Coronavirus pandemic threatens Pennsylvania’s already vulnerable dairy farms
“Maybe that’s what hurts the most – it wasn’t anyone’s fault… Now it’s like, ‘Huh. We really can’t win. – Donny Bartch, a farmer in Perry County on the effects – psychological and economic – of the COVID-19 outbreak.
The successes really keep coming for dairy farmers in Pennsylvania.
As it looked like they were on the verge of pulling out of a broad dairy recession that has already caused the number of operating dairy farms in Pennsylvania to drop more than 10%, the coronavirus pandemic has completely shut down major market sectors, including schools, restaurants and office cafeterias – buyers of one-third or more of the milk from many dairies.
This had the effect of upsetting again the supply / demand balance that had just been reset, with expectations that milk prices are heading into the dangerous areas seen in 2017-18. This assumes that farmers are fortunate enough to still have a market for their milk.
In an extraordinary milestone earlier this month, local processor Harrisburg Dairies asked all of its suppliers to throw out their milk for two consecutive milking cycles, mostly due to school closures.
“We’ve lost the equivalent of about three school business states, and it’s really disrupting the way you manage the flow of your products,” said Alec Dewey, president of the Harrisburg plant which made headlines in 2018 for the rescue of some struggling farms. Schools, Dewey said, account for about 40% of dairy sales by volume during the school year.
There has been some growth in grocery and other retail sales in the meantime, “but it was a mile from what we lost in the restaurant business,” Dewey said.
In a normal year, during the summer months, the dairy will reduce its additional purchases from the larger regional co-ops and use the sales to other processors like ice cream makers or butter factories to lead to well the farms it has under contract. But there was no way to make those adjustments fast enough last month. with the sudden closings of schools.
“Four days in a row (April 2-5) we dumped milk for all of our farms,” Dewey said. “We haven’t had to do it since, but it will probably be week to week until the summer.”
It seemed like the moment that brought the reality of the pandemic back to Bartch and other farmers in the region. What is irritating is that it happened just as many in the company felt their fortunes were finally starting to turn.
The industry had already gone through a painful downturn in recent years. Some 470 dairy farms left the company in 2019 alone, bringing the current number of operating dairy farms in Pennsylvania to 5,730. This was after an almost 20% drop in the number of farms from 2008 to 2018.
But prices had rebounded by the end of 2019 to break even points, new global export deals had been signed, and some farmers were waiting for a year in which they could not only catch up on the losses of recent years, but start getting ahead. .
“It looked like 2020 was going to be the first truly strong year for dairy farmers in the past five,” said Jayne Sebright, executive director of the Pennsylvania Center for Dairy Excellence.
“At the start of the year, we saw milk prices climb to $ 18, $ 19, $ 20 per cwt (100 pounds of fluid milk), which is more than the cost of production. And then, over a period of about three weeks, when the COVID outbreak started happening, we saw milk futures prices for the coming year drop to the ground and they actually are. at the lowest level they’ve been in the last 10 years. “
Supply is suddenly around 10% higher than demand, according to some estimates. “It’s not just milk sales at school. It’s the closing of restaurants. … These are the food establishments that have closed due to COVID-19. We’re really talking about a widespread loss of key markets for dairy, ”Sebright said.
And just like that, all prospects for short-term profits seem to have faded on the vine.
Bartch said that where he was paid $ 19 per hundred pounds this winter, the May futures brought the farm gate price down to around $ 13.
The problem, for some, is that due to the trend reversal, many have opted out of a federal insurance program that guarantees them the cost of production in a bad year. “Hardly anyone has signed up for this,” said Steve Nealy, a Cumberland County farmer, a member of the Maryland & Virginia Milk Producers Cooperative. “Right now, looks like, man, we should have done it.” “
According to the Pennsylvania Department of Agriculture, only 15 percent of Pennsylvania dairy farmers have enrolled in the Dairy Margin Coverage program.
“We got back to the bottom of the shaft and managed to dig a little deeper,” said Bartch, who, at 38, is the fourth generation to operate his 1,000-acre Merrimart Farms near Loysville County. by Perry. His farm made headlines for all the wrong reasons on April 2, when Bartch, like all farmers in Harrisburg Dairies, had to empty its tanks for the first time for purely economic reasons.
