The Glass is Half Full in the North Country

4/20/2013 7:00 AM

During the past two months, our Center for Dairy Excellence staff team spent a lot of time in the Northern Tier counties of Pennsylvania. For those who do not live in this region of the state, conversations among farmers and non-farmers in this area often turn to natural gas and land values.

This topic has brought significant change in Pennsylvania, especially if you are a dairy farmer. The Northern Tier counties, in particular, have a number of dairy farmer groups who meet regularly to talk about industry issues. The Center for Dairy Excellence was invited to join three such groups, with each a wonderful opportunity to us.

One group invited Emily Yeiser to join them for a day in late March. With a master’s in dairy science, Yeiser contributed to a discussion around growing more feed, in particular, soybeans. Raising more home-grown feeds was the most important area of improvement identified by the 1,100 dairy producers across Pennsylvania who responded to the center’s survey last year.

Producers in the Northern Tier are no different than producers in other regions when it comes to growing homegrown feeds, with the group meeting to discuss adding soybeans into the crop rotation.

The same week, a group of dairy farmers in the Northern Tier met to discuss dairy markets and options to consider for managing volatility and associated risk. Alan Zepp, the center’s dairy risk management programs manager, joined this round table where the discussion focused on milk prices during the summer and fall months.

With 14 percent of our U.S. milk supply being exported (approximately the amount of Wisconsin’s entire annual production), the conversation included exports, Northeast demand, Midwest weather forecasts and more. Current Class III milk future prices on the Chicago Mercantile Exchange for the upcoming season are at profitable levels for many farms, so these producers were looking to protect a portion of their milk production through risk management.

In early April, Zepp and I ventured north again to meet with a number of young dairy families to talk about dairy’s future in the region. In some but not all cases, asset management and family estate planning has become more complex with revenue from natural gas.

The interest around this table was about “risk” and how much to invest in a volatile dairy industry. While we were not there to provide all of the answers, we did talk about the opportunities to build successful businesses in dairy and what it will take in the future.

After the meeting with the young producers, Zepp and I visited a nearby dairy farm. What we saw was an example of a successful dairy operation, with optimal cow comfort and a balanced ration of feed available 22-plus hours of the day with twice-daily milk production above 90 pounds. This young family has built a business model positioned for long-term success.

Later that evening, we met with two seasoned dairy farmers who have extensive knowledge and experience in dairy. One of the producers commented, “The Northeast U.S. is the most enviable place to dairy in the world.”

The other farmer said, “The Northeast region of Pennsylvania currently offers some really unique opportunities for some young aggressive families who have what it takes to be entrepreneurial.”

Early the next morning, we arrived at a farm not long after sun-up. A few cars pulled in the driveway and what ensued was one of the most dynamic dairy profit team meetings, I have had the privilege to participate in. Three generations of farm family ownership, along with a number of trusted advisers, sat at the table for 90 minutes together.

We poured over herd performance and financial reports, talked about areas of success, and identified areas for renewed attention. Financial performance was discussed, as well as strategies for managing potentially volatile markets later this year.

As we headed south that day and discussed our trip, it became apparent to us that, even with the influx of the natural gas industry, dairying in the Northern Tier is very similar to dairying elsewhere in Pennsylvania. Profitable dairy farm businesses exist in all regions of the state, and they’re looking to capitalize on the opportunities awaiting the industry.

While challenges are real and different on all farms, we believe that, both in the Northern Tier and across Pennsylvania, the preverbal glass remains half full — and it will continue to be filled with milk.

Editor’s Note: John Frey is the executive director for the Center for Dairy Excellence.

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