Md. milk industry thirsts for assistance

Price supports, tax credits work elsewhere in East

Decline Of The Dairy Farm

December 23, 2007|By Ted Shelsby | Ted Shelsby,SPECIAL TO THE SUN

Maryland officials looking for ways to save state's dairy industry need only cast an eye on Pennsylvania and several other East Coast states for guidance.

Measures taken in other states include tax credits for farmers, the setting of a minimum price that farmers are paid for their milk and subsidies to farmers. Officials say such programs are good for business because farming makes significant contributions to those states' economies.

Moreover, officials say, the programs help the states meet consumer demand for an adequate supply of locally produced milk and preserve rural land.

Maryland has lost 85 percent of its dairy farms since 1970, and agriculture officials here predict that 15 percent to 35 percent of the remaining farms will go out of business within the next decade.

The reasons for the demise of Maryland dairy farms are the same as in other Eastern states: low milk prices, rising production costs, declining milk consumption and the rising cost of farmland.

Milk is a big business in Pennsylvania, the nation's fifth-largest producer with farm-level sales of $1.7 billion last year. Milk accounted for 42 percent of the state's agriculture sales and pumped $4.2 billion into Pennsylvania's economy last year.

But, as in Maryland, dairy farms had been disappearing for years.

"Something had to be done," said Pennsylvania Agriculture Secretary Dennis Wolff, a dairy farmer who was experiencing the industry's problems firsthand.

"A lot was at stake. Dairy has a huge ripple effect on our economy. We had to find ways to regrow our dairy industry."

Pennsylvania swiftly took several steps, including establishing a private, nonprofit organization that focuses on ways to make the dairy industry stronger and more profitable. One of the first steps of the Center for Dairy Excellence was setting up "profit teams" that meet with farmers and advise them on ways to boost production and profits.

About 80 such teams are in operation, each consisting of a banker or financial adviser, a veterinarian, a nutritionist, a facilitator, and a retired business person or university extension agent.

"They serve like a board of director," said Peter Witmer, executive assistant at the center. "They bring a business climate to the farm. The farmer makes the decisions, but he is not operating as a lone wolf. Five minds are better than one."

The teams suggest ways to add value to a farm, Witmer said. An idea could be as simple as advice on a heat-abatement program to keep cows cool in the summer.

"If a cow is too hot, they produce 20 percent to 30 percent less milk," he said.

Last year, Pennsylvania established a subsidy program that pays farmers in two northeastern counties - Bradford and Tioga - a bonus of $3 per hundredweight if they increase their production by 5 percent.

"That was a pilot program," Wolff said "We are now working on an economic-impact study of the program to determine if we should do it throughout the rest of the state."

The center's notable accomplishments include:

An increase in milk production per cow of 818 pounds in 2005 and 688 pounds last year. Taking advantage of economies of scale, farmers earned $149 more in profit from each cow as a result of the increased production.

Stabilization of the state dairy herd at more than 559,000 cows.

An increase in milk production of 750 million pounds last year. That is equal to about 70 percent of Maryland's total production in 2005.

Last year, Pennsylvania teamed with New York and Vermont to look for ways to get a bigger piece of the milk market in the Northeast.

Pennsylvania has set a goal of increasing milk production by about 20 percent, to 10.8 billion pounds, by the end of next year. It also wants to boost each dairy farm's return on assets to between 8 percent and 10 percent.

"We know that most farms are way below that," Witmer said. "They are lucky if they are in the 2 [percent] to 4 percent range."

Steps taken in other states include:

South Carolina offers its 82 dairy farmers a tax credit of $10,000 or more when the price of milk drops below a target price of about $16 per hundredweight.

"We were in a pretty desperate situation," said Beth Crocker, general counsel for the state's Department of Agriculture. "Our farms were disappearing rapidly."

The key points in getting the tax credit through the state legislature were the retention of a local source of milk and keeping retail prices down by reducing the transportation costs of milk shipped into South Carolina from other states.

"The legislature rallied around the farmers because they really thought we were going to lose a lot of our local milk production," Crocker said.

In May, Massachusetts Gov. Deval L. Patrick signed emergency assistance legislation that uses general fund monies to pay its approximately 180 dairy farmers a subsidy of about $20,000 each when the price they receive for their milk falls below a certain level.

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