UNIVERSITY PARK (Cenire
Co.) Changes in dairy produc
tion technology and rising produc
tion costs present Pennsylvania
dairy farmers with an ultimatum
for the future: get bigger, or get
out of the business, says an agri
cultural economist in Penn State’s
College of Agricultural Sciences.
“Dairy farming is Pennsylvani
a’s leading agricultural industry,”
said Milton Hallberg, professor of
agricultural economics. “The
state’s 12,000 dairy farms have
milk, dairy beef, and veal sales of
$1.5 to $1.6 billion annually
that’s 44 to 45 percent of total
cash receipts of farmers in Pen
nsylvania. But developments in
dairy technology and policy over
the past several decades are conti
nuing to put pressure on the state’s
producers.
‘The push to get bigger or get
out is by no means a new phe
nomenon it’s a process that
began 20 years ago,” he said. “But
it does highlight a continuing
challenge facing Pennsylvania
dairy farmers.”
Relatively small dairy farms,
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Changes Challenge Small Dairy Farms
like most in Pennsylvania, are
fairly efficient, Hallberg said.
“But declining milk prices, over
production, global agricultural
trade liberalization and new tech
nologies like bovine somatotropin
may force farmers to expand then
operations. As income per cow
falls, many Pennsylvania dairy
farms will need to get larger just to
maintain enough income to sup
port a family.”
Forty-nine percent of the state’s
dairy farms have herds of 49 cows
or less. “This small herd size
enables farmers to save money on
labor since they don’t have to hire
as many workers from off the
farm,” he said. “But rising produc
tion costs may overwhelm any
savings in labor costs.”
In 1991, the average Pennsylva
nia cow produced 14,800 pounds
of milk and generated $1,954 of
milk sales at the 1991 price of
$13.20 per cwt Using those fig
ures, the average 50 cow herd
generated $97,680 in gross sales
annually.
“That may sound like a lot of
money,” Hallberg said. “But
ivailabie;
annual cash costs of milk produc
tion total $1,600 per cow. When
you subtract those costs, it slashes
net cash income from milk sales to
just $17,680. Even if the farm
earns another $lO,OOO to $12,000
in dairy beef and veal sales, that’s
a modest income for a family of
three or four,”
Expansion, even when possible,
is expensive. “Capital investment
per cow has risen from near
$2,000 per cow in the 1960 s and
1970 s to over $7,000 per cow
today,” Hallberg said. “That high
investment cost suggests that
increasing the size of the opera
tion won’t be easy, even if physi
cal resources like land and labor
are available. Some small produc
ers will likely leave dairy
farming.”
Among other things, expansion
requires more farm labor. “The
relatively small size of Pennsylva
nia dairy farms allows the farm
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family to provide most labor,”
Hallberg said. “This can be an
advantage because the farm’s pro
duction costs aren’t greatly
affected by off-farm wages and
the farmer doesn’t need to worry
about hiring reliable labor from
off the farm. That will change as
dairy farms get larger.”
Some of the cows and perhaps
some of the land from these small
er dairy farms will be purchased
by those who stay in the business
and expand their operations. Hall
berg said. But some of the cows
will not need to be kept in milk
production as technological inno
vations lead to increased milk out
put per cow.
The economic importance of
Pennsylvania’s dairy industry
does not stop at the farm gate.
“Farmers buy feed, seed, fertiliz
er, machines, buildings, milking
equipment and veterinary ser
vices, which generates secondary
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economic activity.” Hallberg said.
“Milk processors and bottlers
also generate considerable value
and employ a sizable workforce,”
he said. “In 1987, processors
added $6OO million to the value of
milk and other inputs and employ
ed nearly 8,000 people who
earned $lBO million in salaries
and wages. If the local dairy
industry fails, the processors, bot
tlers and other related businesses
in that area soon will follow.”
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