Progress Report On Study to Support Growth and Competitiveness of - PowerPoint PPT Presentation

Progress Report On Study to Support Growth and Competitiveness of Pennsylvania’s Dairy Industry Chuck Nicholson August 16, 2017

Outline • Study Objectives • Study Elements • Progress and Preliminary Results • Q&A • Questions for you

Study Objectives • Review past performance to gain insights • Explore future potentials for growth • Seek stakeholder input/feedback • Suggest actions to PDA • to enhance growth and competitiveness of Pennsylvania’s dairy industry

Milk Production, 2000-2016 35 +29.4% 30 25 Billion lbs / year 20 +23.8% 15 -2.0% 10 +90.9% 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 WI NY PA MI One motivation for study elements: slower milk production growth in PA

Milk Per Cow, 2000-2016 27,500 +36.5% 25,000 +37.0% +36.1% Lbs/cow/year 22,500 +13.1% 20,000 17,500 15,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 PA NY WI MI One motivation for study elements: slower productivity growth in PA

Study Elements Phase I: • Farm performance and competitiveness • Processing performance and competitiveness • Data assessment • Institutional assessment • Current program and policy assessment • Economic development assessment • Economic impact of dairy Compare Pennsylvania performance with other states with similar agronomic resources (NY, MI, WI) to gain greater insights

Study Elements Phase I: Phase II: • Farm performance and • Dairy Demand Outlook 5 to 10 competitiveness years • Processing performance and • Dairy Demand and Export competitiveness Projections • Data assessment • Production and Processing Investments • Institutional assessment • Role of PhilaPort in Dairy • Current program and policy Exports from PA assessment • Proposed alternative • Economic development Institutional arrangements assessment • Impacts of PMMB price • Economic impact of dairy regulation Compare Pennsylvania performance with other states with similar agronomic resources (NY, MI, WI) to gain greater insights

Farm Performance Assessment

Change in County-Level Milk Production, 2007-2016 (million lbs/year) Change in Milk Production (millions of pounds) -133.53 to -52.59 (3) -52.59 to -5.00 (23) -4.99 to 5.00 (17) 5.01 to 50.00 (20) 50.01 to 206.04 (4) Source: Mark Stephenson calculations based on milk production and NASS cow data.

US Milk Production Density, 2016 Source: Mark Stephenson calculations

PA Milk Production Density,2016 Source: Mark Stephenson calculations

Change in County-Level Milk Production, 2007-2016 (% change compared to 2007) Percent Change in Milk Production -42% to -22.0% (13) -22.1% to -5% (13) -4.9% to 5.0% (11) 5.1% to 19.9% (15) 20% to 39.6% (4) Source: Mark Stephenson calculations based on milk production and NASS cow data.

Farm Performance Comparison • Using data from “Farm Bench” project • Farm records data from PA, NY, MI, WI being compared – Thanks to Mike Hosterman at AgChoice Farm Credit for sharing PA farm data – Also data from USDA/FSA database • Dr. Chris Wolf at Michigan State is working on this analysis

Farm Performance Comparison • Will compare productivity and profitability during 2011-2016 • Assess trends by size and location • What factors affect productivity and profitability?

Farm Financial Performance One observation: Farm financial records data are more limited in PA than other states – Less information to assess performance and responses – PA organizations not currently participating in multi-state farm records project (Farm Bench)

Farm Performance CDE 2017 Producer Survey results are available • Focus on selected results related to future growth and competitiveness • Together, these suggest challenges for growth and competitiveness?

CDE Producer Survey Responses Number of Farms Per County 5 10 5 2 14 19 6 17 7 2 1 1 7 10 9 1 1 8 2 4 3 6 5 17 17 2 4 12 14 7 3 9 15 4 1 17 17 16 16 6 13 3 5 40 42 3 37 238 1 27 18 1 66 5 13 7 30

CDE Producer Survey Responses Number of Dairy Farms, 2012 Number of Farms Per County * * * 0 to 2 2 to 5 5 to 10 10 to 15 15 to 20 20 to 25 25 to 50 50 to 75 75 to 100 100 to 150 150 to 200 200 to 330 * = Comparison State Source: 2012 Census of Agriculture

Percentage of PA Farms that Expect to be Dairying in 2022, by Farm Size 14% of survey farms expect to exit in next 5 years 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% <50 50-75 75-100 100-125 125-150 150-175 175-200 200-250 250-500 > 500 Current Farm Size, Cows Source: Center for Dairy Excellence 2017 Producer Survey

