September 28, 2004
SIUC Country Column: Survey of dairy farmers offers some surprises
When farmers decide to start or expand dairies, economic and social factors probably play a bigger role in those decisions than do state programs designed to foster the industry, say researchers from Southern Illinois University Carbondale.
"As economists, we had expected that economic forces would be the main drivers, but we were surprised that producers didn't seem all that interested in tax breaks and things like that," said Phillip R. Eberle, associate professor in SIUC's Department of Agribusiness Economics.
"Still, while what we called the ‘public promotion and support' category ranked lowest in importance for dairy growth, two of the items in that category -- extension service and university research -- ranked highly among the 42 individual items that we looked at in our survey. And in terms of support programs, they were more important than assistance in obtaining licenses and permits and more important than guaranteed loans."
Eberle and SIUC graduate student Clinton R. Milliman, Adjunct Professor William C. Peterson and Associate Professor C. Matthew Rendleman reported their findings Aug. 3 at the American Agricultural Economics Association's annual meeting in Denver. Data came from a mail survey of 404 dairy farmers in Idaho, Illinois, Iowa, Kansas, New Mexico, Ohio, South Dakota and Wisconsin, more than half of whom had expanded in the previous five years. Illinois' Council on Food and Agricultural Research paid for the two-year project.
"The overall concern (behind the study) was whether there might be something we could do in Illinois about the decline in farms, cows and milk production," Eberle said.
"Some states, or regions within states, have programs to help dairy farms. Kansas, for example, has an incentive program to attract new dairies; Wisconsin has tax benefits and an Agricultural Development Zone Program. Our idea was to see if these plans -- at least in the perception of dairy farmers -- were important in making decisions to expand or relocate by trying to identify dairy farmers who have had those experiences."
The broad, uncomplicated answer to that question is no. Whether or not they had expanded, dairy farmers on average ranked markets for milk and related products first, followed by resource availability and prices, family and community ties, structural issues, the regulatory environment, and community support and services.
Public promotion and support ran dead last -- but only as an overall category.
Extension service, one of seven items in that category, outranked every item in the top-rated markets category -- from local milk prices and the ability to ship to higher-price milk venues to the cost of selling milk, markets for cows and calves culled from the herd, markets for replacement heifers, and rendering services. The farmers also deemed university research more important than everything in that top category except the markets for culls and replacement heifers.
Although tax breaks and training programs hovered near the bottom of the 42-item list, guaranteed loans took a more middling position. Not surprisingly, established farmers ranked such loans lower than those who had expanded, but both groups said they were more important than the cost of selling milk and the ability to ship milk to better markets -- two items in the top-rated category. And while advertising and other promotion efforts in general drew slightly negative ratings, even among those farmers who had expanded, a closer look at the data showed that slashing away at the ad budget might not prove the best course for policy makers.
"When we compare dairy farmers who had relocated with those who had not, we found that promotion and advertising was one of the significant factors (for that group)," Eberle said.
The researchers also compared responses of Illinois dairy farmers to those from other states and found, to their surprise, that Illinois farmers felt far more restricted by land prices, climate-related problems, utility costs and regulations than farmers elsewhere.
"Because much of our dairy industry is in the northern part of the state, I didn't expect the Illinois response to be much different from dairy farmers in Wisconsin," Eberle said.
So what does this mean for the state's dairy industry? Eberle suggested focusing the efforts of two highly valued services -- extension and university research -- on what farmers see as problem areas.
"We can't do much about land prices or utility costs or climate, but both research and extension might be able to help producers cope by devising and teaching new management strategies and technologies," he said.
"This might also be the time, from a public policy standpoint, to re-evaluate the regulatory rules that apply to the dairy in Illinois as to their effectiveness and impact."