You won't see it at the grocery store, but the milk prices farmers receive have dropped sharply in the past two months.
''In January, the milk check for this farm was 70 percent of what it was last year,'' said Bill England, who owns Weeping Hollow Farm in Williamsburg, which is part of Penn England LLC, a partnership of family-owned dairy farms. ''For February, they were predicting a 20 (percent) to 25 percent drop.''
The laws of supply and demand determine farm-level milk prices, according to the Arlington, Va.-based National Milk Producers Federation. As the global economy has slowed, U.S. exports to overseas markets have also slowed.
Mirror photo by Gary M. Baranec
Bill England discusses falling milk prices at Weeping Hollow Farm in Williamsburg. Weeping Hollow is part of Penn England LLC, a dairy partnership that milks about 1,950 cows.
Environmental factors are also at work, England said - a drought in New Zealand opened up a market for U.S. milk for a few years, but that outlet is disappearing.
''We knew it'd be dropping, but we didn't realize it'd drop as fast as it did,'' said England, 72.
Adding to dairy farmers' problems is the fact that feed prices are ''the highest they've ever been,'' England said. He said it costs $5.50 to feed a cow every day. There are 540 cows on Weeping Hollow; in total, the Penn-England LLC partnership has 1,950 cows.
The Milk Income Loss Contract was established with the 2002 Farm Bill. MILC, funded through the United States Department of Agriculture's Farm Service Agency, will provide payments to farmers when Boston Class I milk prices fall below $16.94 per hundredweight (100 pounds of milk).
Boston Class I milk prices are the standard prices for milk producers in the Northeastern U.S.
MILC also considers the cost of dairy feed. When the costs of feed rise above $7.35 per hundredweight of milk produced, the MILC payment is adjusted accordingly. As of Friday, the National Milk Producers Federation in Arlington, Va., was predicting a Boston Class I price of $13.97 per hundredweight for February.
FSA determines the per hundredweight payment rate for the applicable month by subtracting the Boston Class I price for that month from the $16.94 baseline price, and multiplying the difference by 45 percent.
By those figures, farmers would receive a payment of $1.33 per hundredweight for February. Payments are limited by production. Producers are eligible to receive payments on up to 2.985 million pounds per fiscal year. Larger producers can choose the month for which they want to start receiving payments. After that, they receive payments for all months until they reach their cap. Months with no payment don't count.
The Huntingdon County FSA serves Blair and Huntindon counties. For more information, call 627-1624.
In January, England said the farm received $15 per 100 pounds of milk; he's seen predictions that that number could go as low as $11 or $12.
The falling prices leave farmers unable to pay all of the bills, said Max Smith, a co-owner of Smith-Hollow Farms in Martinsburg, where he and his father and two brothers milk about 540 cows.
''Basically what you have to do is ask some suppliers to wait,'' said Smith, 53. ''There's usually silence. It's terrible, absolutely terrible.''
The drop ''couldn't happen at a worse time,'' said John Burket, owner of Burket Falls Farm in Claysburg. Burket's the third generation to operate the family farm, where he milks about 110 cows.
''For most farmers in this area, their biggest expenses take place at this time of year, with the planting season approaching,'' said Burket, 44.
Burket said his farm - which is on the smaller end of the spectrum - will spend $50,000 to $60,000 on planting. He hasn't had to put any bills on hold yet, but he's delaying updating his farm equipment, which is becoming more and more common, said Randy Acker, co-owner of Bobcat of Martinsburg.
Some of the farmers who have bought new equipment are having trouble paying for it.
''I've had some who wanted to know if they could pay later or make payments on their account,'' Acker said. ''I prefer not to be a bank; I'd just as soon be paid, but basically, I try to work with them and set up a payment plan.''
To cut back on expenses, some farmers are culling their herds by selling lower-end animals to slaughter. Since the price drop, Smith said he's been selling those animals off more than what he normally would.
"Long term, if these prices continue, it's going to be difficult for anybody to stay in business," Smith said.
England said there'll be farms who don't survive this price drop, but those who do survive'll come out stronger.
"It's like a lot of companies," he said. "Banks buy other banks; companies buy other companies. ... Business is business - it's capitalism."
Burket doesn't see it that way.
"We're gonna lose farms in this downturn, and we don't come out of it stronger because we lose numbers," he said. "They always say there's power in numbers. At one time, 60 percent of Americans were involved in agriculture in some facet, now it's less than 1 percent. When we go to Washington or Harrisburg, they look at us and say we're only eight-tenths or 1 percent of the electorate."
To end the falling prices, Burket said some dairy groups are pushing for farmers to cut back production so demand will increase.
"We're getting penalized because we're producing 2 or 3 or 4 percent more than the milk demand," he said. "We could easily cut back that much. If every dairy farm in the U.S. cut back production 5 percent, we could march out of this dilemma in a few weeks."