CLARKS MILLS, Pa. — Dairy farmers across Pennsylvania want to survive the latest crisis in the dairy industry and it’s obvious they are willing to try new things in order to do just that.
Looking for answers
Farmers gathered Oct. 27 in Harrisburg for one of two dairy forums and then a second event was held Oct. 28 in Clarks Mills, Pa. The topic on the table was the same among the men and women: How do we make it through this turbulent milk market without losing everything?
All ears were on the speakers as they listened to how milk markets are affected by what is going on in supply and demand, and how to manage production costs through monthly cash flow budgeting.
And a group of veterinarians and feed suppliers shared ideas for no- or low-cost profit enhancers. Attendees were given several ideas they could go home and use on their farm that night.
Phil Plourd, of Blimling and Associates, talked about the volatile dairy market and why it hit farmers so hard in 2009.
Plourd said one problem is the federal disorder in the dairy markets. He suggested the market needs to be trimmed, and instead of multiple classes of milk, federal orders should be cut down to one or two classes. It would allow a large portion of processors and end users to bid on the milk they need.
He added the export market remains a problem because of the gap between what is coming into the United States and what is going out. However, the U.S. is positioned to fill gaps in the global market as demand grows and traditional suppliers are not able to keep pace.
Plourd also said there is a silent killer hurting the public demand — the diminishing size of products on grocery store shelves.
For example, he said, in 2004, consumers were purchasing half-gallon size ice cream containers, which were then reduced to 1.75 quart size containers. In 2008, many ice cream producers reduced the container size again. Currently, most ice cream producers are selling their products in 1.5 quart size containers.
Dairy farm futures?
The forum did provide a ray of hope for dairy farms wanting to include another generation in the operation.
David Galton, a professor at Cornell University and investor in two Pennsylvania dairy farms, said a future on a dairy farm is possible.
One of the keys is cost control. This has to be found in family living expenses, replacement costs, feed and debt service.
Galton said the best way for dairy farmers to figure out if they can afford something or how much something is impacting their bottom line is by using the hundredweight figure on their checks.
He advised farmers to figure out how many hundredweight they sell a year and then determine costs from that point.
For example, a family living on $40,000 a year, milking 50 cows needs $4.44 per hundredweight for family living costs to maintain that standard of living.
He said a family with off-farm income may be in a better position because the off-farm job may provide the health insurance and other benefits the farm would have to pay out if it didn’t have off-farm income.
Daily operating costs
A second piece of advice Galton gave is to know the daily dairy operating expenses. He said the best way is to determine it by the hundredweight and not by the cow or gross income.
Galton reminded the crowd to be aware of capital investments.
“Remember, not everything has to be now,” Galton said, as he pointed out that sometimes the capital investments appear as good ideas but don’t always look as good on paper.
He said one example could be robotic milkers. They may appear as good ideas, but considerations have to be made about labor costs and what the employees can be doing to create income for the farm if the robotic milkers are installed.
But he reminded the crowd to ask one last question: “Do you have enough hundredweights to pay for the robotic milkers,” Galton said.
Survival is possible
Galton tried to stress to the dairy farmers that surviving this latest dairy crisis is just another step toward turning a profit when milk prices do rebound in the future.