Consumers are drinking less milk. Farmers face tougher management decisions and tighter operating margins. At least one dairy processor has dropped farmer contracts.
Farmers are getting stressed out.
It’s easy to advise a friend who is overwhelmed by his job driving a truck: Just quit. Find another job.
“Tell that to a fourth-generation farmer, it’s not well received,” said Alan Zepp, risk management program manager for the Center for Dairy Excellence. “There’s a lot of history and legacy on those farms. Dairy farming is a business, a strong tradition. Farmers are optimistic, sometimes to a fault.”
The Center for Dairy Excellence, a non-profit supporting Pennsylvania’s dairy industry, has taken unprecedented action. It’s alerting people who regularly visit farms to recognize signs of overstress and to be able to do something about it.
“We recognize the pain,” Zepp said. “The pain is real, but it’s not across the industry. We chose not to ignore it. We chose to help those farms. Other states have systems in place. What we are doing is making some of those resources available to local people.”
The center has been hosting a series of roundtable discussions across the state about a vision for the dairy industry and management strategies. Mixed in with the debate has been the sharing “how best to support dairy farm families currently dealing with the financial and mental stress that accompanies a depressed milk market.” Sessions have been well-attended.
The final roundtable will be held at 12:30 p.m. on Friday, April 27, at Hoss’s Steak and Seahouse, 1151 Harrisburg Pike, Carlisle. For more information or to register, contact Heidi Zimmerman at firstname.lastname@example.org or call (717) 346-0849.
Operating margins on the dairy farm have been narrow for years. Some farmers are in over their heads.
“We’ve had three years where the average price (that farmers are paid for milk) has been close to the cost of production,” Zepp said. “It gets very painful.”
Farmers living on the edge of solvency in hard times may survive on cash reserves or lines of credit, but sooner or later the bank says no.
Zepp said that a major lender told him in December that the bank could support farmers for just one more year.
Going big into dairy in Pennsylvania may not offer economic protection.
Some of the findings in the 2017 Pennsylvania Dairy Study are less than encouraging:
Larger and more productive Pennsylvania farms may be less resilient in the face of economic stress than similar types of farms in Wisconsin, Michigan and New York.
Pennsylvania farms are somewhat less resilient than those in other states when under great financial stress.
Pennsylvania farms tend to have a lower return on assets, higher debt-to-asset ratios and lower current ratios than farms in other states.
There are signs of hope. That is, some farmers say they will produce less milk. Of the Pennsylvania farmers surveyed for the study, 14 percent said they expect to quit in the next five years. Farmers also indicated their herd size would decrease on average by 18 percent, mostly among smaller operators.
The study also considers building a cheese processing plant between Chambersburg and State College or at Reading. The concept however would not create a new market for milk. It does have the potential of opening export markets to American-made specialty cheese, such as Italian cheeses.
“That’s the next ‘what if’,” Zepp said.
The export market however is uncertain with the trade spat over tariffs between China and the Trump administration. U.S. dairy exports for 2017 were up 14 percent from 2016 — up 49 percent to China, the No. 4 market for U.S. dairy. Also unknown are the terms of a renegotiated North American Free Trade Agreement and Trump’s decision to withdraw from the Trans-Pacific Partnership, an accord designed to counter Chinese trade on the Pacific rim.
Consumers, not the processors, call the shots.
The average U.S. consumer has been drinking less milk over the past 20 to 30 years, even during the time when milk marketers were running the popular “Got milk?” ads.
“Milk has lost some of its healthy attributes for whatever reason,” Zepp said. “It’s a downtime. I’ve been telling farmers we’re at the bottom of the cycle. This hasn’t been a definitive cycle.”
Michigan State University Extension offers 10 tips for farming in tough times:
Take responsibility — Get over blaming others, accept the pricing structure and focus on your operation.
Focus — Make time to examine specific areas of your business to determine how they can be made better.
Involve employees — Talk to employees, invite their ideas, answer their questions, and enlist their help.
Communicate with vendors and lenders — Don’t just run up unpaid balances, they may be able to help come up with a plan.
Pencil-out the consequences — Saving money doesn’t get you any farther ahead if it reduces your income.
Invest where your returns will be highest — Even in the toughest times, investing in some things can be the best option.
Look hard at where you are losing money — Examine the weaknesses of the operation and search for alternatives that preserve value for your farm.
Use your records — Start with financial records and calculate your cost of production, compare it to benchmarks and look for where you can make changes.
Seek advice — Consider starting management team meetings with your feed consultant, veterinarian, lender, key employees and your extension educator. Open your records to them.
Keep things in perspective — This is about your business only, not about your life or what should be most important to you. Your business may lose money or you may even lose your business, but that is not your life or your identity. Be thankful for family and friends. Consider others who may have less, and do what you can to help them. Take your eyes off yourself and your own problems and see what you can do to help others with needs around you.
By: Jim Hook
Source: Public Opinion