2023 was a tough and “below-average” year for many dairy producers in the Northeast. While they remain cautious heading into 2024, new processing capacity in New York and other opportunities across the region bring excitement and optimism to the dairy community.
“Many dairy producers came through 2023 with reserves from 2022’s higher income,” says New York dairy producer Dale Hemminger. “Going into 2024 is a mix of well-established dairies with very low debt levels and dairies with considerable leverage that are feeling pinched by higher interest rates and lower milk income. Economies of scale have most farms either getting bigger or exiting the business. We also have a sizable Mennonite and Amish community of dairy farm families that are concerned with the depressed milk price.”
Lower milk prices and high input costs are causing concern about the potential of another year of below-average margins, says Jayne Sebright, executive director, Center for Dairy Excellence in Pennsylvania.
“Farms in this area are financially weary after a challenging 2023, but I talked to a few who felt like the year ended up better than what they expected because of the improved margins that came in the fall months,” she says.
Pennsylvania dairy producer Katie Sattazahn agrees that margins are a concern.
“Some of our biggest concerns are the inability to control a majority of your driving factors such as weather, politics, margins and the continuously rising cost of inputs,” she says. “Sure, we use risk management, but it isn’t a silver bullet.”
Transition planning, labor availability and regulations, fewer replacement heifers and urban pressures are other challenges facing dairy producers across the Northeast.
“There are farms that do not have the next generation coming back, and I think a lot of that is due to low margins, physical labor demands and the time commitment involved in farming,” Sattazahn says. “It’s a double-edged sword as the older producer may not make improvements and the next generation doesn’t realize that there are better ways to farm.”
Sebright says her team at the Center for Dairy Excellence is seeing an increase in the number of farm families reaching out for help with transition planning and thinking about how to best position themselves for a future in dairy.
“More and more farmers are asking questions about how they can create opportunities for that next generation to come into the business and how to develop a business model that can support multiple generations,” she says. “Along with thinking through the ‘hard’ aspects of transition and business modeling, like financials, many farm families are also kept up at night working through how to navigate those ‘soft’ aspects, including family communication and creating empathy and respect among the multiple generations. To me, that is really positive because more farm transition plans fall apart because of soft issues, like the failure to see things from any other perspective but your own, than they do because of the hard issues."
Succession planning is also top-of-mind in Maine.
“One of the most pressing issues to Maine dairies is attrition that is exacerbated by the overall age of the average Maine dairy farm owner, the lack of transition and succession planning, and the difficulty inherent in planning for succession and transition when the farm is home and aging in place is the goal,” says Maine dairy producer Jenni Tilton-Flood.
Vermont dairy producer Will Gladstone says many of the dairies exiting the dairy business in his area are doing so because of finances or not having a next generation to continue the operation.
“This is a real issue facing many farms in our area, and having an interested next generation is a major concern for farms of all sizes,” he says. “Farming is certainly a lifestyle. Since the COVID-19 pandemic, wages for almost all jobs in our region have increased dramatically. In many cases, other jobs in the industry and outside of agriculture offer more time off and flexibility. I think this is a factor as the next generation looks at their future in the dairy industry.”
An increasingly competitive labor market with more jobs available than candidates to fill them presents significant challenges to employers in and outside of agriculture.
“This isn’t just a dairy farm issue,” Gladstone says. “We have to continue to look at new creative ways to find, hire and retain great employees. It doesn’t seem like it is necessarily entry-level jobs that are difficult to hire. Middle managers and people in the trades seem to be sparse. I believe there is a major competitive advantage for the dairies that have low turnover, a great culture and find the right people.”
In New York, state labor regulations continue to cause frustrations for dairy farm employers and workers.
“The minimum wage in New York state is 15 dollars per hour, and this will increase each year because of inflation,” Hemminger says. “In 2024, we are paying overtime over 56 hours per week. Every two years, the overtime threshold will drop by four hours – next to 52, then 48, then 44, until the overtime threshold reaches 40 hours per week. Employees are upset when their hours are held back and are saying they will leave the state if hours continue to be reduced. The state is offering a tax credit for overtime paid under 60 hours per week, but it is very cumbersome to utilize.”
Fellow New York dairy producer Curt Norton adds that many farms have employees “split part of shifts to keep hours down.”
“This does add some angst with employees about their hours being cut,” he says. “It also puts those of us in New York at a disadvantage to neighboring states with no overtime and a 10-dollar minimum wage.”
New York now allows farm labor unions.