Harrisburg Dairies was not the only one. Clover Farms, a Reading-based dairy that sells produce in eastern Pennsylvania and New Jersey, and the Dairy Farmers of America Co-operative have also been forced to ask farmers to throw away milk since the start of the epidemic.
Some other processors, including Dean Foods – the national company that produces milk through a network of factories that in Pennsylvania are found in stores like Walmart and Giant – and the Maryland & Virginia Co-op, were able to avoid the milk dumps. from Friday. , they said.
As painful as the dumping has been for the farmers concerned, it is in fact a much better short-term solution than the alternative, which would be to end the dairy contracts with the farms and force them to find new places to get their milk in a depressed market. where there might not be any takers.
“The processor might say, ‘We’re going to cut these farms,’ and then that would be long-term harm,” Sebright said.
Industry leaders are also trying to redirect as much fluid milk, butter and cheese as possible into the network that provides charitable food distributions through local pantries.
Either way, most farmers can at least expect to receive a lower price for their produce.
But these are probably not the kind of tools that will help farmers – many of whom are already in extremely vulnerable financial circumstances due to the recent “dairy depression” – weather this storm for nearer than expected duration.
They will need to be complemented, according to agricultural industry advocates and policymakers, by a combination of other measures such as paying farmers who have cut milk production by 10% from their March baselines an additional subsidy. for the rest of their milk; forgivable loans to dairies who continue to buy from their current farms, similar to the new paycheck protection program to cover small business payrolls.
These two measures were called for last week by two major dairy trade associations: the National Federation of Milk Producers and the International Dairy Association.
Others called for measures like a forbearance period on farm debt obligations; or reopening windows allowing farmers to obtain production cost insurance.
“This is a national crisis that requires a national response,” Secretary of State for Agriculture Russ Redding told PennLive in a recent telephone interview.
And the key is to build a bridge that will help farmers – who are by definition in a business built for the long haul – weather the current crisis.
“Dairy products can’t just turn off cows. He cannot just shut down dairy farms and expect them to reopen in two months. It doesn’t work like that, ”Sebright said.
She and Redding both maintain that Pennsylvania’s fundamentals as a dairy state remain strong: it is close to the huge population centers of the east coast; there is a critical mass of farms (5,730 entries this year) to support the necessary support businesses; and there is still a good core of dairies and other processors.
“As soon as the channel opens up to do any type of food service, I think the market will respond immediately,” Redding said. “It’s not a fundamental flaw inside the marketing plan. It’s an interruption of the marketing plan, and that’s where I take a kind of hope and optimism … that as soon as we will have a new normal in this market, people will want to eat dairy products.
“We just have to struggle during this time, especially to reclaim the restoration side in some form or another” and, in the meantime, try to prevent another cohort of farmers from making immediate decisions that have generational consequences. , Redding said.
This will require the cooperation of all parties: the federal government immediately pumping money into the system through the bailout; farmers are smart about their production levels, deferring maintenance and other costs; and communications from cooperatives and other processors to farmers regarding market expectations.
“It’s chaotic. Everyone looks for certainty at a time when you can’t give it to them. It makes it really tough if you’re in a business where it’s not just about today and this season and the year. This is a generation. And that’s what worries me, “continued the Secretary of Agriculture.” It’s a generational decision people are going to make today: ‘Can I stay here? Should I stay here? ‘
“So the stress levels on the farms were high before, it’s overwhelming now to find some peace of mind in this storm. “
Bartch is one of the many family farmers who have asked the US Small Business Administration’s paycheck protection program for a potentially recoverable loan to cover short-term costs, and he is also considering the early sale of some herds of Merrimart cattle to other breeders. The farm employs the equivalent of approximately 9 full-time employees.
One thing he doesn’t do?
To give up.
The farm is engaged in its normal spring planting and continues to milk the herd as usual.
“It’s trying to buy time,” he explained in an interview last week.
“I believe the economy is still strong when we get back on the road. We have already been through difficult times. We kind of know how to get our nose in the grindstone and we’re going to try to do it here, “Bartch said.” But how long can we stick with that kind of pace? There’s a certain level here where it’s like we have to wait and see.