Study: Additional Dairy Processing Would Benefit Pennsylvania

The study titled “Analysis of Economic Incentives for Additional Dairy Processing Capacity in Pennsylvania” found that investing in more capacity could produce $34.7 million annually in combined revenue generation and cost savings.

New processing plants would ideally be located in State College and Reading to help limit trucking. The two plants would preferably make non-American cheese such as Italian or specialty styles, while also processing 4 million lb. of raw milk per day.

Leading the study was:

Chuck Nicholson, an adjunct associate professor at Cornell University, formerly with Penn State University when the study started in 2016
Mark Stephenson, director of dairy policy analysis at the University of Wisconsin Madison
Andrew Novakovic, professor of agricultural economics at Cornell University

“Pennsylvania is one of the few major dairy states that are net exporters of raw milk,” Stephenson says. “Having additional dairy processing in the state would markedly increase the marginal value of milk produced in Pennsylvania now being shipped out-of-state. That would generate economic benefits for the state, while enhance the marginal value of milk for Pennsylvania dairy producers by about $28.8 million annually, according to our findings.”

A reduction in hauling cost from the plants is estimated to be $5.9 million annually. At the mail box level hauling costs would drop $0.05/cwt for all Pennsylvania milk. Milk prices would rise statewide average of $0.26/cwt to $0.29/cwt, depending on location.

With the savings in trucking and a marginal increase in milk value, the study projects $433 million could be invested to construct the two processing plants.

Two new cheese plants are estimated to create 1,100 jobs in Pennsylvania and generate additional economic activity estimated at $1.5 billion.

The three study authors believe there would not only be a benefit to Pennsylvania, but also Maryland and Virginia should new plants be built.

 

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