by Phil Yacuboski
The price of milk is causing a bit of a shakeup in Pennsylvania’s dairy industry, causing some Pennsylvania dairy farmers to rethink their business strategies.
“Milk, as is any commodity, is in a highly cyclical market,” said Jayne Sebright, executive director of Pennsylvania’s Center for Dairy Excellence. “Dairy is experiencing a significant crunch.”
Sebright said for many farmers in 2016 and 2017, the price of milk has hovered around the ‘break even’ point.
“Going into 2018, we are about two dollars under that price,” she said.
Per 100 pounds of milk, the price is around $3.50, she said.
“If a cow averages 75 pounds of milk a day, at $3.50, you’re losing quite a bit every month,” she said.
The ebb and flow in the price of milk is what is tricky for many farmers. In 2014, prices were at an all-time high and many dairy farmers then began increasing production.
However, since then, there’s been an oversupply of milk on the market, Sebright said.
“When you’re working with a highly perishable product like milk, a one-percent decrease is a lot,” Sebright said.
According to Pennsylvania Department of Agriculture, Pennsylvania ranks fifth in the nation in milk production and is home to 16 percent of the nation’s dairy cows. More than 99 percent of Pennsylvania’s 7,300 dairy farms are family owned and operated, according to the state.
Pennsylvania’s farms are also typically smaller than others around the nation, with about 72 cows per farm. Nationwide, the average is 129 cows per farm.
The state estimates every cow is responsible for more than $13,000 in revenue.
The Center for Dairy Excellence estimates Pennsylvania lost about 120 dairy farms around the state in 2016 and while Sebright said it’s difficult to say how many farms are up for sale, many are rethinking their strategies.
“Whether that’s changing their business model, taking on another job or diversifying,” Sebright said. “There’s a lot of evaluating going on.”
Christ Taylor, a realtor with Beiler-Campbell Realtors, who specializes in agricultural real estate said the price of milk has always had an impact on the family farm.
“Dairy tends to fluctuate way up and then way down,” said Taylor, whose father was a one-time dairy farmer. “It’s volatile.”
Taylor, who sells properties in 30 different counties throughout Pennsylvania, said there are dairy farms up for sale.
“A lot of it is a timing issue,” he said. “It’s their debt load and where they are at in carrying that debt load when the price of milk drops. I think what you are seeing it’s not that a lot of dairy guys are going to sell, they are looking to get into other businesses to increase their cash flow. Selling is a last resort,” he said.
He said he’s been meeting with several dairy farmers who are interesting in selling.
“There will be a lot of cows disappearing off the marketplace and going someplace else,” he said.
And much like the price of milk ebbs and flows, location is key when it comes to real estate.
“You’re going to sell a property for a lot more in Lancaster County than you are in the northern tier of Pennsylvania,” he said.
“We produce more milk than we need in the United States,” said Dr. James Dunn, a retired professor of agricultural economics at Penn State, whose grandfather used to have 10 dairy cows. “The milkman used to come to our house every day because we had all of these kids drinking milk. Family sizes have gone down since then.”
He said now, there are lot of other competing products to drink on the market. In addition, instead of just butter, there’s now spreads and other products to choose from.
Dr. Dunn said Pennsylvania’s dairy farms are not fading away. He said the Amish and Mennonite communities are well vested in dairy as well as other agriculture for reasons other than economics.
“Those people are going to figure out a way to make it happen,” he said.
Despite the downward drop in the price of milk, Sebright said things like butter, cheese and yogurt production is growing.
“But Pennsylvania, most of our processing capacity is in fluid milk,” she said. “We’re looking to see how we can change that product mix to get more investment in the other products, which would help us create more opportunities for our dairy farmers.”