Milk surplus fallout begins to hit Western Pa.

Stephen Huba
Thursday, June 15, 2017 10:38 p.m. | Thursday, June 15, 2017 10:38 p.m.

Kyle Hodges

Westmoreland County dairy farmer Rick Ebert, president of the Pennsylvania Farm Bureau, with his cows on Will-Mar-Re Farms in Derry Township.

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Little consumer impact

A local milk surplus probably won't affect retail milk prices, an expert said Thursday.

"If it does, it will be very subtle," said James Dunn, a professor of agricultural economics at Penn State University. "I would suspect that most people aren't going to notice a difference."

Any impact of a surplus would likely show up in cheese and butter prices, Dunn said.

"They try to keep the gallon of milk price pretty stable because the people who buy a lot of milk are focusing on that," he said.

The prices farmers get for milk are driven by national and international conditions, he said.

"We export a lot of milk, particularly to Mexico," he said.

Those exports typically take the form of powdered milk, butter and cheese rather than fresh milk, he said. Milk exports run from about 9 percent to 17 percent of the nation's milk production and the farm price tends to track that percentage — the higher the better for dairy farmers, he said.

The local surplus has its roots in Michigan and New York, Dunn said.

Michigan farmers increased their production, and their surplus milk flowed east to New York. The New York bottling plants, however, limited the amount of milk they would handle for local distributors, and that sent the surplus to Pennsylvania, he said.

— Brian Bowling

Penn Hills-based Turner Dairy Farms is expanding its reach further into the Pittsburgh market by acquiring the city's last remaining dairy. Turner's officials said Thursday...

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Dairy farmers in Westmoreland County say they're not surprised that a dairy in neighboring Cambria County has stopped buying milk from 11 farms.

The decision by Galliker's Dairy was blamed on a statewide surplus of milk and depressed prices.

“Everyone in the industry is nervous whether they're going to be the next one to receive a letter like that,” said Westmoreland County dairy farmer Rick Ebert, who is president of the Pennsylvania Farm Bureau.

Ebert, co-owner of Will-Mar-Re Farms in Derry Township, said dairy farmers used to have more options for selling their product. “I've been in this industry for more than 35 years, and I never thought I'd see the day when nobody wanted milk like this,” he said.

Ebert said he did not know whether any Westmoreland dairy farms will be directly affected by the Galliker's decision. But three recently faced a similar predicament.

“The dairy industry around here is in turmoil. It's a mess. Dairies are shutting people off,” said Jim Kepple of Kepple Brothers Farm in Salem Township.

Kepple said he and two other Salem Township dairy farms recently were let go by Colteryahn Dairy in Pittsburgh and had to find another buyer.

“We had a heck of a time finding another dairy to take us,” he said.

The three farms were scheduled to start selling their product to United Dairy in Uniontown on Thursday, said Bill Selembo of Selembo Dairy Farm.

“All three of us stuck together and worked this out,” he said. “It was a close call there. ... United was good enough to take us in.”

The farms received a 30-day notice from Colteryahn last month, as required by the Pennsylvania Milk Marketing Board. The notice expired Wednesday.

Turner Dairy in Penn Hills announced Thursday that it had purchased Colteryahn Dairy, but it was unclear whether the acquisition was a factor in the decision to let the three farms go.

Colteryahn officials could not be reached for comment.

“They just said they can't handle the excess milk. They're losing money on the excess milk,” Selembo said.

Galliker COO Evan Fineman gave a similar reason for the company's decision to let 11 of its 85 farms go, according to news accounts.

“The surplus nationally and especially in the mid-Atlantic and Northeast areas has been so large that many of the co-ops now have laid off many farmers, and we held tight as long as we could,” Fineman told a Johnstown TV station.

Pennsylvania Farm Bureau spokesman Mark O'Neill said the entire country, not just Pennsylvania, has experienced a milk surplus over the last two years. That oversupply drives prices down, which causes farmers to increase production.

“It's typical supply-and-demand economics,” he said.

Other factors contributing to the milk surplus are the vagaries of foreign exports and the increasing efficiencies of dairy farms, O'Neill said.

“The trend has been (that) they've been producing more milk, but the demand for dairy products has been flat or down,” he said. “When you have an oversupply, the price in the grocery store goes down, but the price paid to the dairy farmer also goes down.”

The state Milk Marketing Board sets the minimum price that can be charged for milk on the first of each month.

Pennsylvania dairy farmers produced 10.80 billion pounds of milk in 2015 and 10.82 billion pounds in 2016 — what O'Neill described as a “modest” increase.

“The bottom line is: We try to find new markets all the time to make our milk available,” he said. “When our exports are high, that has a positive influence on the dairy industry and takes care of some of the supply issues.”

If the 11 farms let go by Galliker's aren't able to find new buyers, they may have to sell their herds and close up shop, Ebert said.

Stephen Huba is a Tribune-Review staff writer. Reach him at 724-850-1280, shuba@tribweb.com or via Twitter @shuba_trib.