Stability-Jr The Northeast Dairy Industry Demands United Front
(Continued from Pag* A 1)
face tough competition from pro
ducers in other regions, but they
also face competition from mem
bers of their own regions who
refuse to join together with their
fellow industry members to stren
then the dairy industry. Industry
leaders agree if the Northeast mo
become more competitive in the
national and international market,
they must do it as a cohesive unit
and the sooner the better.
Dr. Hand, in giving an overview
of the industry, said the instability
of the Northeast dairy industry is
the result of government reduction
in support price levels and the
move toward the “free market”
pricing system. This move will
result in price volatility and put
more pressure on the dairy indus
try for better management of
resources.
Dairy farmers in the Northeast
find it hard to compete with milk
producers in other regions.
According to Carolyn Liebrand of
the USDA Economic Research
Service, regions with smaller aver
age herd sizes, such as the North
east, show much less return on
their investment dollar compared
to some-other regions.
According to Liebrand, North
east dairy farmers can make a pro
fit with a $2.00 in residual return
on their investment, but may need
to look seriously at the benefits of
larger herd sizes.
Residual returns in other regions
are:
Appalachia-$2.62;
Combelt-$1.48;
Pacific-2.38;
Southeast-$3.62;
Southern Plains-$2.97
Upper Midwest-SI.S6.
The average NorthetMt producer
with average herd size at 51 head
had residual returns of $16,000 in
1987. In the Southeast and Pacific
regions, where there are much lar
ger herd sizes, farms residual
returns at 388 head were $171,000
in the Southeast .and at 322 head
were $130,000 in the Pacific.
In the Northeast facilities are
high because of the cold climate
which requires more substantial
housing. However, facilities are
used less intensively. Milking
facilities are used on the average
four hours in the Northeast, but in
the Pacific they are used an aver
age of nine hours.
The Pacific’s estimated eco
nomic costs were the lowest of all
regions partly because its average
output per cow was the highest of
any region at (yield is CWT. of
milk per cow) 168 pounds in the
Pacific, while in the Northeast is
143 pounds.
Total economic costs in the
Pacific is $10.22, meaning it cost
the Pacific fanners $10.22 to pro
duce 100 pounds of milk compared
to the USDAiigures for the North- *
east at $12.01.
The future of the dairy industry
in the Northwest depends upon:
—greater farm profitability
—growth in per capita milk
consumption
—and rapid adoption of techno
logical change to increase
efficiency.
Price support and income
enhancement programs will
decline substantially, according to
Hand, and U.S. agricultural com
modities will be priced closer to
world market prices and this will
encourage erratic price
fluctuations.
Concern over the future of the
industry has generated several stu
dies. One of these, Project 2005,
pointed to several specific issues
weakening the Northeast industry:
—The milk marketing systerti is
fragmented and operates at excess
capacity. The system should be
consolidated to cut costs.
—Too many dairy coops in the
Northeast are heavily leveraged,
with low producer equity. Often
directors have excellent produc
tion experience, but are weak in
financial and marketing expertise.
—Production per cow and per
worker in the Northeast are lag
ging behind the nadon as a whole.
—The Northeast needs to take
the lead in milk quality.
Acdon suggested by Project
2005:
—Assist farmers in developing
profitable farm management
skills.
Chicken Festival
Many of the “poultry pioneers”, people who have made techni
cal and marketing contributions to the industry over its 66 years of
spectacular growth, were on hand to talk over old times, look at the
latest innovations in breeds and equipment, and join in the fun of
the annual festival which pays honor to chicken and its achieve
ments for Delmarva.
Chicken from Delmarva’s famous 10-foot frypan filled with
Mazola com oil, from a barbecue pit ahd in the form of hot dogs
proved so popular that this year’s festival almost ran out of pro
duct. An extra supply of chicken had to be rushed to the festival
grounds at the Lord Baltimore Elementary School mid-afternoon
Saturday to keep the large crowd fed.
Despite the threat of rain and some sprinkles Saturday, the festi
val drew a crowd estimated at 20,000, which was just fine with the
many local service organizations of Ocean View and surrounding
communities which pitched in to prepare the food and handle the
many chores involved in such a large event.
The importance of chicken to the region was noted by Delaware
Governor Mike Castle who said that what Mrs. Steele started was
as significant as, “anything that has ever happened on the Delmar
va Peninsula or probably ever will happen.”
Delmarva Poultry Industry, Inc. (DPI) President Donald J.
