Dairy study eyes troubles, potential in Pennsylvania
ROCK SPRINGS, Pa. — During the Center for Dairy Excellence session at Penn State’s Ag Progress Days in mid-August, CDE’s executive director Jayne Sebright focused on the extensive study on growth and competitiveness. She began the discussions with the study’s key recommendations.
The study started in 2017 from leadership from the CDE and the Pennsylvania Department of Agriculture, and has been released in phases.
The study reviews historical data on performance, compares the industry with other key states, summarizes stakeholder opinions, assesses the economic impact of the industry on the state, and evaluates the potential of the Port of Philadelphia and the state’s milk marketing board.
Sebright reported that one key growth constraint appears related to farm size and farmers interest in their productivity. Opportunities to improve growth arise through resources for management education, information dissemination, and highlighting the opportunities for profitable investment in additional processing facilities. Also, strategic planning could envision goals and suggest actions for enhanced competitiveness. Evaluating existing demand-related programs and assessing the potential for value-added and branded processing investments may also leverage the existing farm structure.
The study noted that incentives for additional processing capacity in Pennsylvania exist, especially for Italian and specialty cheese plants. Significant economic benefits would accrue due to increased in-state processing of milk now shipped out-of-state. Also, investing in other cheese plants would reduce supply chain costs.
Regarding Pennsylvania dairy financial performance, Pennsylvania dairy farms tended to have lower return on assets, higher debt-to-asset ratios and lower current ratios than other states. Larger and more productive farms may be less resilient of economic stress than similar types of farms in other states. However, that analysis does not directly indicate the underlying causes or their management or implications.
Interestingly, stakeholders have diverse views regarding the drivers of Pennsylvania’s dairy growth. These include market access, regulation, farm structure, access to production resources and professional development. The key data requirements include a set of broadly accessible information about financial performance and processing capacity. Numerous diverse organizations support Pennsylvania’s dairy. However, other programs such as those in New York and Wisconsin might be considered.
The port of Philadelphia appears to have the capacity for substantial growth in dairy product exports. But despite its capability and market diversity, dairy export share departing from the Philadelphia port district had been less than 1 percent on a value basis during 2007 to 2016. However, its capability will be enhanced by expansions funded by the state government currently under implementation. Export increases, particularly those through Philadelphia, would augment benefits to Pennsylvania-produced milk.
Pennsylvania’s dairy industry contributed about 52,000 jobs, and $14.7 billion to the state’s economy in 2015. Increased processing would add substantial jobs and income.
The study did not find that price regulation under the milk marketing board is a major cause of declining fluid milk sales or decisions about the location of fluid milk processing.
The study was conducted by Chuck Nicholson and Andrew M. Novakovic of Cornell University and Mark Stephenson of the University of Wisconsin.
Pennsylvania Secretary of Agriculture Russell Redding commented that the forthcoming dairy development plan for Pennsylvania considers recommendations of the comprehensive study.
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