Low Milk Prices Spark Frustration Among Pennsylvania Dairy Farmers Lehan R. Power, Director Bradford Co. Extension TOWANDA (Bradford Co.)- Dairy farmers across the state are struggling with record low prices for their milk, and some are blaming the nation’s milk pricing system. But an expert from Penn State’s College of Agricultural Sciences says the expanded milk production in Western states, not a new price system, is the reason for low prices. “Farmers received very high milk prices in 1998 and 1999,” says Kenneth Bailey, associate professor of agricultural eco nomics. “They responded by Smoker _ Kgw i Company CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS DEVELOPMENT ADVISORS "Your local source for convenient, professional tax preparation" e Now accepting new clients for business & 1040 preparation £ Walk-in's welcome at our Leola office Work-site interviews available for business owners & / Other Services... f Business Development I jßj§K £ Human Resource Advisory IJftfSiX/lT* f Technology 49 E. Main Street, Leola, PA 17540 717-656-7544 - 717-665-5979 24 S. 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But in Pennsylvania, milk production grew less than one percent in 1999.” Milk prices, which started this year at record lows, could stay depressed for four or five months, Bailey says. “In many cases, prices will be below the cost of production for Pennsyl vania daily farmers,” he says. “Unfortunately, prices are de clining just as a new method of national milk pricing is coming in, and some dairy farmers may Stock A Complet Hypro Pumps And Accessories see the new system as the rea son for their problems.” Effective Jan. 1, 2000, the U.S. Department of Agriculture instituted a major overhaul of the 60-year-old federal milk marketing order program. The overhaul will streamline and improve the nation’s wholesale milk pricing system by tying prices more closely to commodi ty prices for butter, cheese and powdered milk. Unfortunately, Bailey explains, the new order reforms coincide with record low wholesale prices for cheese and butter. 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Gallon Special *46.50 *711509 PAUL B. ZIMMERMAN, INC. • HARDWARE • FARM SUPPLIES • CUSTOM MANUFACTURING • CRANE SERVICE states recently protested outside the Maryland Statehouse for fairness in milk pricing. “But milk prices would be low whether or not we had order reform,” Bailey explains. “The cause of these low milk prices is basically supply and demand. All of that excess milk produc tion had to go somewhere; it went into cheese vats. Cheese production in 1999 grew 6 per cent over a year ago. In the West, cheese production grew 12 percent. Demand, however, has been relatively steady. As a result, cheese stocks in public warehouses were up 10 percent at the end of December, and are growing.” Inflated cheese stocks will keep milk prices low, Bailey says, until the milk glut passes through the nation’s system. Dairy farmers have no choice but to wait out the low prices. “Farmers I’ve talked with are frustrated with these low prices, especially when everyone else is benefiting from a strong nation al economy,” Bailey says. “Ex pansion in Western states should slow down this year. In the meantime, Pennsylvania dairy farmers will have to try to ride out the storm. Milk prices will be better in the spring.” Bailey suggests that farmers consider “forward contracting” on milk prices with dairy cooper- SPRAY TANK CLEANER *OBBl6O 3 Iba. *7.16 50 Woodcorner Rd., Lititz, PA 17543 1 Mile West of Ephrata (717)738-7350 Lancaster Farming, Saturday, February 26, 2000-A27 atives if they can lock in a fair price. Right now those opportu nities are limited. Farmers also should budget their monthly income and expenses for the year. That’s especially important when prices are low. Farmers also can try to lock in other costs, such as feed concentrates, interest rates and fuel costs, if they are reasonable. Dairy farmers can find useful financial planning strategies, up-to-date forecasts and a bud geting model for projecting the year’s income at Penn State’s Dairy Outlook site on the World Wide Web at http://www.aers. psu.edu/DairyOutlook/. “We’re coming up with new things for the Web site-new tools that I think will help dairy farmers,” Bailey says. “We’re going to be training cooperative extension agents with a spread sheet that helps farmers to bud get their income. We also have projections on what milk prices will be for six marketing areas in Pennsylvania for 2000. “It’s very important that Pennsylvania farmers under stand what causes their milk prices to fluctuate each month. With these tools, larmers will be able to sit down with their Penn State Cooperative Extension agent and plan out their cash flow.” FOAM DYE *009077 For Hlghir Visibility Foam *1 3.50 HOURS Mon , Thurs ,Fn 7-8 10 Tuns. Wed 7-5 10 Sal 7-4 00
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