By JIM MARTIN

Erie Times-News via Associated Press

EDINBORO, Pa. (AP) -- Steven Woods has a bachelor's degree in agriculture on his wall and memories of his dairy farmer dad to guide him.

But the 24-year-old Edinboro man isn't sure what to do next.

The uncertain world of the dairy business is more uncertain than usual these days.

Just a year ago, milk prices were hovering in rare territory. Farmers, who sell their milk in 100-pound units -- not by the gallon -- were collecting $20 to $21 per hundred pounds.

Today, a year later, the price has fallen by about $5, a pay cut of more than 20 percent.

Roller coaster prices are hardly unprecedented in the dairy business.

Like his father, Dan Woods, who died less than two years ago, Steven Woods has seen far more meager milk checks. Just three years ago, in a historic low point for the dairy industry, prices fell into the neighborhood of $12.

The good news for dairy farmers like Woods is that prices are expected to rise, and soon. David Dowler, a dairy agent with Crawford County Cooperative Extension, said experts expect prices will regain a good portion of what's been lost, driven by widespread concerns about drought conditions that are pushing feed costs higher.

But that isn't helping farmers sleep more easily at night.

Woods, who found himself indoors last week, crunching numbers and reviewing bills, isn't concerned about the price of milk.

"It's not like 2009 when you are getting $10 milk," he said. "It's not going to fall that low."

He's worried about the price of everything else.

With corn at $8 a bushel -- about three times its historic average -- and soybeans at $16, the cost of producing milk is at perhaps its highest point in history.

That has farmers watching every penny, Woods said.

"If you have a cow that looks at you the wrong way, you're going to get rid of her," said Woods, who milks about 100 cows at his farm near Edinboro University of Pennsylvania.

In theory, farmers who grow all of their own feed shouldn't need to worry about the high cost of feed.

But it rarely works that way, Dowler said.

"Traditionally, you don't find that many farmers growing all their grain and their crops," he said. "Hardly anybody grows all the things that get put through a cow."

In short, that means dairy farmers are paying record-high prices along with everyone else. And despite relatively high milk prices, profit margins are shrinking.

A report from a dairy risk management team from Pennsylvania State University summed up the problem in a report that carried the headline "Yikes."

The Penn State team, which has been studying the costs and output of nearly 200 farms, concluded: "Producers have a false sense of security. ... Feed costs and other expenses have margins so tight that producers are short $1 to $2 per cow per day."

That, the report continues, "means they aren't making enough to pay bills or to save money."

Despite rising prices, Dowler sees tough times ahead.

"I think margins are going to be squeezed on dairy farms," he said. "You are going to see grain prices move up and be fairly volatile, while milk prices are not going to respond that rapidly."

The uncertainty has Woods thinking about making a change. He's talking about selling his dairy herd and producing corn and grain instead of milk.

Woods, who works in a small office surrounded by photos of his late father, said selling the cows would be an emotional decision. And he's trying his best to remove emotion from the equation.

He plans to talk to his banker soon -- looking for a second opinion on whether a different sort of farming might pay the bills.

"That would be very hard, very emotional," he said.

He certainly wouldn't be the first to give up on dairy farming.

About 6 percent of the nation's dairy farms disappear each year, according to the Center for Dairy Excellence. The remaining farms are getting bigger and picking up much of the slack.

Dowler said he's not surprised that Woods -- or any dairy farmer, for that matter -- would think about getting out of the business.

Higher prices mean higher stakes, he said.

What's more, higher grain prices have farmers scrambling to find land they can rent at ever-higher prices.

"There is more management involved," Dowler said. "There is more risk. That (quitting) is a trend that's going to continue."

And for all that's changed on the nation's dairy farms, there's just as much work to be done as ever.

Alliene Lewis has been a part of it for 60 years. The 86-year-old McKean Township woman worked for years alongside her late husband after moving to their farm in 1952. These days she lends a hand when she can to her daughter, Debbie Lewis, who runs the farm.

She would like to see her quit.

"You don't have vacations," she said. "The cows have to be milked every day. And I think if she figured it up, I don't know how low the pay would be."

It's Dowler's job to help dairy farmers find ways to be profitable.

But he's not about to talk anyone into playing an extra hand in an increasingly high-stakes game.

"People have to make up their own minds," he said. "This is a fight, and it's been a fight forever. It's only made for certain people."

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Information from: Erie Times-News, http://www.goerie.com

Copyright 2012 The Associated Press.

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