Farming, Saturday, Juna 4,1994
Future
(Contbuwd from Pag* A 1)
Wolff opened the meeting.
Hood likened the planping for
the forum as “putting down a lot of
hay over the last several years” and
said it's now time 10 lake some
acton or “make some hay.” “If we
don’t get this hay in the bam. our
dairy industry is not going to have
any feed in the future.” Hood said
allegorically.
Wolff said that holding the first
dairy forum on the first day of dairy
month (June) was appropriate. He
emphasized need for marketing,
management, and cooperation.
“We need to find a way to relieve
the squeeze on the spread between
costs and prices.” Wolff said.
Dr. Ronald Knutson, Ag Eco
nomics, Texas A & M University,
used their large number of study
herds in many different parts of the
U.S. to illustrate facts about the
diversity of the dairy industry. For
example, herd size vairies from SO
cows to 1,000 cows. Output per
cow also varies and is critical to the
profitability of individual herds.
He showed wide differences reg
ionally and among individual
farms within the regions.
While many people think the
milk price is better in California,
Knutson said it is actually lower.
But he said they are very efficient
and produce milk on smaller
margins.
Another factor in regional dairy
farm problems is the enforcement
of EPA regulations. While federal
laws are standard, EPA delegates
authority to states that have at least
as stringent laws as federal require
ments. But many “dairy” slates are
not enforcing the laws, and other
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stares are enforcing laws much
more stringent.
“It takes a large investment to
meet the requirements of manag
ing dairy waste,” Knutson said.
“When dairy farmers are forced to
make these investments, they
begin to ask other questions about
their involvement in the dairy busi
ness and the timeliness of an up
date to their operation. These kinds
of decisions are coming in the next
five years for all those farmers who
arc not already facing them.
"This doesn’t affect the dairy
that is making a lot. of money,”
Knutson said. “But if a dairy is
already on the margin, a large
investment is going to be tough.”
A more important factor is the
unlevcl playing field that exists
across the states. Technically, all
states have the same EPA regula
tions, but not every state is follow
ing the regulations. This has an
adverse impact on dairy farmers in
stares that are cracking down.
On the subject of BST, Knutson
said research on their model dairy
farms across the nation show that
its use is profitable on every one of
these farms. Tm not saying it is
profitable on your farm,” Knutson
said. “But on every one of our lest
farms it is. Technology is an integ
ral pan of successful dairying.”
Knutson said analysis studies
indicate that the downhill move
ment of the dairy industry in Wis
consin, Minnesota, and east Texas
is sct to also happen in the North
east if adjustments are not taken.
He said extra debt load will take a
dairy farm down the tubes. He said
this presents a real challenge to len
ders and dairy farmers who have a
"V--
r"'i , i
son or daughter who wants to take
over the farm.
“Large, well-managed dafry
farms ate realizing favorable
returns.” Knutson said. “Not
everyone is losing money. But
many moderate size dairy farms
are experiencing considerable
stress. Many are making.the deci
sion to grow or get out"
Dr. Terry Smith, dairy science.
University of Wisconsin, said the
dairy industry is competing for
“stomach space” but has some
optimism because 15 of the top 50
selling items in the grocery store
come from the dairy case. New
supermarkets have 10 to 15 per
cent more dairy case space because
dairy items represent double the
profit of the next best selling
item—frozen foods.
“We are going in the right direc
tion and should look at it as a posi
tive indication of the future (of
dairying),“ Smith said. “You
shouldn’t be surprised that the
retailer is excited about marketing
dairy products. He likes the rela
tive profitability of that space in
the store and it’s the number one
reason consumers come into the
store. That’s why the retailer puls
the milk and dairy products at the
rear of the store so you pass the soft
drinks and junk foods on the way
there.”
Smith said management repre
sents the key issue in the dairy
industry. This applies to dairy far
mers as well as to other industries.
“With all the dairies in the land, a
few are making double the money
on their cows than others are,”
Smith said. “What causes this dif
ference? Simply the exchange of
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THANKS! DAIRY FARMERS
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For Their Dedication and
Hard Work Towards Attaining
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better thought, better knowledge
and more energy. The many who
refuse to belteye this business
requires intelligence are severely
punished over the yean by this
skepticism.” Smith was quoting
what W. D. Hoard had said 105
years ago.
Robert Taylor, Pennwest Farm
Credit said that when farmers shift
into neutral, their income base
deteriorates. The average size
dairy in Pennsylvania is 64 cows
but the top performance group is
146 cows.
“Lack of adequate scale is a dis
advantage," Taylor said. “Busi
ness is business. Farmen need to
plan, to organize, to lead, and to
control.
“Cattle, are living things and the
emotional factor plays a roll. But
decisions must focus on manage
ment goals. A lot of our farms
today are not geared for the size of
dairy herds we have now. Many
are add-on affairs. Lanes built for
horses and buggies must now
accommodate tractor-lrailor
trucks.
“Farmers must learn to manage
their own money, and the money
of others. You need to budget and
you need to do comparison shop
ping. Many operations are manag
ing in reverse. They look for pro
duction without consideration of
the cost of production. Today, far
mers need to focus on returns.”
Taylor also said debt must be
used properly. He suggested that a
$2,000 to $2,500 debt per cow is as
high as you should go in long-term
debt. “Work with lenders,” Taylor
said. “Have a business plan. Have
liquidity for emergencies.
“In some areas of Pennsylvania
multiple land-use possibilities has
kept land values high. But general
ly a farmer is no longer going to be
able to farm to retirement and liq
uidate. The opportunity (buyer)
may not be there in the future,”
Taylor said.
Ronald Denker, retired Kraft
General Foods executive,
explained how a large processing
company decides where to locale
plants. He said the objective was
always sales with saving money
also important but secondary. No
one reason is responsible for a
facility to get closed or a new facil
ity to be built. “If you are making a
high quality product at a compe
live price that the marketing peo
ple can take and run with, you will
get benefit,” Dcnkcr said.
“New technology does influ
ence new facilities.. It lakes a lot
more room. That’s why a lot of
small plants arc gone. Increased
productivity is also possible with
new technology." ‘
Denker said labor availability is
not so much an issue as trained
labor and labor that wants to work.
Also environmental concerns
sometimes close plants.
“Things change—the price of
inputs or distribution patterns
change,” Denker said. “But cost
and availability is a primary rea
son. The cheaper milk inCalifomi
a of $2.00 per hundred equates to
20 cents per pound of cheese, it
costs 10 cents a pound to ship
cheese to Boston so that’s an 8 to
10 Cent per pound saving. On mil
lions of pounds produced you can
see why you can close a plant in the
East and go to California.”
Denker said planning is started
five to 10 years in advance of the
opening of a new plant and state
governments or organizations that
know about this planning can have
some effect on where the plaHl will
(Turn to Pago A 29)
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