- Associated Press - Friday, November 18, 2016

TECUMSEH, Kan. (AP) - Iwig Dairy has dumped thousands of gallons of milk down the drain and, after years struggling to stay in business as a small, independent dairy farm, the owners have closed two retail outlets and are selling raw milk and ice cream at the Tecumseh farm.

Tim Iwig moves between anger, frustration and sadness at losing a family legacy, and he dreams about relocating to another state. But financial obligations, including more than $79,000 owed to the Kansas Department of Revenue, will keep him locked tight to the area unless there is an infusion of cash.

“We’re a 100-year farm family,” he told The Topeka Capital-Journal (https://j.mp/2fNJvoT ). “My great-grandfather came to Kansas in 1891, when he was 56 years old.”

In recent months, Iwig said, he was forced to dump milk down the drain because he was unable to get it to market. He expressed frustration and anger at a system that hasn’t made it possible for him to sell the bulk milk that wasn’t being used for bottling at his farm.

“When we started bottling (milk) in 2005, we were Dairy Farmers of America members,” he said, referring to a national dairy cooperative through which farmers sell milk and receive marketing help. “They told me if I was going to bottle milk, they were going to sue me, because I was under contract and was supposed to sell all my milk to them. I couldn’t keep part of it and sell the rest to them.”

“Under DFA’s membership and marketing agreement, members are obligated to market all of their milk to DFA,” spokeswoman Monica Massey confirmed, adding that all 9,000 membership agreements operate on an open, one-year renewable basis. “Obviously, we need this agreement and we need to put some perimeters around the time of the agreement because we need to plan.”

As a farmer-run co-op, Massey said, DFA negotiates with milk buyers to sell them a specified amount of milk, and it is essential they have solid estimates of what is coming in from farmers.

“In a cooperative model, we need everybody in and we need them locked in,” she said.

For such members as Iwig Dairy, which wants to bottle some of the milk, there are about 20 agreements out of the 9,000 DFA has with its members that sell milk back to the dairy farmer.

“It has to not be to the detriment of all the other members in the cooperative,” Massey said.

Iwig moved his bulk milk business to the Arkansas Dairy Cooperative Association, he said, after splitting with DFA over the organization’s unwillingness to let him keep milk to bottle. For years, that co-op bought his excess milk. Then it dissolved in 2014. Iwig said he was forced to contact DFA as his only other option for selling his bulk milk, but the company again refused to accept the milk if it couldn’t pick up the full load.

“We had milk to sell, lots of milk,” Iwig said. “We were just exiting the two-year drought period of excessively high feed prices. We had the best situation ever to make back money - feed prices down, milk prices high. We had stuff we needed to pay, stuff we needed to do. I had milk sitting in the tanks.”

Iwig said he called his representative and filed a complaint with the attorney general. “They said, ‘We can’t help you any. We can’t tell DFA to pick up your milk,’ ” he said. Iwig said he even reached out to the governor, but was unable to talk with him.

“It was a make or break situation for us,” he said. “We dumped thousands and thousands of gallons of milk down the drain. We cut our production, cut our nutrition to our cows. It’s cost us about a half million dollars in gross sales.”

The inability to sell his bulk milk came as the farm faced other troubles, including failure of its boiler, a necessary component for bottling milk. But if he had been able to sell his bulk milk, Iwig said, the boiler could have been replaced.

Still, this small local dairy has struggled for years, often publicly. Iwig said he originally worked with Washburn University business professor Rick LeJuerrne in the early 2000s, when he wanted to get into bottling and selling milk in the retail market.

“His advice was to ease out of wholesale and build our retail, which we began doing, but we hit those drought years,” Iwig recalled.

In 2010, the dairy sold more than $200,000 worth of shares to help repay past debt and alleviate financial challenges, The Topeka Capital-Journal reported at the time.

“In 2011 or ‘12, something like that, feed prices tripled, and the bulk milk price did not come up. What kept us going was our retail market, and we were putting milk on the tanker for Arkansas,” Iwig said.

He opened two retail locations in Lawrence and continued to develop the retail market, adding one on S.W. Gage Boulevard in Topeka.

But times were always tough. In a previous Capital-Journal article, Iwig talked about coming out of the 2012 hard times and walking straight into a Chapter 12 bankruptcy reorganization in an effort to avoid liquidation.

In 2013, a local woman invested $250,000 in the business. The business also launched an online fundraiser to try to raise $650,000. The business raised $6,770 in that effort.

It is almost over, and Iwig mourns the ending.

“We fought our way through the drought, we get through that, and then we lose our bulk market,” he said. “We lost our bulk market at the worst possible time. It was probably the best margin of milk price over cost production that I will ever see in my lifetime. That next six months I estimate would have netted $80,000 to my operation, and it just turned into a disaster. We had all these cows getting ready to calve. We had lots of forage. I dumped thousands of gallons of milk.”

Iwig is hopeful that he can move to a different part of the country and continue to operate his dairy. But he has obligations here first, including a debt to the Kansas Department of Revenue, he said. He would like to find another backer.

“The only alternative then becomes liquidation,” he said. “We’re just producing milk and selling raw milk off the farm because our boiler’s broke down. We’re still dumping some milk. We need a financial backer that’s in it for the long haul if we’re going to be able to do anything, move or stay.”

They also continue to sell ice cream.

“I always planned to be a dairy farmer. That’s the way I grew up,” he said. “Iwig Brothers, my dad and his two brothers, started bottling milk in the 1930s. They had a reputation of the finest bottled milk around. That was my upbringing, that’s my heritage, that’s my background.”

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Information from: The Topeka (Kan.) Capital-Journal, https://www.cjonline.com

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