Expected % Change in Cows by 2022, PA Farms by Current Size 10% Survey farms expect average reduction of 18% in cow numbers 5% 0% <50 50-75 75-100 100-125 125-150 150-175 175-200 200-250 250-500 > 500 -5% -10% -15% -20% -25% -30% Current Farm Size, Cows Source: Center for Dairy Excellence 2017 Producer Survey

Expected % Change in Cows by 2022, PA Farms by County Expected Change in Cow Numbers -67% to -100% (6) -1.000000 - -0.666667 (6) -10% to 67% (27) -0.666666 - -0.100000 (27) -10 to +10% (14) -0.099999 - 0.100000 (14) 0.100001 - 0.200000 (3) +10% to + 20% (3) 0.200001 - 0.688889 (6) +20% to +69% (6) Source: Center for Dairy Excellence 2017 Producer Survey

Importance to Future Farm Business Performance (Average of 0=Not Important, 1=Somewhat Important and 2=Very Important) 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 How important are the following in improving business performance for your dairy in the next 3-5 years? Source: Center for Dairy Excellence 2017 Producer Survey

Factors Constraining Farm Expansion (Proportion of Farms Indicating) 70% 60% 50% 40% 30% 20% 10% 0% Source: Center for Dairy Excellence 2017 Producer Survey

Processing Performance Assessment Our initial idea was … Use NASS dairy product data to study trends in: • Production • Plant numbers • Plant volumes

Processing Performance Assessment • Publicly available NASS data are incomplete and limit analysis to compare state trends in processing volumes and capacity • Data often not published for states in our study for the time period we wanted to look at

NASS Processing Data Limitations: NDM Production 200 180 160 140 120 100 80 60 40 ? 20 0 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 CA ID PA US

Example: NASS Processing Public Data Availability US PA NY WI Cheese, All Other 2000-date 1993-1994 2000-2008 2000-2001, 2004-2008 Types, Production Cheese, American Types, Cheddar - 2000-date 1992 2000-2004 2000-date Production Cheese, American 2000-date 2014-2016 2000-2004, 2014-2016 2000-date Types, Production Cheese, American Types, Other (Colby, 2000-date Not listed 2000-2009 2000-2015 Monterey and Jack) - Production Cheese, Blue and 2010-date Not listed Not listed 1990-1995 Gorgonzola, Production Cheese, Brick and 2000-date Not listed Not listed 2000-2004 Muenster, Production Cheese, Cream and 2000-date 1996-1997 1994-1997 Not listed Neufchatel, Production Cheese, Feta, 2010-date Not listed Not listed Not listed Production Cheese, Gouda, 2010-date Not listed Not listed Not listed Production Cheese, Hispanic, 2000-date Not listed Not listed 2000-2015 Production

PA Cheese and Butter Production, 2000-2017 50 45 40 35 Million lbs/month 30 25 20 15 10 5 0 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Butter Cheese Power (Butter) Power (Cheese)

PA and WI Cheese Production, 2000-2017 350 300 250 Million lbs/month 200 150 100 50 0 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 WI PA Poly. (WI) Power (PA)

PA American Cheese, Sour Cream and Yogurt Production, 2000-2017 0.30 0.25 Million lbs/month 0.20 0.15 0.10 0.05 0.00 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 American Cheese Sour Cream Yogurt Note: Much smaller amounts!

PA Ice Cream Production, 2000-2017 6 5 Million gal/month 4 3 2 1 0 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Lowfat Regular Hard Power (Regular Hard) Expon. (Lowfat)

Processing Performance • Publicly available NASS data are incomplete and limit analysis of state trends in processing volumes and capacity • Available data suggest that PA plants process smaller volumes for many products

Processing Sector Economies Average Volume Processed Per Year, PA Plants as % of US Average 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% Source: Dairy Products Annual 2015

Our Processor Survey Nationwide survey, with focus on PA, WI Questions about: • Products processed and overall volume • Capacity used in recent years • Future plans regarding capacity and constraints • Product exported

Potential for New Processing Capacity in PA • Would additional investment in dairy processing capacity be profitable? – Would it reduce overall supply chain costs? • What are the potential benefits to producers from additional investment? – Reductions in hauling costs? – Increases in milk values? • What are the potential benefits to the state?