Nicholson is spearheading the study with Andrew Novakovic, a professor of agricultural economics and director of land-grant programs at the Cornell Dyson School of Business, and Mark Stephenson, director of dairy policy analysis at the University of Wisconsin.
“Competitiveness is something we need to focus on because we don’t have to be bigger to be more competitive,” Nicholson said.
There are several missing pieces to the puzzle, said state Agriculture Secretary Russell Redding. “We are struggling with what answers do we give as we are trying to figure out this new paradigm around dairy.”
Redding said the study is intended to bring a greater understanding to the situation and has involved some difficult conversations about the state’s dairy industry.
Also contributing to the effort is Chris Wolf, a professor of agricultural economics at Michigan State who is using state farm-level data from AgChoice Farm Credit and Farm Service Agency loans to analyze dairy productivity and profitability.
The data will be uploaded to a Farm Bench pilot project to compare the Pennsylvania data with farm data from New York, Michigan and Wisconsin.
Nicholson said Wolf will be looking for differences based on farm size and location to “start unraveling what is going on.”
The Farm Service Agency’s Farm Bench project is a collaborative effort by Cornell, the University of Wisconsin and Michigan State to incorporate farm records into a single database.
Once the Farm Bench project is online, Pennsylvania dairy farmers, organizations and universities will be invited to join.
Nicholson said that gathering data about dairy processing has been difficult. The National Agricultural Statistics Service does not publish reports for all dairy products because of limited production volumes.
The fill that gap, the Pennsylvania Center for Dairy Excellence is rolling out a national processor survey this week to generate more information on current capacity and plans for future processing plants.
Based on the data available so far, Nicholson said that Pennsylvania has the potential to expand cheese production.
Such an effort could lower hauling costs and generate a net benefit of $30 million based on 2016 milk production, he said.
“With the existing milk supply, there is a place in the milk supply chains for a plant to be profitable in Pennsylvania,” Nicholson said. But it will take some coordination to connect someone looking to build a plant with a long-term supply of milk.
Reacting to the initial finding, Richard Roush, Penn State’s dean of agriculture, said, “It’s about diversification.”
Jayne Sebright, executive director of the Center for Dairy Excellence said Team PA and the state Department of Community and Economic Development have had five interviews over the past year regarding potential dairy plants.
Although none of those interviews has resulted in a new plant, the campaign is prompting national dairy players to think of Pennsylvania.
The state has more 50-100 cow dairies than other dairy states, and these smaller farms require more stops to fill a tanker, Nicholson said. But that could be an advantage in supporting niche processing plants that don’t need large volumes of milk.
David Smith of the Pennsylvania Dairymen’s Association asked Nicholson if he thinks the state has been a victim of its reliance on fluid milk production.
Fluid, or Class I, milk has driven Northeast milk prices for decades. But lately, consumer tastes have been shifting away from drinking milk to consuming other dairy products, such as cheese and yogurt.
Nicholson said the declines in fluid milk sales can be blamed for a reduction of about $1.50 per hundredweight in farmers’ milk checks.
“That’s why we are looking at alternative products and the potential to put them into our mix here,” he said.
Gary Heckman asked about farm profitability in light of the limited information available to date.
Nicholson said a profitable business can expand, stay as is or sell. If a farm is not profitable, its choices are limited.
“We have to understand where we are and how it is different for farms in different parts of the state,” Nicholson said.
Source: Lancaster Farming