March 27, 2009

C.U. Extends Helping Hand to Farms

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Even though the University has had to deal with its own internal problems brought on by the current recession, the Cornell Cooperative Extension is still making a concerted effort to help New York dairy farmers cope with the downturn of the dairy market.
“The milk market over the last 10 years has developed a pattern of spikes and valleys in prices,” said Carl Tillinghast, executive director of the Franklin County branch of CCE. “This is our fourth cycle; we had experienced higher prices over the last year or two and now we’re bottoming out. Time will tell if the price goes back up and to what extent.”
Tillinghast said that on average milk prices were around $18 to $20 per 100 pounds of milk at this time last year and they are currently at around $11 to $12 per 100 pounds of milk, about a 30-percent decrease. The market does indicate that prices may improve by a dollar or two by June or July, but currently the price of milk is not sustainable. Depending on the farm, it costs at least $18 to $20 to make 100 pounds of milk, so right now for every 100 pounds sold farmers are losing around $6 to $8.
According to Anita Deming, executive director of the Essex County branch of CCE, during the low phases of the cycle some farmers go out of business. CCE is trying to get farmers access to services to help them through the recession. One of the ideas that they are promoting is the concept of profit teams.

“Profit teams are especially useful in the situations where farmers are trying to make changes on their farms to make it through these difficult times instead of selling out,” Deming said.

A profit team involves a team of professionals meet regularly to discuss the best management practices for a farm. For example, the nutritionists, veterinarians, farm staff, financial advisors and various other consultants would all get together to form a feasible monthly plan, and they would then meet every month to reevaluate the state of the farm.

Mark Stephenson, senior extension associate, said that what is happening in the dairy industry right now is a demand problem. Demand overseas in part has collapsed, as has some of the domestic market. According to Stephenson, in terms of the domestic market the impact of the economy on the restaurant trade is what has been most affecting the dairy market domestically. As people have stepped away from higher end restaurants to casual dining and fast food, the demand for restaurant dairy products such as higher end cheeses, has declined. However, as more people opt to eat at home, the sale of beverage milk increases accordingly.

Stephenson said that the international market has had a bigger impact. In the last two or three years the United States has become a significant world player in the export of dairy products, partly due to the rapidly growing economies of countries such as China and some of the oil-exporting countries. As most of those economies have collapsed as well, they have scaled back their dairy imports, which translates into a surplus of dairy products in the United States. New York state farmers now have to compete with other dairy farmers all over the country for their share in the east coast markets.

“It’s going to be a supply solution, which means we have to stop producing as much milk,” Stephenson said. “Farms will go out of business as a result of this; there are also farms that are reducing their herd size by a fair amount — that will ultimately be the solution until demand responds or the economy improves.”

To help the farms stay in business, the CCE is encouraging an alteration in management practices. Deming said the CCE can play a part in the profit teams serving in organizational and advisory capacities as well as by moderating between the different groups.

“Profit teams are a concept that is being used more and more,” Deming said. “Instead of being disjointed, the farm has one management plan that comes together, and it seems to be working well for farmers that are willing to commit to it.”

Tillinghast added that most farm managers that have stayed in business over the last 10 years throughout the various cycles have done so through skillful business techniques. They know to not over-expend when prices are good so that they can save some of their income as insurance against the times when prices drop.

According to Jason Huck, general manager of Cornell’s dairy plant, from a production standpoint Cornell Dairy is somewhat insulated from the effects of the recession in that they have a fairly fixed market selling their products on the Cornell campus. However, Stephenson noted that Cornell’s dairy farm only sells a portion of its milk to the Cornell dairy plant (10 percent, according to Huck) — the majority is sold in commercial markets just like any other dairy farm.