Economic downturn drains Western Pennsylvania dairy farmers

Joe Napsha
| Sunday, Sept. 19, 2010

Western Pennsylvania farmers trying to earn a living raising cattle or producing milk were hurt by a plunge in exports to other states and overseas when the world economy went into recession, state agriculture experts say.

Dairy farmers, who represent about 7,400 of the state's 63,200 farms, were hit the hardest, said Gary L. Sheppard, director of the Penn State Cooperative Extension office in Westmoreland County. The dairy industry in the United States was growing, with a surge in production of cheese and dry powdered milk, but that changed.

"When the economy crashed, we saw a drop in exports, and we have not recovered," Sheppard said.

Pennsylvania's farm exports declined almost 11 percent to $1.73 billion in the year ended Sept. 30, 2009, from $1.94 billion in the previous year, according to the Department of Agriculture's Economic Research Service. Milk exports plunged 43 percent to $81.5 million in fiscal 2009.

All dairy products accounted for 30 percent of the state agriculture industry's total revenue of $4.97 billion in 2009, federal data shows.

Pennsylvania has a strong dairy industry, ranking fifth in the United States in total milk production, according to the Pennsvylania Center for Dairy Excellence in Harrisburg. The state had 540,000 cows in 2009 that produced 10.5 million pounds of milk. The state ranked fourth in total cow numbers and 15th in milk production per cow.

Even so, the loss of export markets hit dairy farmers with a double whammy, experts said.

When exports dropped, more milk and milk products went to the domestic market, said John Frey, executive director of the Center for Dairy Excellence. In 2008, America exported 12 percent of its milk products — cheese, whey and powdered milk. That fell to under 9 percent in 2009, Frey said.

"All that milk placed back into the domestic market helped to drive the prices down," Frey said.

Those factors pushed prices for the dairy farmers in the state from $21.40 per hundredweight (11.63 gallons) in July 2008 to $13 by July 2009. It has recovered to $17.80 this July, according to the Center for Dairy Excellence.

Some dairy farmers have exhausted their financial cushions to remain in business, said Carl T. Shaffer, president of the Pennsylvania Farm Bureau. Shaffer operates a farm northeast of Bloomsburg in Columbia, County.

"Last year and part of this year were very, very severe for dairy farmers. It's slightly improved over last year," said David R. Smith, executive director of the Pennsylvania Dairyman's Association.

To help the dairy farmer, "we need to change the pricing formula to bring it up to date," Shaffer contended. Dairy farmers can't just stop the production of milk to force an increase in price by restricting supply. "You can't turn off the cows from producing milk."

Pennsylvania's cattle farmers are facing their own problems, including lower production and higher feed and fertilizer costs.

"Agriculture is one of the bright spots in the national economy, particularly the beef industry," said Paul Slayton of Bedford, executive director of the Pennsylvania Beef Council, which represents cattle farmers. They pay a $1 fee for every head of cattle sold, split between the state and national beef councils, to support marketing and promotion of beef consumption.

The cattle industry is enjoying strong demand for beef among consumers, said Slayton, who has 50 head of purebred Herefords and Angus cattle at his farm in Bedford Township, Bedford County.

Even so, beef producers in the state sent 1.2 billion pounds of beef — cattle and calves — to slaughter in 2009, down about 100 million pounds from 2008.

Beef production was down and herds were smaller because of the higher expenses. "There is a lot of feeding capacity that is vacant because costs are so high," Slayton said.

The price of concentrated cattle feed, between 32 percent and 36 percent protein, rose to $455 a ton in March 2009 from $335 a ton two years earlier in the Northeast, according to federal data. At the same time, the average farm in Pennsylvania spent about $4,692 in fertilizers, lime and soil conditioner, up 30 percent from $3,625 for the same products in 2007.

For Pennsylvania cattle farmers, exports of meat and live animals, excluding poultry, decreased to $227.4 million in fiscal year 2009, from $243.6 million in 2008.

Demand for beef is biggest in Asian markets. But the United States has not been able to satisfy China's demands that beef exporters have the ability to track the source of beef to the processor and all the way back to the farm where it was raised, Slayton said.

"The U.S. really can't offer a full trace and has never really endorsed it. If we can open that door (to China), that will be a huge market," Slayton said.

Cattle farmer Frank Mutnansky, 55, who is raising 50 head of cattle at his 150-acre farm in the town of Phillips in North Union, Fayette County, said he is hoping the price of beef goes higher than the current 90 cents to 96 cents a pound he can get for the steers he is feeding.

At the same time, he hopes the $4 per bushel of corn the cows will be eating drops to last year's level of $3.50 a bushel.

"Farmers need to have the prices go up because the feed prices are going up. It's a real, real tight margin. You can only make a few bucks, or you're just trading dollars," making no profit at all, said Mutnansky, who is president of Keystone Farmers Cooperative Association Inc., a three-farm group that has close to 300 head of cattle raised without steroids or antibiotics.

While demand for beef remains strong, cattle farmers are reaping the benefits of a national cow inventory that is at a low point, Slayton said.

Jeff Johns of Mt. Pleasant Township, Westmoreland County, sold a few hundred head of cattle this spring and is left with about a dozen heifers at his Lonesome Valley Farm that he will use to rebuild the herd.

At the time, Johns, who grows corn, oats and hay, said he saw only bad news on the horizon -- his supply of feed crops was running low and the price of feed was running high. The cost of keeping and feeding the cattle to fatten them for market looked too daunting.

"I missed the market," Johns said, adding that farmers, more often than not, miss the economic upswings. "That's the nature of farming," he added.

Additional Information:

How it breaks down

Pennsylvania farm facts

Number of farms: 63,200

Farm size by percent: 96 percent under 499 acres

Average age of operator: 55.2

Male operators: 35,773

Female operators: 15,238

Farms by selected category:

Cattle farms: 19,764

Dairy farms: 7,400

Corn : 13,436

Soybean : 5,713

Wheat : 4,463

Sources: Department of Agriculture Economic Research Service, 2007 Census of Agriculture and Pennsylvania Center for Dairy Excellence

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