Shopper Save, Farmers Suffer

The past year has been rough on Lancaster County dairy farmers, as astute shoppers might have deduced at the supermarket. The price for a gallon of milk has dropped 60 cents since reaching record levels in 2014, according to the Pennsylvania Milk Marketing Board.

In recent months, the drop in price has translated into a 40 percent pay cut for dairy farmers, the U.S. Department of Agriculture reports.

For many farmers, sales have not paid for the cost of producing milk, forcing them to draw down savings, extend lines of credit or go out of business.

That’s a big deal in Lancaster County, the eighth-largest dairy producer in the United States, with all of the other top 10 milk-producing counties in the West. According to the 2012 Census of Agriculture, there were 110,805 milk cows on 1,878 farms in Lancaster County, producing about $400 million in wholesale milk sales.

Lower farm incomes are felt by the larger community, as about 85 percent of farm income goes to support local businesses and the community tax base, according to the Pennsylvania Center for Dairy Excellence.

Costs remain

Mike Brubaker, in partnership with his brother Tony at Brubaker Farms in

Mount Joy, has been on the front line of those price shifts.

“The general rule of thumb is our dairy has 60 to 65 percent of our income as it was two years ago,” he said.

The farm’s bills for feeding its herd of Holsteins have dropped some, and

equipment upgrades have been delayed, Brubaker said, but “our costs are not one-third less.”

Still, it’s business as usual for Mike and Tony Brubaker. They and their employees have 950 cows to milk and feed, along with crops to tend. They also raise broiler chickens as another source of income.

Supply and Demand

About half of what grocery shoppers pay for the Brubakers’ milk returns to them. The other half pays for transporting, processing, packaging and selling the milk, according to Chuck Nicholson, a professor of supply chain management at Penn State’s Smeal College of Business.

Overall supply and demand, both domestically and in the export market, determine what prices farmers are paid.

Store prices follow that trend, with slight delays in increases or decreases. Wholesalers and retailers also will “smooth” prices to avoid sudden, dramatic changes, Nicholson said.

Their profit margins are the largest when the prices paid to farmers are the lowest, he said, which is one reason the topic is popular among farmers this year.

In addition to producing milk, Mike Brubaker is on the governing board of the 325-member Mount Joy Farmers Cooperative.

“Anything we can do to return more to the farmer, we try to do,” he said. “It’s not easy. … At times like this, you look under every rock to save some money.”