 300 hilly acres. For years the Silloways leased another 300 acres nearby to get enough hay in to feed their herd.  When that land went up for sale in 2015 they had to make a hard choice and, for the first time, take on long-term debt.

“We either had to downsize or buy it. That was a half-a-million-dollar decision,” says David.

The Silloways made another important decision recently when they decided to transition to organic milk production.

Organic milk prices are stable and about twice what the Silloways currently get. They’re in the middle of the year-long transition process.

The farm’s biggest expense is grain. Typically, they spent about $100,000 annually, but the organic grain they’re feeding now is twice that. John Silloway says the organic grain also effects milk production.

“Their production may go down 5-10 percent overall. For a real good milk price, it’ll be worth it, I guess,” he says.

Since this is a small operation, Silloway says labor accounts for only about 10-15 percent of costs. If extra hands are needed, the Silloways have many relatives living within a mile or two of the farm.

David and John Silloway and Paul Lambert have spouses who work off the farm, on jobs that provide them with health insurance; an expense the farm isn’t saddled with.

John Silloway is confident the farm could survive without transitioning to organic, but the more stable organic milk prices mean budgeting and planning should be much easier.

“We can even plan for retirement. A lot of farmers don’t even consider that,” he says.

Every farm is different in the way its managed and the economic realities it faces.  Silloway Farms has found an approach that has worked for them for three generations.

Vermont Public Radio: http://digital.vpr.net/post/how-vermont-family-dairy-farm-makes-ends-meet#stream/0