PA Ag Secretary Outlines Recommendations to Help America's Dairy Farmers in Congressional Testimony

Redding says Low Milk Prices, Other Factors Hurting Next Generation of Farmers

HARRISBURG, Pa., April 20 /PRNewswire-USNewswire/ -- Pennsylvania Agriculture Secretary Russell C. Redding testified today before the U.S. House of Representatives Committee on Agriculture, saying historic challenges facing the dairy industry warrant aggressive actions to reform policy and pricing mechanisms that will ensure a viable future for the nation's producers.

From falling milk prices to depressed land values, Redding said the combination of economic factors impacting the industry has created difficult operating conditions for farmers across the state.

"Dairy farm families have faced one of the most challenging periods in history," said Redding. "The overall loss of cash-flow, coupled with losses in real estate values, has diminished or nearly eliminated equity on some of our most progressive and forward-looking farms. After a slight increase in milk prices at the turn of the year, prices are beginning to erode again, making it difficult for producers to rebound."

Redding told of one family-owned dairy farm in Lancaster County that expanded just before the current crisis took hold. The family had a sound business plan and sufficient capital, but after milk prices plummeted, the farm was only able to generate a margin of $6.50 per hundredweight, or less than half their expected margin of $13 per hundredweight -- which had been a conservative estimate before prices crashed.

The depressed margins greatly altered the family's ability to operate and bring the owner's two children on board as partners and managers, factors which Redding said will hamper the next generation of farmers or lead them to leave the industry.

"This story is not unique to the family in question and is, in fact, playing out on numerous farms in Pennsylvania – with much more dire results in many cases," said Redding. "We must look at bolstering existing programs and exploring new ways to maintain a vibrant dairy industry.  Most of the dairies that have survived to-date will find it difficult to say the least to make it through another downturn, especially one as protracted as the crisis we are still working through."

Redding said that, under Governor Edward G. Rendell, the commonwealth is working to ensure the Pennsylvania Milk Marketing Board uses its full authority to return a larger percentage of the state-mandated premium to dairy producers. The Governor's proposed changes to the over-order premium policy could return as much as $7 million to Pennsylvania's producers, or an average of nearly $1,000 per farm.

Redding's testimony today was part of the state's ongoing effort to secure the help of Congress and the USDA to take advantage of options available in the Farm Bill to bolster the country's dairy industry.  In his testimony, Redding offered several suggestions, including:

• Encouraging dairy producers to use risk management tools such as LGM for Dairy and the Dairy Option Program; and asking USDA and Congress to aid producers by supplementing the costs of risk management.
• Improving price discovery with a reliable and transparent method for dairy commodities. Rather than relying solely on the Chicago Mercantile Exchange to set the price of dairy, information from the cash and futures markets, pricing surveys and input cost calculations should also be used to reflect the current market conditions of supply and demand.  

"The current systems used to discover prices, manage risk, protect farm income, secure financing, and bolster farm equity must be revisited before we can truly move past this crisis," Redding told the committee. "Agriculture is a business without walls, but it is every bit a business. We must take steps to ensure that our farmers have access to the capital and resources needed to survive today so they can thrive tomorrow."

For more information about the dairy industry in Pennsylvania, visit the Center for Dairy Excellence at www.centerfordairyexcellence.org.

Media contact: Justin Fleming, 717-787-5085

SOURCE Pennsylvania Department of Agriculture