EDR 0615 CDE revised

6/15/2013 7:00 AM

In 1945, 80 percent of U.S. jobs were in businesses that made things — machinery, wood products, food and fiber products and much more. The remaining 20 percent of U.S. jobs were in service-related business, such as mechanics and electricians. We were a manufacturing-based economy and agriculture was central to the workforce.

By 2010, these numbers were reversed with only 20 percent of U.S. workers making products and the vast majority providing services. Automation and mechanization have each played significant roles in this reversal. While we remain a global leader in manufactured output, the production of food, fiber and other goods are in fewer hands in fewer businesses. One only need look to the dairy industry as an example of automation’s impact on how we do what we do. For example, we no longer milk cows by hand nor do we harvest with a scythe. We milk 50 percent fewer cows on 90 percent fewer farm businesses in the U.S. today and achieve 100 percent more output than only a few decades ago.

Historically, businesses dissolved and new businesses emerged. In 1982, 50 percent of all U.S. companies in all industries were five years old or younger; by 2010, only 35 percent met this criterion. There have been fewer start-ups in the past 30 years, both in dairy and in all industries. And yet, the foundation of our industry has been in manufacturing, making milk and feeding people around the world; and demand is growing. How should we evaluate current and future opportunities for our dairy farms in Pennsylvania? Is this an industry worth consideration of new investment and subsequent risk; and is it a business the next generation can purchase, grow and succeed with?

Looking back over the past 65 years, eight recessions occurred in the U.S. between 1945 and 1989. The average economic recovery to “pre-recession peak” was 20 months. Today, nearly 48 months since the most recent recession, pre-recession peak remains elusive. The consuming public remains, and perhaps appropriately so, more discreet in how money is spent; even for food purchases.

Competing in this environment, for any manufacturing business in any industry requires stronger business acumen, savvier financial management and a stronger business support team (including your veterinarians, nutritionist, ag lender, etc.) than ever before.

Entrepreneurship is said to be a numbers game that draws a handful of winners from a crowd of participants. Other industries face challenges we’ve not dealt with. Demand for our products remains robust because we make an extraordinary product increasing in demand around the world. For Pennsylvania dairy farmers, being in business near the consumer and having access to feed, water, transportation, labor and infrastructure provide a competitive advantage. The risk remains, the pressure on business management skills continues and yet the opportunity for entrepreneurship in dairy is present and real. Tomorrow’s dairy farmer will not resemble yesterdays. He or she will be the entrepreneur who manufacture and produce a product the market is telling us it wants.

As we look towards our future work at the Center for Dairy Excellence, we’ll intensify our focus on providing those resources tomorrow’s dairy business owner will need to capitalize on the opportunities which are very real here in our region. During the past year, we’ve worked to analyze these opportunities, associated challenges and the impact on our region. We plan to share our findings in detail, in a series of webinars beginning Friday June 14. Webinars will begin at 2 p.m. the second and fourth Friday of every month from June through October, with each one reviewing a different portion of the final Pennsylvania Dairy Futures Analysis report. Participation in the webinars can be through the web or on a conference call. All webinars will be recorded for later viewing. Lastly, on June 28 and July 16, we’re hosting open houses on two dairy farms on opposite ends of the commonwealth. Both farms have sought to bring in the next generation, remain entrepreneurial and position their business for the future. Please join us and hear what they are doing to make it a rewarding journey.

Editor’s Note: John Frey is the Pennsylvania Center for Dairy Excellence executive director.

Does milk have a lot of untapped potential in today’s competitive beverage market?

  • Yes
  • No
  • Unsure

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