Can dairy farms survive
Flat milk prices force many dairy farmers in Southwestern
Pennsylvania to adopt new technology or find a new industry.
July 11, 2017
The last dairy farm in Allegheny County, Scott Dairy, watched its stake in the future go up in flames the night of April 29, 2016.
Farmers came from all around while the barn was still burning. They helped evacuate the cows to barns, some of which were up to an hour away, said Bill Scott, who currently runs Scott Dairy.
Three years prior to the accident, Scott had taken a leap and sunk major capital into necessary improvements to modernize the milking facility. The fire wiped out all of the updates and didn’t touch the rest. It was a worst-case scenario, said Scott, who is 40.
After looking at the numbers, Scott decided it didn’t make sense to rebuild. He is working on selling the 70-cow milking herd to a family farm in Scenery Hill in Washington County, and converting Scott Dairy — an institution since 1789 — to a direct-to-consumer beef operation. No milking equipment necessary, plus he said it’s easier and, therefore, more profitable to sell beef directly to customers.
“I love what I do. I love what I’ve done,” Scott said. “… but it gets to a point where you run yourself into the ground and you’re not making money.”
According to Scott, four other dairies in Western Pennsylvania have closed since the start of this year. Scott attributes the general decline of dairy farms in the area to depressed milk prices.
In 1976, Scott said his farm was earning $15 for 100 pounds of milk, or about $1.29/gallon, and that’s about the same as what he earns today. Milk prices have not risen substantially in four decades.
“People in the U.S. demand cheap food,” Scott said. “... When milk prices creep up, people buy less milk.”
Besides insisting on a low prices for milk, Americans generally consume less milk than they did decades ago, and although cheese consumption is up, the domestic share has risen only slightly.
Helping local farms remain competitive in this challenging market is a focus for Andrew Sandeen, an agricultural consultant with the Penn State Extension.
Unfortunately, the recipe for success is different for every farm.
One natural response to depressed prices, Sandeen said, is to produce more milk. When the price per gallon of milk is low, simply selling more gallons can achieve the same bottom line. But that creates challenges about where to market all that milk. Some of the milk processing plants in the area have such a surplus that they had to cut farms off. Cooperatives that collect milk from other parts of the country are starting to put quota caps in place to address the problem with oversupply.
Much of American agriculture is exported. But exports can introduce more volatility, Sandeen said, because what’s happening around the world can suddenly shift the price that American dairy farmers are able to earn for their milk.
A prime example: Russia's annexation of the Ukrainian peninsula of Crimea in 2014 had a significant impact on the dairy business, Scott said. When the U.S. imposed sanctions on Russia in response, American farmers lost one of their biggest export markets.
Finding a niche
While the national average farm size tends to grow over time, there is still room for little farms in this economy, Sandeen said.
“It’s definitely a challenge,” he said. “I think for a lot of small farms to remain really successful, I think oftentimes they need to look at other niche markets or other unique things that they can do to help them instead of that economy of scale.”
Kevin Caldwell, a sixth-generation farmer at Broadrun Farms in Beaver Falls, believes the future for small dairies like his — with its 80 cows — are in specialty markets like the organic food movement.
Broadrun Farms grazes its free-range herd on grass rather than raising feed crops, which not only allowed for easy conversion to organic farming practices, but also cuts down on labor costs.
Grass-fed cows produce less milk so they only need to be milked once a day, in contrast with the two or three times that corn-fed cows require.
In the early 2000s, Caldwell said his father was alone to run Broadrun Farms when his four children all went off to college. The labor needed to plant crops, harvest them and feed the cows was too much to do on his own and hiring out the labor would be cost-prohibitive. That’s when his dad bought a post-pounder, built fences and converted to a grass-fed operation to keep the farm running with less labor.
Caldwell, now in his early 30s, returned to the farm after college and a brief stint as an agricultural consultant in the Harrisburg area.
“I didn’t see a prosperous industry growing up,” Caldwell said. “I saw something that was a lot of work, and I guess I was only looking at it from the financial side. When you look at it from the quality-of-life side, this beats the heck out of working for somebody any day.”
Using what you’ve got
Besides finding a hold in niche markets like organic, GMO-free or pasture-based farming, some farms in the region are turning to green energy production as a way to keep operating costs down and make a little extra income by selling harnessed energy to the power companies.
One of the most popular forms of green energy production on farms that keep livestock is called a methane digester. These digesters are popular because they take a substance livestock naturally produce in abundance — manure — and convert it into free, renewable energy.
Biogas digesters work by capturing the methane gas that is naturally produced when bacteria break down manure. Then the gas is burned to cleave methane molecules into carbon dioxide and water, which releases energy that was stored in the form of chemical bonds.
Because digesters capture and break down methane — a powerful greenhouse gas — they also serve to reduce environmentally harmful farm emissions.
To promote widespread adoption of methane digester technology, the United States Department of Agriculture offers subsidies to help farmers with the initial investment, but only if the farm meets certain criteria, such as herd size.
Being one of the larger farms in the region with 700 cows, Dovan Farms in Somerset County was among the first in the area to install a methane digester in 2006.
Jason VanGilder, 36, grew up on the family farm and continues to work there full time. He said the digester makes enough energy to power the farm and 10 houses on top of that, which saves about $3,000 per month in operating costs and generates some revenue by selling the surplus energy back to Allegheny Power (now owned by FirstEnergy).
“In today’s business, in any business, you have to be looking forward,” VanGilder said.
‘It is a challenge’
Hillcrest Saylor Dairy, also in Somerset County, installed its methane digester in 2007. Fourth-generation family farmer Shawn Saylor manages the project.
In addition to stocking the digester with manure, they also take in food waste from other places as another source of free fuel, said Saylor, 44.
During the conversion of methane into electricity, the system puts off waste heat, which Saylor harnesses to produce hot water and keep the buildings warm in the winter.
Saylor also has his eye on cutting-edge reverse osmosis technology that would further lower his operating costs by allowing him to process his own wastewater on site.
Right now the wastewater from the animals is pumped into storage ponds — where solids slowly settle to the bottom — and then hauled to fields 5 miles away for fertilization, Saylor said. Traditional reverse osmosis systems have been unable to effectively deal with the high solids content of his wastewater. With the newest technology, he hopes to be able to recycle the water and then transport only the highly concentrated manure to the fields. That would significantly reduce hauling costs. It costs a penny a gallon to haul it now; the new system could take up to 80 percent of the water out, drastically cutting the overall gallons.
According to Sandeen’s colleague at Penn State Extension, Virginia Ishler, water reclamation from manure is not an easy process. She said the only American farm that might currently be doing it is a dairy farm in Sheboygan, Wisconsin.
Part of what allows the farm to undertake large technology projects like this is the staff specialization that being a sizeable farm affords, Saylor said.
But Hillcrest Saylor Dairy is nowhere near as large as the mega-farms possible in the wide-open spaces of Iowa, Texas and elsewhere in the West, where a single farm can house tens of thousands of milk cows.
Sandeen said farms of this size will likely never come to the Western Pennsylvania region. Instead, farmers in the area will have to continue to find ways to survive in a market dominated by giants.
“It is a challenge, but I think there are ways to do it,” Sandeen said, “and I at least hope that we’ll continue to see the small dairies that I think people appreciate having here.”
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