HARRISBURG — Bankruptcy filings by two of the country’s biggest dairy producers — Borden Dairy and Dean Foods — show the need for immediate action to strengthen Pennsylvania’s dairy industry, the chairman of the state’s dairy future commission told lawmakers on Tuesday.
Borden Dairy announced Monday that it is filing for bankruptcy protection. The announcement followed the bankruptcy of Dean Foods Co., the nation’s largest milk producer, in November. Dean has a milk-processing plant in South Pymatuning Township.
The dairy industry’s issues came up this week at a legislative hearing held at the Pennsylvania Farm Show, the nation’s largest indoor agricultural expo, running all this week in Harrisburg.
The pair of bankruptcies shows that the dairy industry needs to confront its problems, said Brett Reinford, chairman of the Pennsylvania Dairy Future Commission, which was created as part of the state’s PA Farm Bill.
“It’s a clear sign dairy is struggling across the nation and here in Pennsylvania. We really need to figure some things out,” said Reinford, the owner of Reinford Farms, a dairy farm near Mifflintown. He added that he expects the 23-member commission will hand down “unique” and “bold” recommendations about what ought to be done to help the dairy industry in Pennsylvania.
The commission has met only three times, including an initial organization meeting. Its recommendations are due by Aug. 1, he said.
“I would expect to see, a minimum of 15 recommendations but upwards of 30 or 40,” Reinford said.
While some milk processors are struggling, Joe Paxton, who owns Irishtown Acres in Findley Township, says the business climate for individual farmers in Pennsylvania is showing signs of improvement, in spite of the Dean and Borden bankruptcies. Prices to dairy farmers have been trending upward because production is declining and demand is increasing, although both dynamics are moving slowly.
“The general economy for a dairy is certainly better than it has been for four or five years,” Paxton said. “It’s moving fairly slowly, but it’s been a steady improvement.”
While milk prices to producers are on an upward trajectory, Paxton warned that the situation could change quickly.
“My biggest concern is as soon as it happens, dairy farmers will see an opportunity to make more money by producing a little more milk,” he said. “Some will produce a lot more milk. As soon as production increases, the prices will come back down.”
That volatility, Paxton said, speaks to the need of addressing marketing statewide, a primary goal of the Dairy Future Commission.
Reinford said the commission is focusing in four general areas: farm-level, market-level, state-level and consumer-level.
Farm-level changes would include trying to suggest how farms can reduce production costs. The market-level will be looking at whether the Port of Philadelphia can be better-used to export dairy products.
Paxton said exports of cheese and powdered milk, especially with openings in the Chinese market, are a key driver in increased demand for Pennsylvania dairy farmers.
State-level changes could include recommendations about tax policy reforms that might help dairy farmers. At the consumer-level, the commission would look at plans like product innovation and trying “to build consumers for life,” Reinford said.
“Building consumers for life” could involve returning whole milk as an option in schools — which many dairy farmers, including Paxton, believes is a contributing factor in falling milk demand.
Federal school meal regulations limit milk options to 1 percent fat and skim, zero percent fat. Paxton said he thinks reintroducing 2 percent and whole milk as options would increase milk consumption among children and create “consumers for life.”
A gallon of 1-percent fat content milk contains about 1.28 ounces of butterfat, or about 0.08 of an ounce of fat in an 8-ounce glass. A gallon of whole milk, which is 3.25 percent fat, contains 4.16 ounces of fat, or about 0.26 ounces per 8-ounce glass.
“The difference between 1 and 2 percent and full content is really not going to have a huge effect on one’s health,” he said. “It is going to have a huge effect on the flavor.”
And most of the alternatives, including high-sugar and artificially sweetened soft drinks, are far more unhealthy than whole milk.
State Senate Agriculture Committee Chairman Elder Vogel, R-47, Beaver County, said the Borden bankruptcy seems like “another domino in the domino effect. I don’t know where it’s all going to shake out.”
Before his election to the state Senate in 2008, Vogel operated a dairy farm in New Sewickley Township, Beaver County. His district also includes Lawrence County.
Agriculture Secretary Russell Redding told lawmakers that the implications of the Dean Foods bankruptcy raises more immediate concerns in Pennsylvania because of the amount of business that processor does in this state.
“Fifty percent of fluid milk processed in Pennsylvania is done by Dean Foods,” Redding said. “It’s critical we’re paying attention to that.”
Dallas-based Dean Foods is continuing to operate while it seeks protection from its creditors. Paxton is a supplier to Dairy Farmers of America, not Dean, so the company’s bankruptcy doesn’t affect him directly.
However, DFA supplies milk for Dean, and Paxton said Dean owes DFA for milk already supplied. Paxton said DFA is on solid ground financially, based on correspondence with the association.
DFA, based in Kansas City, Kan., is negotiating to purchase Dean Foods, according to a November statement by Dean Foods officials, and any acquisition deal could include payments Dean owes to DFA.
Pennsylvania ranks seventh nationally in total milk production, with nearly 520,000 cows producing more than 10.6 billion pounds of milk annually, according to the Department of Agriculture.
According to the Associated Press, the amount of milk that Americans drink annually has fallen 40 percent since 1975. In 1996, annual milk consumption was roughly 24 gallons per person, a number that dropped to 17 gallons per person in 2018.
Meanwhile, sales of oat milk increased 636 percent between 2018 and 2019. Cow milk sales fell by 2.4 percent during those same 12 months.
The commission isn’t the only effort included in the Farm Bill to help the dairy industry, Redding said.
The Farm Bill also included a $5 million Dairy Investment Program to help support on-farm innovation to help farmers expand into value-added products like cheese, yogurt and ice cream, he said.
ERIC POOLE of The Herald contributed to this story.