MARTINSBURG - Phil Kulp and his family's business has come a long way since the days of having 150 dairy cows on his parents' farm when he was a boy.
Now, the Martinsburg man's three farms within 33 miles total nearly 2,700 cows, making him one of the largest farm operations in the county and state.
Kulp Family Dairy in Martinsburg, made up of two farms and Hilecrest Farm LLC in Sinking Valley, are a successful example of consolidation of dairy farms, a trend that may be the wave of the future, Penn State associate professor Chad Dechow said.
Mirror photo by Gary M. Baranec
Phil Kulp gets a helping hand from his son, Hank, 4, who pushes feed to some of the cattle on his Martinsburg dairy farm.
"We've tended to think that we're heading toward really large family farms," Dechow, an associate professor of dairy cattle genetics, said. "I think that's just a step along the way towards consolidation to huge mega-farms like we have in hog and poultry industries."
Dechow said that shift will be more visible in one to two decades, although if there are more "horrendous milk price" years like 2009, it will happen even quicker.
Kulp called 2009 "the worst dairy year" there's ever been.
Associate Professor Chad Dechow of Penn State University said farmers in 2009 were paid on an actual dollar basis the same as in the mid-1970s, forcing many farms to refinance and approach bankruptcy. Dechow said in 2007, the best recent milk year,
farmers got about 38 percent of the retail cost of milk.
According to the U.S. Department of Agriculture:
In 2007, farmers in eastern Pennsylvania - all counties east of the Westmoreland and Fayette counties - received an average of $19.78 for about 8.6 gallons of milk.
In 2009, that same area's farmers received about $13.07 for the same amount.
In the first six months of 2010, farmers in the eastern half of the state were getting an average of $16.06.
According to USDA Economic Research Service, in 2007, the average national retail price for a gallon of whole milk was $3.50. In 2009, it was $3.11.
"It forced a lot of farmers to take a real hard look at their business and business model and see if it was viable to move forward," he said. "Some farms decided that they wanted to get out of dairy, and I think we'll see some more cows being sold off of farms the next couple of years."
For Kulp, the gradual consolidation of the three farms began with a partnership between he and his wife, Becky, and his parents' farm in 1999 and the operation's first major building project, bringing the family's herd from 250 to 750. Then in 2001, another expansion brought the total to about 1,250. A neighboring farmer sold his farm and 700 cows to the Kulps in 2007, just before the 2008 purchase of a Sinking Valley farm with 450 cows.
It's all about efficiencies and the purchase and production in bulk, Kulp said.
"There would have been a duplication of feeders and also a duplication of ownership," Kulp said of the original two farms. "Now there's one person feeding those 2,200 cows instead of multiple people. We use large machinery to feed and process more feed more quickly, larger feed trucks to feed more cattle more efficiently and a larger milking center. All the consolidation and the advantages, it's all based on doing things more efficiently with less man-hours."
Kulp and Dechow both acknowledge that the consolidation trend means fewer employees and fewer of the smaller family farms.
"The motto of a lot of farms is the saying 'Get big or get out,'" Dechow said. "If you're a small family farm, that's probably where you would like things to stay. If your farm is growing, you'd like to be able to pick up those small farms."
Keeping the state as a whole operating smoothly is key to competing with the top dairy states of California, Wisconsin, New York and Idaho.
"We are competing against other states to try to produce milk economically," Kulp said. "We have to run these farms like a business. I want to have our business positioned in such a way that we don't have to be perfect to survive. If we can take advantage of specializing of labor and more efficiencies, we don't have to be perfect to be profitable."
Kulp thinks the consolidation trend in Pennsylvania will be much slower than other states due to smaller family farms being slow to adopt the new business model as well as more conservative Mennonite and Amish farmers who are able to do the labor within their farms and save money that way.
Among his three farms, Kulp produces more than 23,000 gallons of milk each day, sending much of it to the Carolinas for drinking milk and some to Carlisle's Land O'Lakes plant to make butter and powdered milk. The larger production now allows Kulp to fill up an entire trailer of milk each day, making milk collection more efficient. Purchasing feed is less expensive for Kulp now that he can purchase entire trailers of things like soymeal.
Still, "there are days I would like to go back to the farm operations we had as a boy growing up," Kulp said. "That's not as viable an option now."
Kulp said that there are smaller family farms, some with as few as 80 or 100 cows that are able to keep their costs low and have a successful production. As milk prices plummet, it takes more and more cows to come up with the same profit, meaning consolidation is likely the future.
"Whether it's a small family operation or a large family operation, the margin per cow has gotten less and less and less," Kulp said. "It takes more cows for any dairy operation to make a living."
"The farms have to get more and more efficient," Dechow said, adding that in 2009, farmers were paid the same as in the mid-1970s. "You either have to get out of the dairy business or if you want to be able to continue to provide for your family, you had to grow. That's what these folks have done. They've done what they had to do."