“Most farms want to do as much as they can for their employees,” Hemminger says. “Recently, there has been union activity and labor activists’ practices that we have requested the state to review. We are moving forward hoping we can all help our industry proceed with a positive future.”
Environmental regulations are also increasing in the Northeast, including stricter concentrated animal feeding operation (CAFO) permitting in New York and water issues in Vermont.
“There seem to be new initiatives weekly that could have negative impacts on farming,” Gladstone says. “Clean water in the state of Vermont has been a major focus at the state level. The interpretations of rules aren’t always the same, which has led to confusion.”
Bright spots
Producers across the Northeast agree that the increased processing capacity on the horizon in New York from fairlife and Great Lakes Cheese brings much-needed excitement to the region. Some of the base excess programs are also adjusting to allow for increased milk production. Additionally, lower feed and other input costs provide hope that financial margins will improve.
“We have needed additional processing in New York for years,” Hemminger says. “Many small processors have closed in the last 20 years, and this has caused issues for many farms. We are excited about the additional processing capacity coming into our state.”
Gladstone is excited about the impact the new processing capacity will have on the Northeast.
“New competition for milk will hopefully have some incentives to return to our milk checks,” he says.
With new processing facilities to the north in New York and to the south in West Virginia, the Commonwealth of Pennsylvania is also hoping to attract new processing to their state.
“There is a lot of momentum in Pennsylvania to attract additional processing capacity and incentivize on-farm reinvestment and modernization,” Sebright says. “The state has committed to addressing some of the regulatory hurdles holding back the industry and to creating economic incentives for growth.”
Sattazahn adds, “Pennsylvania is home to many unique operations. We have larger farms that can specialize, medium-size farms that fit well with the land limitations in the state as well as small niche farms."
“While currently viewed as a negative by corporations, the number of farms we have is actually a huge safety net. Having more farms that milk is procured from means that if something disrupts one farm or region, there are still many others that can produce. Whereas that ripple can be greater when consolidation occurs if one large farm or region is disrupted,” she says.
In addition to opportunities for milk production growth, many dairy operations are also diversifying with beef-on-dairy, crop production, agritourism, on-farm processing and other opportunities to increase revenue.
Tilton-Flood says the greatest growth within Maine’s dairy sector over the past several years has been outside the commercial and cooperative model with diversified farms, direct-to-consumer and value-added businesses.
“In Maine and New England, I think the greatest opportunities lie in the regional appetite and demand for locally grown and produced dairy. Consumers here know the importance of our milkshed and take pride in calling their farmers their neighbors,” she says.
However, farmstead and direct-to-consumer opportunities are not feasible everywhere.
“There is a wider range of diversification occurring including on-farm processing, but that really does depend upon access to population and retail opportunities that can be difficult in sparsely populated areas,” Tilton-Flood adds. “For farms located near population centers, this can be a great option.”
Many smaller farms in Pennsylvania have diversified by adding an additional enterprise to their operation, such as poultry, agritourism or a value-added venture. Simultaneously, many other dairies in the state are steadily growing and looking for their next expansion.
“To capture opportunities in diversification, expansion and production growth, these farms are investing in technology to reduce labor costs, improve cow comfort, enhance efficiency, improve productivity and create new revenue streams in their business model,” Sebright says.
Norton and Hemminger have both invested in automation on their farms and are seeing more automation on other dairy operations across New York, including automated milking systems and rotaries. Additionally, automation helps to address labor-related challenges associated with their state’s agriculture overtime law.
Gladstone is also noticing an increase in new barns, parlors, retrofits and other technology.
“In talking with different barn builders and milking equipment dealers, there are a huge number of new milking centers on the books for 2024,” he says. “There is a mix of parlors being installed, but a large number of them are rotaries. Many dairies have invested in cow monitoring systems. Our farm is part of a peer group through Cornell PRO-DAIRY, and a number of our peers are feeding cows with self-loading mixers. They have seen labor hours associated with feeding decrease substantially. There certainly has been a lot of small to mid-size dairies switching to robotic milking over the last two to five years.”
Looking to the future, many producers and industry leaders find optimism in the caliber of youth and up-and-coming dairy leaders in the industry.
“We have a lot of ‘next generation’ farmers emerging who are either stepping into management or looking to come back to the farm. That always inspires optimism,” Sebright says.
Tilton-Flood agrees.
“For me, it’s the next generation and next crop of kids that brings optimism. Not just the ones raised on farms, but those who are looking to find a way onto a farm and into ag – not just as a participant but as a champion,” she says.
