Dairy downturn slams W.Pa. farmers – By Stephen Huba (triblive.com) / June 17 2018
Even without the large fans, a steady breeze blew through the barn of Graham Dairy Farm in Fairfield Township — cooling the last of Robert Graham’s milking cows.
The winds of change, however, have not been as kind.
When Graham sold most of his herd four days before, the last of the Ligonier Valley dairy farms went out of business.
“When I graduated from (Laurel Valley High School) in 1980, there were 24 dairy farms in this valley,” he said. “I’m the last one.”
Graham contemplated the sale for some time. But in the past year, it became apparent that larger economic forces were arrayed against him. Waiting out the latest dairy industry downturn was no longer an option.
“The cumulative effect of having four years of poor milk prices have caught up with the industry,” he said. “We should have had at least one really good year in that cycle. We never had it.”
Although he would not disclose the sale price, Graham said his herd of about 110 milking cows was worth only half of what it was in 2015. He said goodbye to the last of them Wednesday. He kept about 10 cows, mostly show cows for his children.
“I was pretty much mentally prepared for what was going to happen,” he said.
More than half of the cows, including all of the bred heifers, will be sold by Rockwood broker Adam Luce to other dairymen. At least a third will be sent to slaughter, he said.
The Grahams’ cows weren’t just milk producers. They had names. Last weekend, their daughter Lauren, 16, said goodbye to Pumpkin, a 7-year-old Jersey that was born on the 187-acre farm.
“That was one of her first show cows,” said her mother, Christa Graham, 48. “She was a champion for her in 4-H at the county fair.”
Market sours
In 2014, milk prices — what the market was willing to pay the farmer — were at their highest recorded level in Pennsylvania, the nation’s sixth-largest dairy producer.
That price dropped 28 percent in 2015 and continued to go down, according to the Penn State Agricultural Extension.
Other factors also conspired to hurt the small dairy farmer — a glut of fluid milk in the United States, a decline in foreign exports, a shift to low-fat milk by American schools, increasing competition from almond and soy milk and, ironically, improved efficiencies from better technology.
The combination of high production levels and declining demand for whole milk have kept prices low, although milk production in Pennsylvania started dropping this year, said Jayne Sebright, executive director of the Harrisburg-based Center for Dairy Excellence .
Another sign of the downturn was the fact that, a year ago, local dairy processors such as Galliker’s and the now-defunct Colteryahn started cutting loose certain dairy farms that sold to them. They said the statewide surplus of milk and depressed prices forced their hand.
At the start of 2018, market conditions were such that some experts predicted a large sell-off of dairy herds in Lancaster County, the state’s dairy capital, and other counties.
Pennsylvania lost 200 dairy farms total in 2016 and 2017, according to the Center for Dairy Excellence. At the end of 2017, there were still 6,570 dairy farms in the state.
The downturn hit family farms especially hard, said Phil Taylor, farm business consultant for the AgChoice Farm Credit office in New Stanton.
“We have seen statewide and regionally more liquidations than we would see in other years … generally smaller farms. Most of that’s economics-driven,” he said.
Some farmers who are nearing retirement age are moving up their retirement because of the dairy downturn, Taylor said.
“Dairy farmers are price takers, which means they have very little influence on what they’re getting paid for their milk,” Taylor said. “The things they can control, such as the breed of cow, don’t have much of an impact. The vast majority of the price makeup, they have very little control over.”
Robert Graham agreed.
“Everybody’s guaranteed a profit — the retailer has a profit, the processor has a profit,” he said. “The farmer’s the only one that’s not guaranteed a profit. He gets what’s left.”
Changing times
Graham said he used to make a good living at dairy farming. His grandparents, Paul and Dorothy Graham, bought the farm in 1934. His parents, John and Roberta Graham, took over in the 1970s.
Graham has lived on the farm for 45 of his 56 years, so it was only natural he should take over in the late 1990s. His family always shipped through farmer co-ops, which used to be local in scope.
His grandfather shipped through a farmer-owned co-op in Greensburg called Westland Dairy. In the mid-1970s, it joined a regional co-op known as Milk Marketing Inc., which covered Michigan, Ohio and Western Pennsylvania.
By the time Graham took over, he was shipping through Dairy Farmers of America , a national co-op that processes about a quarter of the nation’s milk. The trend in dairy farming, he said, has been toward consolidation and bigger farms.
“The economies of scale cannot be denied,” he said. “Anytime you start getting up above 2,000-3,000 cows, you’re talking a lot of economic advantage.”
Even at its best, Graham Dairy Farm produced about 7,000 pounds of milk a day, or 70 to 75 pounds per cow.
Milk is typically priced and sold in 100-pound increments, which equals about 12 gallons.
A snapshot of DFA membership herd size in December 2017 shows the overwhelming advantage of what Graham calls megafarms: The largest 115 farms, with an average of 4,825 cows, can produce as much as the 7,448 smallest farms, with an average of 75 cows.
After prices peaked in 2014, Graham had to borrow money in 2015 and 2016 to pay the bills. With each passing year, the bank looked less favorably on his business. The financial strain he felt from a divorce didn’t help.
“Lenders start to look at your balance sheet, and the balance sheet is upside-down right now because your biggest asset, the cattle, have lost half their value,” he said.
Graham knew that if things didn’t change in 2017, he would not be in business in 2018. But milk prices stayed low, forcing him to make a decision.
“I decided to put everything I had left into the farm and see what happened, and nothing really happened,” he said.
Life, interrupted
A personal tragedy during the crucial 2015 growing season added to the family’s difficulty. A wrong-way driver killed Christa Graham’s ex-husband, Ligonier Township police Lt. Eric Eslary, while he patrolled on Route 30.
Eric and Christa’s three children — who are Robert Graham’s stepchildren — worked through their grief on the farm.
“You have to give those kids credit,” Robert Graham said. “In the mornings, they still got up and fed the calves that whole week.”
“This farm is what really got those kids through that,” said Christa Graham, who married Robert in 2010. “The last three years have been horrible. That’s what makes this so hard.”
The family hopes to keep the farm running, albeit on a smaller scale. They may use some of the cows they kept to tap into the raw milk craze, Christa Graham said.
“You put your whole life into this, so what do you do now? You have to go find another job,” she said. “It’s your livelihood, your life.”
http://triblive.com/local/westmoreland/13748580-74/dairy-downturn-slams-wpa-farmers
