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Schoutens’ plan is to survive, recover, retire

PD Editor Emily Caldwell Published on 22 March 2010

Schoutens

In 1988, dairyman Pete Schouten, a California native, ventured to Texas.

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“I came for the opportunity to get started [on my own],” Schouten says. “You couldn’t get started in California – not at a low number of animals. At that time, Texas was great. Now it’s just like the rest of the nation. Not a whole heck of a lot of anything.”

He settled in Hico, Texas, and ended up marrying his landlady, Nova, who was raised on a dairy farm in the area. Although she never disliked the farm, Nova pursued a career in Stephenville, working at Tarleton State University.

She retired early from Tarleton to work on the farm full-time with Pete. They started with 50 cows when they married in 1991 and have grown to a milking herd of 750 and 700 youngstock. The Schoutens have two farms; their home operation is where they milk the majority of their cows. They named this farm Profit and Loss Dairy, because back when they started, they had a sense of humor, Pete says.

The namesake, now more than ever, gets lots of comments from fellow dairy producers.

“Someone asked us the other day, ‘When are you going to change it to Loss and Profit instead of Profit and Loss?’” Nova says.

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The Schoutens’ other facility, S-Cow-10 (which is how their last name is pronounced), is managed by their son-in-law, who owns 120 of the 300 milking cows. He plans to get his herd paid off and then start his own operation.

“He picked the wrong time to start, but that’s the way it goes,” Pete says.

In all of their years of farming, the Schoutens say this is the worst crisis the dairy industry has ever seen, and they find themselves wishing they could go back in time.

“If we would have sold out two years ago, we would have enough to retire on and been OK,” Nova says. “Now, I’m not so sure.”

Before the economy went sour, their plan had been to expand the herd. In fact, the couple fought for five years to get permitting increased so they could add cows, but their current financial position makes them question if it was worth it.

“We had intended to increase the herd, hire some higher management people that we could turn it over to, and have some time to go ahead and retire and maybe even travel,” Nova says. “We don’t even talk about retirement now.”

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What led to the downturn?
While some people are quick to blame a specific occurrence that caused the dairy crisis, the Schoutens know it’s really a combination of factors. However, they believe it all started with the push for ethanol.

Pete remembers his California days when the milk price was somewhere around $7 a hundredweight, and his family could make a living.

“Even as recent as five years ago around here, milk was bringing around $13 or $14, but breakeven was maybe $11,” he says.

Now, milk is only bringing $16, and, because of the market for corn, the breakeven point is at least at $18.

But as most dairy producers know, feed prices aren’t the only problem.

“They’ve blamed this mess that we’re into on exports,” Nova says.

The U.S. dairy industry was able to take advantage of drought conditions in Australia and New Zealand two years ago. But as those countries started recovering, they were able to gain back the markets.

“That’s when everything took a dump in the U.S.,” Nova says. “We went from around 12 percent exports to about 5 or 6 percent exports in one year.”

The Schoutens say that’s the explanation they heard about the pricing, but because the crisis has been ongoing for more than 16 months, they have begun to doubt the sources and the reliability of that explanation.

“No one had a good handle on inventory numbers, import numbers, export numbers... even cattle inventory numbers came into question,” Nova says. “I don’t know where the problem lies.”

The other angle of the current dairy situation that is particularly frustrating for this Texas couple is the role of upper-level management in cooperatives.

“I think CEOs and COOs are way overpaid for what they’re doing,” Pete says. “Not knowing what it’s like to really be on the dairy, they’re making deals that look good on paper, but not for the industry.”

“We’ve questioned all year long how processors never go broke,” Nova adds. “Processors can post record profits, and yet dairymen are going broke. There’s something real wrong with that picture.”

Underrepresented
The Schoutens are well aware the dairy crisis is a nationwide problem, but as they have paid attention to the messages and meetings of various organizations, they have noticed that one particular region is being left out of the discussions.

For example, U.S. Agriculture Secretary Tom Vilsack appointed a committee to look into the milk price formula and why it had no ties to cost of production.

Once the committee was selected, Nova quickly pointed out that the Northeast, Midwest and Northwest regions were represented but not the Southwest.

“When you take Texas, Oklahoma, Arizona, New Mexico and Kansas, you’re talking about a lot of milk,” Pete says.

The Schoutens believe a lot of the problem goes back to the Federal Milk Marketing Orders and the way the lines were drawn sixty years ago.

“They’ve never been adjusted for the way the pockets of production move around the nation,” Nova says. “We still have the same lines. And to get one of those lines changed is literally an act of Congress that takes years.”

“It’s a helpless feeling,” Pete says. “You know what the problems are, but you can’t do anything about them.”

Weathering the storm
Despite the challenges and frustrations of dairying, the Schoutens remain at least somewhat optimistic, both for their operation and the industry as a whole.

When asked about his 10-year plan, Pete says he has a longer-term vision.

“Actually, I probably have a 20- year plan. Just to stay in and manage,” he says. “I don’t look at expanding anymore. We enjoy what we do.”

Pete explains that if they wanted to expand, it would mean putting in more time and they’re looking for ways to not put more time – and money – into the operation.

And although the couple plans to retire someday, they know it will be a tough decision.

“You have such an investment in your cows and land and life,” Nova says. “Most people choose to retire on their farms. Where else are you going to go? That’s home. It’s not just like walking away from a job in town and retiring.”

The Schoutens feel fortunate that they went into the crisis having a good financial position, but in the last year, they estimate they’ve lost a fourth to a third of their equity. At this point, they’re just hoping they can survive long enough for the economy to turn around and gain some back.

“I hope the industry turns around,” Pete says. “I’m sure it will. But when it’s going to turn around, I don’t know.” PD

PHOTO : Pete and Nova Schouten manage two dairies, totalling 1,450 animals, in Hico, Texas. Photo by Emily Caldwell.

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