Lynch, a veteran of many years in the poultry business and a 1941
graduate of the school on whose grounds this year’s festival was
held, said it was “appropriate to recognize today’s poultry industry
in the town where it began. We’ve come a long way since 1923.”
Joseph P. Lobb, the town manager for Ocean View and festival
coordinator, summed up the festival in briefer terms, “we’re
tickled to death.”
The aspect of marketing poultry, which is now the leading meat
on America’s table, was not overlooked. A day-long series of
demonstrations and educational seminars for cooks and eaters was
held under the heading of “Chicken, The Convenient Choice” and
featured presentations on preparing chicken in the microwave, use
of chicken in low-fat diets, cutting and deboning chicken at home,
and other subjects.
Mitzi Perdue, wife of prominent poultry marketer Frank Perdue
gave standing-room-only presentations featuring a 10 question
quiz on chicken and egg handling in the kitchen. She awarded
prizes to her best students in the form of handsome cookbooks
which she authored.
There was a lighthearted aspect to the festival in the form of the
annual Chicken Capers contests, often referred to as the “Olym
pics of the Chicken World.”
The events featured egg toss competitions, crowing and cack
ling contests, and a relay event for teams from the region’s poultry
companies.
Winners of the “chicken scratch” in which children root out
coins buried in a mound of chicken feed were: Colleen McGowan
of New Carrollton, Md.; Elizabeth Adkins of Frankford, Del.; and
Matthew Schifano of Clarksville, Del.
Egg toss team winners were Patrick Connor and Paul Guaro of
Ocean View, and Steve Cambron and Gerard Graham of Salis
bury, Md.
Spoon race event winners were David Robinson of Williams
town, N.J. and Brian Rush of Seaford, Del.
Champions in the crowing and cackling contests were John
Waples of Georgetown, Del., and Philip Adkins of Frankford, Del.
A battle in the senior event, the clash between the poultry 90m
pany teams in the relays, drew the largest field of competitors ever.
Winners and holders of bragging rights for the next year on
Delmarva were the following: the Processing Plant Relay team
from Hudson Foods, Inc. at Berlin. Md., comprised of Fred Hall,
Larry Finney, Mark Ayres and Carl Williams, and the Grow-Out
Relay team fielded by Townsend Farms, Inc., Millsboro, Del.
comprised of Wayne Bunting, Danny Collins, Scott Conaway and
Guy Phillips.
The 42nd Delmarva Chicken Festival will be held in Easton
Md., in June of 1990 and will include the Delmarva Chicken
Cooking Contest which is held every other year.
Mrs. Steele in 1923, the organizers of the first Delmarva Chick
en Festival in 1948 and the folks of Ocean View in 1989 aU share
in the cavalcadp of poultry industry dynamics on Delmarva. They
never knew at the time what the future would bring, but they all
have had fun in doing it.
—Accelerate the adopdon rate
of new technology to increase per
worker and per cow production.
—Use the full potential of high
quality, home grown forages
through improved varieties, timely
harvesting and better preservation.
—Lower the maximum per
missable somatic cell count of bulk
tank milk to 500,000.
—Discourage the expansion of
milk production in marginal areas
or on maiginal farms.
According to Jim Putnam, vice
president of Springfield Farm Cre
dit Bank, the average Northeast
dairy farmer earned a positive but
dissapointing return on equity in
1988. This return, approximately
two percent, was clearly less than
(Contlnuad from Pago At)
alternative investments or rates of
return considered acceptable by
non-farm business.
In the past two years debt usage
has turned around and farmers
have paid down their debt load.
However, farmers are operating on
much narrower profit margins.
“Dairy farmers in the Northeast
arc operating much closer to the
edge than they were 10 years ago,”
said Putnam.
This makes the dairy fanner
much more vulnerable to sudden
shifts in milk prices and feed costs.
This makes the dairy industry in
the Northeast volume driven. The
shrinking profit margins is a major
motivating factor for expanding
milk production per farm.
In addition, in the Northeast,
there is tremendous variability
from farm to farm in income above
the breakeven point. The average
for farms in the Northeast in 1988
was 39 cents/CWT. Average net
earnings per CWT for the top per
cent of the farms was $2.28. How
ever, average net earnings for the
bottom 25 percent was -$1.79.
That is a range of $4.00/CWT in
the farm’s ability to meet financial
obligations.
