A year ago, Tide Mill Farm in Edmunds was featured by HP Hood on promotional brochures for the Stonyfield Farm organic yogurt and milk brand. One year later, "and we're the ones getting the pink slip," says Aaron Bell, who runs the dairy farm with his wife Carly DelSignore.

"We were shocked," Bell says, noting that there was no indication from the dairy industry giant that their farm's contract with Hood would not be renewed. The letter from Hood came on Friday, February 13, just over three years after Tide Mill Farm got into milking cows because of Hood's willingness to truck the milk for free over 800 miles to upstate New York for processing. Hood will stop buying the milk in November.

The small dairy farms worked by David James of Charlotte and Herb McPhail of Perry also are being dropped by Hood later this year. The company notified eight organic dairy farms in Washington and Aroostook counties that it would be ending their contracts, and other dairy farms from Maine to New York state are being asked to voluntarily reduce production by 10% to 15% because of the economic downturn. Bell says that to be cut off from selling their milk is "pretty extreme." DelSignore adds, "We're going to start dumping it down the drains as of November 13," if new markets aren't found.

Bell observes that the industry giant likes people to think it is buying its milk from small farms, "but the small farms are getting the squeeze." Hood, though, had provided the opportunity for the rebirth of dairy farming in Washington County, picking up milk from the three county farms and trucking it to Oneida, N.Y., to be bottled under the Stonyfield Organic Fluid Milk Label. Before that, David James had been the last dairy farmer in Washington County, going out of business in November 2001. He had to truck the milk himself to a processing plant, paying about $2,300 a month for trucking. Before Hood came in, Grant's Dairy in Bangor had been the last processor to send a truck to farms in Washington County, stopping about 15 years ago.

In a letter to James informing him about the ending of his contract, HP Hood Director of Milk Procurement Karen Cole stated, "The difficulty brought on by the economy has prompted us to re-evaluate all segments of our organic business. Hood is reviewing everything from transportation, distance of our milk supply from our processing plants and the growth potential in the areas of our current milk supply."

Along with the difficulties in the organic milk business, the price paid to farmers for nonorganic milk is also low, Bell says. While Hood is paying $32 a hundredweight for organic milk with bonuses for butterfat and quality, the price on the conventional milk market for March is at $15.73 a hundredweight for Class 1 milk, with a base price set by the Maine Milk Commission, which provides a subsidy. Although they receive a much better price, organic dairy farmers face some higher costs, including paying about twice as much for grain. David James says he could make a living selling on the conventional market if a truck was sent into the county to pick up the milk, since he could cut the feed cost in half and would get more milk from his cows. "Hood pays enough to take care of the extra grain cost," he notes.

Both James and Tide Mill Farm are milking about 40 cows, with each having a herd of 80 to 90 cows. James says he invested "quite a bit" based on what Hood told him. "We all borrowed money," he says, adding that the company indicated to the Finance Authority of Maine (FAME) that the contracts to buy the milk would last at least five years. "I figured eight to 10 years it would last, then a fellow would be on his own," says James. "It's just farming, I guess. Working for yourself, you take what you can get. Farmers are the first ones they cut back and the last ones to get a raise. It's always a struggle."

He says if they can't find a processor, "we're done." Although the farmers paid as much as $2,000 a piece for the milk cows, they would end up either being sold as beef cows for around $500 each or as milk cows for up to $800 to $1,000.

Hood had told the Washington County farmers when they signed up with the company three years ago that the long-term outlook for the business was good. According to Bell, the outlook for organic milk demand is still good, with 7-10% growth anticipated in the market, but the growth rate previously had been 20%. Hood has indicated that beginning in June 2010 it will need more organic milk, but "it's goodbye Washington County," notes DelSignore.

Opportunities explored

That goodbye, though, may open the opportunity for a new path to provide milk processed either in Washington County or in the state. Several options are being considered: finding a Maine processing facility and marketing the milk in the state under a Maine label; starting a milk processing facility locally; and developing markets to sell raw milk.

The Maine Farm Bureau and the Maine Organic Farmers and Gardeners Association (MOFGA) have been working to help the eight organic dairy farms in Washington and Aroostook counties find a Maine processor. Teaming up with several partners, including some of the affected farms, a working group planned to submit a grant application to the Maine Technology Institute to develop a business plan for introducing Maine-labeled organic milk into Maine retail markets. DelSignore says they like that option if the farmers can get a sustainable price for their milk. "We don't want to be part of an unsustainable system," she notes. David James mentions that different processors are being looked at, including one in northern New York state and Houlton Farms Dairy, which might sell the milk under a different label to Wal-Mart.

In addition, Tide Mill Farm has been licensed to sell raw milk for a couple of years, with the milk tested monthly. The farm is currently selling about 50 gallons a week, through home deliveries and buying clubs, while it's producing around 200 gallons a day. They believe they can sell more raw milk, and five area stores have expressed interest in carrying the product. Although they receive more money for the raw milk than what they receive from Hood, that revenue is offset by additional costs, including milk jugs and the extra effort. Tide Mill is also selling over 60 gallons a week to Garden Side Dairy in Jonesboro, a creamery that uses the milk to make ricotta cheese.

As for starting a local creamery or dairy, Bell and DelSignore say they will pursue developing a business plan to look at the startup and production costs and the potential market. They note that Houlton Farms Dairy, which has proven to be successful, buys from local producers and sells its products locally. Their success, Bell believes, can be attributed to the dairy being a family tradition and making a quality product and the regional isolation.

Noting the farms in the area that used to process their own milk, like Knowlton's in Perry and Schoppee's in Machias, Bell says they would like to replace the milk that's been treated under ultra-high temperatures with a more perishable product that's "more healthy, more local and more nutritious." Since Washington County is "at the end of the road" for trucking, he adds, "We should be as close to our market as we can be."

The solution may be a mix of the different markets, Bell observes. "A lot of people see this as an opportunity," he says. "It's an opportunity to process milk and sell it locally. It may be us or it may be someone else."