As milk prices plummet, Pa. dairy farmers consider selling off their herds
Technology is a blessing and a curse for Pennsylvania’s dairy farmers.
“It allows for more production, but everyone is producing more, and that’s driving the price down,” said Rick Ebert, 57, a third-generation dairy farmer in Blairsville and president of the Pennsylvania Farm Bureau.
The U.S. dairy herd has been increasing, Ebert said, and now stands at about 9.8 million cows. That includes about 530,000 in Pennsylvania.
Those cows produce more milk as farming practices have increased their efficiency.
“We have fewer farmers today, and yet we’re getting more milk now than we did before,” said Craig Marburger, owner and president at Marburger Farm Dairy in Evans City.
Ebert and his sons farm on about 580 acres, with 72 milking cows that produce, on average, 1,000 gallons of milk every two days. They sell their milk to Turner Dairy Farms in Penn Hills.
But a three-year downturn in milk prices and a similarly dismal forecast for 2018 have many farmers considering — and in a lot of cases selling off — their dairy herds.
Variety of factors
In eastern Pennsylvania, local agriculture lenders and leaders along with politicians fear the next six months may bring an unprecedented sell-off of dairy herds in Lancaster County.
“Most of the people selling are the Amish, so they must know something more than we do,” Marburger said. “I think there are 10 or 12 Amish farms being sold in the next month.”
The exits are expected to be mainly by younger dairy farmers and those renting farms who don’t have the equity built up to weather the storm any longer.
“As farmers use up the forage they produced last fall and are stored in silos, you’re going to see them just sell their cows. It’s the young farmers trying to start up. They’re not going to stick around,” said state Rep. David H. Zimmerman, a Republican from East Earl.
“In Lancaster County, you won’t get dairy cattle back into those farms,” he said. “The farmland will be cash-cropped or used for produce farming, maybe tobacco. We could lose a whole generation of young farmers.”
The same thing is happening in the western part of the state, said Andrew Sandeen of Indiana, dairy educator at the Penn State Agricultural Extension.
“Oversupply is really what’s driving a lot of this,” Sandeen said. “Pretty much everywhere you look, there’s more milk than we need.”
Marburger said school cafeterias are causing problems with the milk market.
“They have skim milk and fat-free chocolate milk, and kids just don’t want to drink it,” he said. “And if you don’t start drinking milk when you’re young, you likely won’t start when you’re older.”
As president of the state’s farm bureau, Ebert said he is working to get whole milk back into school cafeterias.
“Nobody really wants to drink skim milk,” he said. “Nutrition guidelines have continuously cut back on fat intake, but whole milk is only 3 percent fat. … I think we’ve lost a whole generation of milk drinkers.”
In 2014, milk prices were at their highest recorded level in Pennsylvania, Sandeen said. However, that price dropped 28 percent in 2015 and continued to go down.
“Basically, ever since then, milk prices have been pretty tough to turn a profit on,” Sandeen said.
While the United States is still near the top of the world’s rankings for dairy production, the national market faces a number of obstacles when it comes to making international inroads.
“Ninety-five percent of the world’s population is outside the U.S., so we need to get into those markets,” Ebert said.
Asian markets — China in particular — offer some hope for expansion, but the strength of the dollar and increased transportation costs complicate that effort.
The world’s top milk exporter, New Zealand, is positioned much closer to Asian markets and able to export there at a lower cost.
“A lot of what they’re exporting is heading toward China,” Sandeen said. “The European Union has also made some changes that have affected world markets: a mixture of Russia banning certain EU products, but also the EU backing away from a quota system on how much milk is produced.”
The EU also sits on a large supply of milk powder, which Sandeen said is a significant portion of the world dairy market.
“There’s a lot of competition from 20 years ago, where we exported about 5 percent of the dairy produced here to about 15 percent today,” Sandeen said. “That has a big effect on pricing.”
U.S. trade agreements are “huge,” according to Ebert.
“As much as people complain about (the North American Free Trade Agreement), it’s been a very positive thing for us, allowing us to ship a lot of milk to Mexico,” he said.
Both the state and American farm bureaus are looking into safety-net protections for farmers, including a revenue insurance program, “so you can get insurance coverage to cover your losses in a bad year,” Ebert said.
Milk is typically priced and sold in 100-pound increments, which equates to about 12 gallons.
According to the USDA, the average national milk price has gone from its September 2014 high of $25.70 down to $18.10 as of Nov. 30.
“We’re really looking at, probably, another $2 drop in milk prices for us (in 2018),” Ebert said.
His sons, fourth-generation farmers Jon and Jacob, have discussed the possibility of selling off their herd if the downward trend continues.
“With three years of downturn in prices, it’s hard to sink money into things like repairs and new equipment,” Ebert said.
Sandeen said the Eberts are hardly alone.
“I think all of Pennsylvania is in a similar boat,” he said.
Patrick Varine is a Tribune-Review staff writer. Reach him at 724-850-2862, [email protected] or via Twitter @MurrysvilleStar.