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Drought forces dairy into difficult selloff decision, but farmer hopes to rebuild

Quaal Dairy in Otter Tail County sold off most of its herd in April. Vernon Quaal says the 2021 drought drastically cut into its feed supply and the rising prices for feed made maintaining the 300 cow herd unstainable. Quaal says many dairies are suffering. But he is determined to build back up, with a crop of bred heifers ready to calve in September.

Man standing in barn with cows
Vernon Quaal says the 65 bred heifers in the background are his hope to rebuild his herd at Quaal Dairy near Underwood, Minnesota.
Jeff Beach / Agweek
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UNDERWOOD, Minn. — April 16 went about as well as could be expected for Quaal Dairy.

The dairy that has been operating near Underwood in northwest Minnesota was selling off most of its milking herd.

“Quite good,” Vernon Quaal says of the Easter weekend sale. The cows sold for an average of $1,625 per head.

“We gave most of it to the bank,” Quaal says. The proceeds are being used to pay creditors, secured and unsecured, after the dairy filed for bankruptcy in 2016.

“Going in (to the bankruptcy), we owed over $1 million,” Quaal says. “We paid off half of that before the sale.”

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He called the bankruptcy an “extra struggle to make all those extra payments besides trying to cash-flow the operation.”

Holstein calf behind a fence.
This calf at Quaal Dairy near Underwood, Minnesota, had recently been weaned on Friday, May 6, 2022.
Jeff Beach / Agweek

While getting out of debt is a good feeling, that wasn’t the driving factor behind the sale. As the drought of 2021 decimated forage crops in northern Minnesota, Quaal says he knew it was going to make feeding a herd of 300 Holsteins too expensive not to cut back.

“I told some of my friends, ‘As soon as I’m out of corn silage, the cows are going to be going.’ They thought I was bluffing,” Quaal says.

But the sale is not the end for Quaal Dairy. Quaal kept back about 60 of the lowest producing cows and is still milking them.

Man walking through large door of a barn with cows inside.
Vernon Quaal on Friday, May 6, 2022, walks into the free-stall barn with bred heifers he hopes will allow him to rebuild his herd and keep Quaal Dairy near Underwood, Minnesota, going.
Jeff Beach / Agweek

Then there’s the 65 bred heifers in a free-stall barn, ready to start calving about Sept. 1.

“That’s my future herd,” Quaal says, looking at the heifers. “That’s my hope.”

No easy path

But it will take more than a healthy crop of calves to build Quaal Dairy back up.

While a wet fall and spring have pulled northern Minnesota out of a drought, the cost of feed is still high and so are many of the other expenses that go into a dairy operation, such as fuel, parts and building materials needed to make repairs, and the cost of labor.

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While price of milk has gone up, it hasn’t been as dramatic as other commodities. “The milk price didn’t double,” he says.

Obtaining financing is harder for the livestock operations than for crop farmers, he says.

With some barns standing empty, Quaal is hoping to make some needed repairs around the farm.

Quaal-weld.JPG
Vernon Quaal, left, talks with a welder making repairs in a milking barn on May 6, 2022, at Quaal Dairy near Underwood, Minnesota.
Jeff Beach / Agweek

But instead of managing eight employees, five who had been living at the farm, he’s doing most of the milking himself. He says that’s proving to be more work than managing the larger operation.

But he has hired one worker and his parents, who built the dairy, still provide some support.

Vernon Quaal’s father, John Quaal, 77, had been telling him for a couple of years that it was time to sell the cows, in part because he couldn’t provide the same level of help as he had in years past.

man standing in front of a skid loader on a farm
John Quaal started dairy farming in the 1970s and has been on this farm near Underwood, Minnesota, since 1981.
Jeff Beach / Agweek

Drought's long shadow

While the drought may seem like a distant memory as a cold wet spring has kept farmers from getting in the field, it is still very fresh for Vernon Quaal.

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“I’m feeding hay I normally would not feed,” Quaal says, looking at some of the baled hay on the farm.

In 2021, “I baled anything I could,” he says, such as cattails that snapped of easily in the dry conditions.

The farm has three large concrete bunkers for corn that now are mostly empty. Tires that had been used to hold down tarps over the corn are piled on the ground.

Quaal did recently get a crop insurance check from lost hay production in 2021. He says the check was more than he expected but he lamented how long the process takes.

“I needed that money a long time ago,” he says.

The Minnesota Legislature also has yet to pass a drought relief package that was proposed last fall.

He says he did take advantage of the U.S. Department of Agriculture’s Dairy Margin Coverage program to lock in some profits, but he says not all his neighbors in Otter Tail County did.

He says dairy farmers are “selling cows left and right,” being bought up by larger dairies.

Quaal-office.JPG
Vernon Quaal made the decision to sell off most of the cows from Quaal Dairy near Underwood, Minnesota, as the 2021 drought cut into feed supplies.
Jeff Beach / Agweek

There are about 2,000 dairies left in Minnesota and Lucas Sjostrom, executive director of the Minnesota Milk Producers Association, says the number of dairies has been dropping 4% to 8% per year. There are some dairies starting up, so the percentage of dairies closing is higher than what that figure shows.

At any given time, there are probably hundreds of dairy producers on the brink of folding up, he says.

“The drought just compounds that,” Sjostrom says.

But the fact that milk prices are relatively strong helped Quaal Dairy get good prices for the cows it auctioned off.

“Profit potential is outstanding for the next eight months or so,” Sjostrom says.

Highs and lows

Quaal Dairy also was hit by drought in the late 1980s. But Quaal says that because the dairy has grown in size since then, the impact of the 2021 drought has been magnified.

Vernon Quaal bought his own small farm a few miles away from his parents in 1989 and continues to farm that land.

Quaal says the bitter cold winter of 1995-96 was a bigger setback for the dairy. The dairy had just made a big jump from 100 to 265 cows.

“We weren’t ready to handle sub-zero temperatures day after day,” Quaal says. He estimates the dairy lost $1 million that year.

But the Quaals remained dedicated to dairy farming. Vernon points to awards that the dairy earned over the years, such as the 2010 Premier Dairy Award for West Otter Tail County and Connie Quaal being named Farm Woman of the Year for the county in 2005. There are lists printed out from years past showing Quaal Dairy among the top producers for Dairy Herd Improvement Association in Otter Tail County and among the top 200 in Minnesota.

Vernon Quaal says, "I always knew I wanted to milk cows." In 1986, he started attending the University of Minnesota Crookston because of its dairy program, a program that no longer exists at UMC.

He's endured the highs and lows, and now he’s trying to hang on and rebuild.

"I want to keep going at it," he says. “It was my dream.”

Two men unloading bags from a pickup.
Vernon Quaal helps unload feed supplements delivered to Quaal Dairy near Underwood, Minnesota, on May 6, 2022.
Jeff Beach / Agweek

Reach Jeff Beach at jbeach@agweek.com or call 701-451-5651 (work) or 859-420-1177.
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