Milk Price Drop Jolts Dairy Farms
Mar. 17, 1999
PITTSBURGH (AP) _ Dairy farmer Martin Marburger has no choice but to lose money with the severe plunge in dairy prices this month.
``If we keep all the cows, we'll lose money,'' said the 80-year-old head of Marburger Farm Dairy Inc. north of Pittsburgh. ``If you take 30 percent off your income and your costs stay the same, you can't possibly meet your bills.''
Farmers who enjoyed all-time high milk prices when supply lagged behind demand last year are experiencing the downside now in Pennsylvania, the nation's fourth-largest milk producing state behind California, Wisconsin and New York.
The federally calculated base price of milk dropped by 37 percent in March, the sharpest decline from one month to another in the industry's history.
``It's the most dramatic price swing ever experienced,'' said Joel Rotz, dairy specialist with the Pennsylvania Farm Bureau.
Farmers are receiving $10.27 per hundred pounds of milk _ the same level as in the early 1980s _ down from last month's base price of $16.27.
``That price pays the farmer for his labor and his whole operation,'' said Marburger, whose ancestors established his farm in 1842 in Evans City, Butler County.
The farm _ one of 10,200 in Pennsylvania _ started producing milk in 1938.
``We have some 150 cows, and we buy milk from 60 other farms. I don't know what we'll do, except lose money,'' he said.
Producers do have a cushion waiting for them. Congress included $200 million for dairy producers in last year's emergency farm aid package. Agriculture Secretary Dan Glickman is still deciding how to distribute the money.
The stress caused by last year's severe drought in California and Texas last year caused cows to either stop producing milk or to produce less. With supplies down, milk prices jumped to $17.34 per hundred pounds by December.
Now the oversupply of milk has reduced prices.
Jim Dunn, a Pennsylvania State University professor of agricultural economics, said economists and farmers knew supply would catch up with demand as states recovered from the drought, but no one expected such an abrupt price decrease.
Ron Kopp _ who cares for 140 cows with his brother, Jay, at a farm near Harrisburg _ said the plunge means he's back to breaking even or losing money.
Rotz said Pennsylvania's dairy industry is lobbying the state Legislature to let the state join the Northeast Interstate Dairy Compact, which is designed to protect farmers from fluctuating milk prices. Membership in the compact must be approved by the Legislature and Congress, Rotz said.
``Farmers are in trouble for the short term,'' he said. ``Even if the compact passes, we still need approval from Congress, which is not expected until late summer.''
Dunn said farmers need not panic by laying off workers and selling cows. Economists predict the price will stabilize at about $12 per hundred pounds which, combined with low feed corn costs, will let farmers stay afloat and make money.
``The big thing is just how fast it fell,'' Dunn said. ``It doesn't look like 1999 will be a bad year for dairy.''