Management and the rapid
adoption of technology to increase
farm efficiency are the keys to
improving the profitability gap per
farm. And as the complexity of
dairy farming increases the impor
tance of improved management,
improved efficiency is crucial to
the profit margin.
Also, the volume of milk sales
needed to pay fixed family living
expenses has increased by nearly
50 percent in the past 10 years. In
1979-81 the volume of milk sales
needed to pay family expenses was
544,000 pounds. As of 1988, the
volume of milk needed to meet
average family living expenses
was 811,000 pounds. That is a 49
percent increase.
In this financial climate, the
impact of milk price premiums
becomes crucial to dairy farmers in
the Northeast. Cash margins were
reasonably good in 1988, however,
an estimated 45 cents of the aver
age milk price received consisted
of various price premiums over the
Federal order price minimum.
Without these premiums, added
Putnam, the average Northeast
dairy farmer would have exper
ienced as bad a year in 1988 as in
the mid-1980s.
In this light, cooperatives
.become more important that ever
because of this continuing need to
obtain the milk price premiums.
Cash margin per CWT. was 39
cents in 1988. Without the pre
miums, the cash margin would
have been minus 6 cents. Market
ing activity does make a
difference.
Norman Harvey, chairman of
Agri-Mark, Inc., calls for consoli
dation of all members of the dairy
industry to strengthen the North
east’s position and through
improved leadership dairy farmers
will be able to overcome political
and economic barriers.
A consensus is important now in
the industry to prevent the forma
tion of decisive groups. The goal
of the dairy cooperatives is to bar
gain for greater economic benefits
Of the dairy farmer, but the
cooperative is only as strong as it’s
membership. The dairy coopera
tives need total membership to be
an effective, strong bargaining
unit.
“Bargaining power is the great
est gain in a merger.” said
Harvey.‘Tt plays a big part in the
big success of MAGMA.”
“RCMA (Regional Cooperative
Lancaster Farming, Saturday, June 24.1989-A23
Marketing Agency) has not been
totally successful due primarily to
the lack of dairy farmer member
ship,” added Harvey. “Dairy far
mers pose the greatest threat to
RCMA due to their lack of
support.”
Dairy farmers, by failing to
merge into a larger cooperative,
weaken the dairy farmer’s
position.
“There are cooperatives which
believe it is more important to pre
serve their independant status than
to enhance the income of dairy
men,” said Harvey.“We must
address this failure soon.”
Harvey added that he was seri
ously concerned with the lack of
vision in the-dairy industry.
“Coops are. needed now more
than ever. All members of the
industry must put aside their dif
ferences. Only this will enable us
to work closely together to suc
cessfully face competition from
other parts of the country.”
Rex Warland, Professor of Rur
al Sociology, Penn State Universi
ty, discussed the findings of his
study on public milk consumption.
He found that the biggest majority
of consumers who were decreasing
consumption of dairy products, did
so due to misinformation.
These consumers were “more
likely to be concerned about the
fat, calories and cholesterol in
milk. Less likely to consider the
calcium, protein, and vitamins in
milk to be important.”
“When we asked these people
how much fat was in milk, they
didn’t know,” said Warland.
Misinformation seemed to be
the key reason for losing consum
ers. Warland’s next study will be
focused on the those consumers
decreasing their consumption of
dairy products.
The symposium was sponsored
by the Northeastern Agricultural
and Resource Economics Associa
tion and the Department of Agri
cultural Economics and Rural
Sociology of Penn State
University.
Pesticide
Exams Set
CHAMBERSBURG (Frank
lin Co.) Franklin County
Agent, John Shearer, has
announced that exams for
interested persons to become
licensed as Pennsylvania Pesti
cide applicators, will be held
Tuesday, June 27, at the Frank
lin County Administration
Building, 191 Franklin Farms
Lane, Chambersburg.
Applicants should arrive
between 9:00 and 10:00 a.m.
Exams for Private-Applicator
licenses, as well as for the eigh
teen different categories of
Commercial/Public licenses,
will be offered. Commercial/
Public categories include: lawn
and turf, industrial, rightS-of
way, fumigation, wood
destroying pests, aquatic,
house and related pests, wood
preservation, vertebrate pests,
forest pests, and others. C/P
applicants should be prepared
to pay exam fees. Reference
materials may be brought along
and used, since these are “open
book” tests. Dave Thompson,
pesticide inspector of the Penn
sylvania Department of Agri
culture will administer the
written exams.