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Solutions take shape for Pa. dairy crisis

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Based in Lancaster County, Kreider Farms has been stepping up its efforts to make new dairy products to satisfy changing consumer tastes.
Based in Lancaster County, Kreider Farms has been stepping up its efforts to make new dairy products to satisfy changing consumer tastes. - (Photo / )

For some dairy farmers in Central Pennsylvania, the old adage of “don't put all your eggs in one basket” has an almost literal meaning.

As they face sustained low prices on fluid milk amid shrinking demand, dairy farmers are exploring how to keep operations afloat, short of selling off their herds, a fate some midstate farmers have already chosen. Diversification, equipment upgrades and other solutions to sell more milk also are on the table.

More recently, the Wolf administration has introduced initiatives to better support dairy farmers, such as grants, marketing campaigns and incentives to draw milk processors to Pennsylvania.

Like the broader agricultural industry, dairy production has historically been a key contributor to Pennsylvania’s economy. In 2015, the most recent year for which data is available, dairy production in the state brought in $14.7 billion and employed more than 52,000 people, according to the Harrisburg-based nonprofit Center for Dairy Excellence.

But while the state’s dairy industry may look strong by the numbers, dairy farmers are facing mounting challenges, chief among them being low demand.

Consumption of fluid milk – the stuff that is sold in cartons in school cafeterias and by the gallon in grocery store coolers – has been on a downward trend in the U.S. over the past five years or so, said Jayne Sebright, executive director of the Center for Dairy Excellence.

“We’re producing more milk … but at the same time the places where we’re selling our fluid milk are declining, so the balance is off,” said Sebright, who noted that the imbalance has made milk prices increasingly volatile.

Dairy diversity

To cope with a tough market, dairy farmers have a number of options, said Cheryl Cook, deputy secretary for market development at the Pennsylvania Department of Agriculture.

“If you come to the conclusion you can’t keep doing what you were doing, you have a choice: You can convert to organic, cut your herd back and have a more labor-intensive, exclusive product; join a cooperative; go further into debt to try to expand; or you can add value to your product so you’re less into milk and more into yogurt and cheese,” Cook said.

Leaders at Lancaster County-based Kreider Farms realized they needed to switch things up about five years ago. They took a value-added route by creating new products on top of their regular fluid milk varieties.

Kreider also revamped branding on existing products to latch onto consumer trends, like a desire for natural, locally sourced products. The trends have fed growth in rival “milks” made from processing almonds, soy, oats and other plants, all of which have chipped away at cow milk’s market share.

“Whenever you go into a grocery store, you see that the dairy case continues to fragment into more and more milk-alternative products,” said Dave Andrews, Kreider’s vice president of sales and marketing.

Competition in traditional fluid milk also is heightening, with the southwestern U.S. emerging as a rival to Pennsylvania’s dairy industry, both Andrews and Sebright pointed out.

Kreider, a third-generation family-owned dairy and poultry farm that owns over 3,000 acres of farmland across Lancaster, Lebanon and Dauphin counties, first rolled out lactose-free milk in June 2016. Next came a line of Kreider’s iced coffee (with milk added, of course). This past summer, the company introduced a variety of flavors of drinkable yogurt, and it also produces lactose-free ice cream.

“We’re trying to push back and say we’ve got plenty of cows and milk here … If products are being shipped in from out of the area that are addressing needs that we’re not meeting, then we need to address that and produce those products locally,” Andrews said.

The decision to add new products coincided with equipment upgrades and additions for milk processing, all of which Kreider does in-house. Andrews said the company spent several million dollars on new tanks, new pipes, new flooring and new filling machines for its milk plant and a new ice cream freezer that is four times the size of its old one.

Another common way dairy farmers have coped is by adding poultry. Cook praised expanding Lebanon County natural poultry producer Bell & Evans for providing a market for struggling farmers whose decisions to add chickens have eased the strains from dairy production.

Kreider, which has maintained an egg-laying flock since its founding in 1935, took its chicken operations one step further around the same time it decided to add new dairy products. It rolled out Noah’s Pride, a new brand of USDA-certified organic, cage-free eggs, whose packaging features a black-and-white photo of Noah Kreider Jr. and Noah Kreider Sr., the father and grandfather of current Kreider Farms CEO Ron Kreider.

Kreider, which today employs just under 500 people, also has leveraged its principles of authenticity and history through ramped-up social media marketing and promotion of farm tours. Plus, its products have only ever been available within a roughly 150-mile radius of its operations.

“Our philosophy is not to produce extended shelf-life milk products. We know we’re local farm fresh, a real farm,” Andrews said.

State initiatives

What the state wants to do

The state has proposed two plans for boosting dairy, one from the Department of Agriculture and one from the office of Gov. Tom Wolf.

Agriculture Secretary Russell Redding’s Dairy Development Plan calls for:

  • using existing funding for grants and loans to support dairy innovation
  • advocating for trade policy certainty
  • incentives for existing producers to upgrade their dairy equipment and facilities and invest in on-farm processing capacity
  • streamlining and reform of Pennsylvania’s regulation of the sale and marketing of dairy products
  • broader marketing efforts to promote the sale, consumption and health benefits of Pennsylvania milk
Wolf’s plan to secure the future of farming in the state includes:
  • rebuilding and expanding the state’s infrastructure, including roads, bridges, ports and broadband to connect farmers and draw processors to new markets
  • an initiative to promote new and existing jobs in agriculture
  • removing unnecessary regulatory burdens and strengthening the state’s business climate
  • establishing business succession plans on farms and throughout the food system
  • creating more processing capabilities to accommodate a growing animal agriculture and protein sector
  • making Pennsylvania the nation’s leading organic food-producing state

Wolf also unveiled a program that will provide $5 million in grants in an effort to help farmers grow and diversify.

On the policy level, a bipartisan effort has taken hold to support Pennsylvania’s dairy farmers, Jayne Sebright of the Center for Dairy Excellence said. The center provides grants and other support for innovation on farms.

“What I think is really encouraging is the discussion around dairy happening across departments, across the legislature, into local government and local planning commissions,” Sebright said.

In August, Gov. Tom Wolf and Agriculture Secretary Russell Redding simultaneously unveiled plans to boost the state’s dairy industry and farmers overall. Both plans include an emphasis on strengthening infrastructure, streamlining and removing regulatory burdens, incentivizing in-state milk processing and upgrades for larger, out-of-state processors; and committing funding to research, marketing and outreach.

Lighthearted marketing campaigns like “Choose PA Dairy: Goodness that Matters” and an “ice cream trail” showcasing local creameries have also boosted awareness about the value of the state’s dairy industry, said Cook.

While Andrews alluded to potential renewed interest in whole milk for its proteins and other health benefits, dairy farmers aren’t out of the storm yet.

“There have always been challenges in agriculture,” said Andrews. At Kreider, “we feel that what we’re doing is hopefully leading the way in inspiring other farms to maybe try to do what we’re doing.”

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Becca Oken-Tatum

Becca Oken-Tatum

Becca Oken-Tatum is the web editor for the Central Penn Business Journal. She also coordinates and writes for CPBJ's monthly Young Professionals e-newsletter. Email her questions, comments and tips at btatum@cpbj.com. Follow her on Twitter at @becca0t.

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