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New rules may milk farm dry

An independent dairy says it needs its business exemption to survive. But rivals insist Smith Brothers has outgrown its family-run status.

By Tomas Alex Tizon
Los Angeles Times Staff Writer
July 11, 2005

KENT, Wash. - It all began with a lone farmer, Benjamin Smith, and a couple of Holsteins he milked by hand 85 years ago.

Today, with Smith's granddaughter running the place, Smith Brothers Farm owns 3,000 cows and employs 171 people, including 61 deliverymen who drop milk on the doorsteps of 40,000 customers.

The farm - headquartered south of Seattle - is one of a handful left in the Pacific Northwest that raises and milks the cows and processes and bottles the milk. "From grass to glass," said the granddaughter, Alexis Smith Koester, 60. "We're one of the few that still does it all."

And some think the farm does it too well.

Under pressure from large dairy conglomerates, the U.S. Department of Agriculture has proposed new rules that could do to Smith Brothers Farm what the Great Depression, floods and a changing marketplace could not: drive it out of business.

"We'd be out of the game," Koester said.

The conglomerates say Smith Brothers has outgrown its "small family farm" status and should abide by the same rules as all other major dairy operations. But Koester said the proposed regulation was just another way for big agribusiness to swallow up or stamp out competition from independent dairy farms.

The farm still has the feel of a family operation, with Koester, the dairy's president, often answering the phones. Above her desk is a large, framed photograph of her grandfather, father and uncle standing in the middle of a herd of Holsteins.

Behind the office are 225 acres with huge, open-air barns separated by grassland and pastures. All the buildings are painted white like milk, and all the milk trucks are painted with black markings like Holsteins. The farm's motto is "Milk from moo to you." Cow-shaped planters sit along the walkways.

The dairy industry has been heavily regulated since the 1930s, when the federal government adopted rules to prevent price gouging. But Smith Brothers was exempt from the rules because of its status as a farm, processing plant and distributor. Most farms today perform only one of those functions.

In the Northwest, the majority of dairies sell their raw milk to large regional cooperatives, which in turn sell it to processors that produce the dairy products that are then marketed by distributors. One such cooperative, the Northwest Dairy Assn., has 665 member-farms - most of them smaller than Smith Brothers.

Bill Anderson, vice president of the association, said Smith Brothers had prospered because of its exemption from the rules, which allowed it to become one of the largest independent dairies in Washington.

"I resist the idea that we're picking on a small family farm," he said.

The USDA said it would study comments on the proposal from both sides.

The proposed rules change, which could go into effect in as little as six months, would require dairy farms that produce more than 3 million pounds of milk a month, or about 350,000 gallons, to sell their product to a cooperative.

Smith Brothers, which produces twice that amount, would be forced to sell its raw milk to a co-op such as the Northwest Dairy Assn. and then, in essence, buy it back to process at its plant.

Koester said the cost to her farm would be $150,000 a month, devouring the company's profit margin.

She said the farm, which was passed on to her father and then to her and her sisters, would not survive. Three of Koester's children work there and were planning to carry on the tradition.

Among the losers, should the farm close, may be the thousands of customers who have chosen Smith Brothers as their milk provider. Smith Brothers does not sell its products in major grocery chains.

The farm serves 1% of the Northwest market, but that 1% has proved to be loyal. One reason is that the farm's trademark milk trucks deliver to homes as far south as Olympia and as far north as Arlington in Snohomish County.

Because the milk comes from the same place, there is a greater assurance that no growth hormones are used - something that many large cooperatives cannot guarantee. In addition, the milk tends to be fresher because the process from cow to carton to doorstep usually takes one to two days, rather than the three to seven days typical through the cooperative route.

Gary Waldie, plant manager at Smith Brothers, said the employees were nervous about the future, especially the ones who had worked there a long time. He said five employees had spent their entire working lives on the farm, and that some families had devoted multiple generations to Smith Brothers.

Marty Good, 39, has been a milkman for Smith Brothers for 15 years, having taken on a route that his father once delivered. His brother also drives for the farm. Their father delivered milk for more than four decades.

Good said he used to accompany his father on his routes, and realized early on that he would spend his life doing the same.

"It's an honest business where you can make an honest living and make a whole lot of friends," he said. "Once I started, I couldn't stop."

Good said he planned to work an additional 15 or 20 years, supporting his wife and four kids, before retiring to the "good life."

"I feel like the government is saying, 'You guys are doing your jobs too well,' " Good said. "Now here I am, almost 40, and if they close up, I don't know what I'm going to do. Yeah, I'm nervous. I'm scared. And what am I going to say to my 700 customers?"