Economy cuts both ways for farmers

by DAVID WENNER, Of The Patriot-News

Saturday January 10, 2009, 10:12 PM

CHRISTINE BAKER, The Patriot-News The Bechtel family of farmers in Halifax Township.

Farmers sell milk by the hundredweight, which amounts to a little less than 12 gallons. Last January, they were paid more than $21 per hundredweight. Now they're getting $14.50, with the price expected to drop to $12.61 next month.

"I can assure you that takes away all the profit and then some," said Joel Rotz, the governmental relations director for the Pennsylvania Farm Bureau and a former dairy farmer.

The culprit might seem surprising: a strong U.S. dollar. A stronger dollar has been one bright spot amid all the recent economic gloom.

Yet the weaker dollar had made U.S. agricultural products a bargain for much of the world, leading to high demand for farm products, including those from Pennsylvania.

Now demand has plunged. Countries including China and India, which had significantly increased their consumption of dairy products and meat, have reversed.

Lower prices hurt farmers

Several additional forces have dealt a blow to Pennsylvania farmers.

In early 2008, there was much interest in ethanol, which is made from corn and soybeans. Investors including hedge funds invested heavily in corn and soybeans, driving up the prices.

When the economy unraveled, investors sold off holdings, causing prices to plummet.

The falling prices are good for consumers, but they are causing short-term problems for a lot of local farmers.

That's because local farmers who raise animals need more grain than is produced locally and must buy some from outside the area. So they paid high prices for feed but now face a down market as they sell their animals.

Likewise with high fuel prices, which affect the cost of running equipment and the cost of fertilizer, which is fuel-intensive to produce.

Fuel prices have dropped in recent months, but many farmers signed contracts locking them in at higher prices.

The result is farmers facing a market that won't let them recoup investment costs.

Ken Bechtel, 57, farms in partnership with his father, Ken, 87, and his brother, Jay, 54. They farm their own 136 acres plus more than 700 rented acres. They raise hogs and beef cattle, and they grow crops including corn, soybeans, wheat, barley and oats.

Having a diverse operation helps them withstand the assorted economic problems affecting local farmers.

For example, in recent years, they have sold some of their hogs and cows directly to customers. They have sold hay to people who kept horses for pleasure.

But now consumers aren't spending. "People don't seem to have the money they normally would have to buy a hog or a side of beef," the younger Ken Bechtel said.

Hope for farmers

Still, no one is predicting the collapse of farming or calling for a government bailout.

And some new forces are working in farmers' favor.

One is rising consumer demand for vegetables, fruits and meats produced close to home.

"It's a small niche. But it's an important niche, which we hope will grow," said David Swartz, the director of the cooperative extension office that serves Cumberland and Perry counties.

Statewide, one of the big farming stories involves Marcellus shale, which lies below much of Pennsylvania and holds a huge reserve of natural gas.

New technology has made it possible to extract the gas. Farmers in some areas, such as Honesdale, have struck it rich.