The Changing Economic State of Agriculture in Genesee County, New York

The Changing Economic State of Agriculture in Genesee County, New York

Produced as an Appendix to the Genesee County Farmland Protection Plan

May 2016, Revised August 2016

This publication will provide a concise overview of Genesee County’s current agricultural economy, including products produced, and existing markets for those products, opportunities for expanded production of current products, potential new products, and untapped markets; an analysis of barriers to markets and an analysis of Genesee County’s agricultural economy’s strengths, weaknesses, opportunities and threats. The study will also include an evaluation of trends in agriculture production in the County and will make a prediction of the likely direction of future agriculture production based on local, regional and national forces impacting agricultural production.

Background and products produced: Genesee County is one of the most diverse and productive agricultural counties in New York State. Currently, the County ranks 4th in farm gate sales across NY State. The major crops produced on the 187,317 acres of county farmland include corn for grain and silage at 55,000 acres (30%), soybeans at 13,500 acres (7%), dry alfalfa hay at 9,100 acres (5%) and winter wheat at 12,000 acres (6.5%). These four crops comprise almost 50% of total farmland in Genesee County. Land in these crops varies from year to year, but has remained remarkably steady over the past decade or so, even as total available farmland has increased slightly, from 183,539 total acres in 2007 to 187,317 in 2012, the most recent census year. The remainder of acreage in the County belies the true diversity of Genesee County Agriculture. Genesee County is a leading producer of cabbage, beets, sweet corn, snap beans, onions, green peas, winter squash, carrots, collard greens, spinach, lima beans and dry beans. NASS estimates that 20,500 acres of processing vegetables are produced in the County. This represents 11% of the County’s land base. There are many reasons for this diversity, but principal among them is a unique combination of highly productive soils, including muck soils, in combination with a well-established processing vegetable industry which was grown out of the ingenuity and cooperative spirit of Genesee County farmers, and has maintained with the 2013 investment by Bonduelle, a French based firm into assets formerly owned by the Pro-Fac Cooperative, Birdseye and more recently, Allen Canning Co.

The remaining 40% of active farmland in Genesee County is made up of pasture, fresh vegetables, most of which are listed above, small fruits including you-pick blueberries and strawberries, and most substantially, corn for silage and hay ground for haylage to supply the County’s 63,000 cattle and calves which make up the dairy industry of the County. There are, on average, 29,000 mature dairy cows in the County, and 1,100 beef animals. The remaining 33,000 calves and heifers weigh, on average 650 lbs. While it is not well captured by NASS statistics, the acreage required to support the dairy herd is generally 1 acre of haylage and 1acre of corn silage per mature head. This would likely mean that up to 60,000 acres of farmland in the County are dedicated to the production of forages for our mature dairy and beef herd, and an additional 30,000 acres are used to support the heifer herd. Of these 90,000 acres, 19,700 are included in the corn acreage number, so the remaining 70,000 acres (37%) supports our cattle industry. The dairy industry in Genesee County has grown steadily over the past several years, to the point where Genesee County is the 4th largest County in the State for dairy cattle, and is producing roughly 6,960,000 cwt of milk annually. Production per cow and the number of cows in the County have grown from 22,300 lbs. per cow and 24,000 cows in 2009 to 24,000 lbs. per cow and 29,000 cows in 2014. Value of milk output, as measured by the statistical uniform price received in the Western NY order, has ranged from $17.40 per cwt. in 2010 to $25.40 per cwt in 2014, and as high as $26.87 in September of 2014. This variation in price, at constant current production, results in a difference of $55.68 million in revenues from 2010 to 2014. Unfortunately, the price of milk has dropped back to levels not seen since 2009, as 2015’s average price per cwt was $17.30 per cwt, and 2016’s average price has been $15.12 per cwt through June of 2016. This means that in the course of 24 months, the farm gate value of milk in Genesee County has dropped by $71 million at static production.

Milk is still the single largest producer of revenue for the County. County average farm gate sales were $236, 952,000 at the 2012 agricultural census. Livestock and poultry made up 63% of farm gate sales, with milk being 51.2% of total farm gate sales output, cattle and calves being 10.8% and other livestock, mainly poultry and eggs making up less than 1.0% of total farm gate sales. Wheat, corn for grain and soybeans make up $41.3 million in farm gate sales, or 17.4% of the total. Processing vegetables, fresh vegetables and potatoes totaled $35.13 million, or 14.8% of the total and other crops and hay make up 3.0% of the total farm gate sales. Nursery, greenhouse, floriculture and sod, sheep goats and goat milk, and other livestock including hogs and pigs, make up the remaining 1.8% of farm gate sales in the County.

Existing Markets:

The County is blessed with robust markets for its agricultural output. Processing in the dairy industry, in particular, has grown substantially in the last decade. In order to have a healthy and robust dairy industry that serves the fluid milk marketplace, it is critical to have effective markets for milk not needed to service the high value fluid market, particularly when that market slackens during times off from school, or during holiday periods. The most effective balancing system is one that allocates milk to its highest and best use, and that identifies new and innovative ways to process milk into value added products. Existing County resources that address this attribute include: The O-at-Ka Milk Products Cooperative, located in Batavia, which processes milk into butter, dry milk powders, high value energy drinks (RTD beverages), nutritional products for pediatric, diabetic, weight management, and other uses. O-At-Ka is the largest producer of high protein drinks in the US, including protein shakes, and drinks, muscle recovery beverages and weight gain shakes. They also produce dairy based liqueurs and pet food milk replacers; Alpina, also located in Batavia, is a Columbian based milk processor that makes specialized Greek yogurts and other cultured products, predominately for the Latino marketplace in the US; Yancey’s Fancy cheese, New York’s Artisan Cheeses, is located in Pembroke and produces specialty flavored cheddar cheeses; Upstate Niagara Milk Cooperative, with fluid plants in Buffalo and Rochester, and cultured product manufacturing in West Seneca, Erie County, is the area’s largest processor of milk. Farmer owned, it delivers significant value back to Genesee County producers. Other out of County resources include: Lactalis American Group, manufacturers’ of Galbani brand mozzarella cheeses in Buffalo; and other smaller processors in the region. A joint venture between Mueller North America and PepsiCo, made a $240 million investment in new Greek Style yogurt manufacturing in Batavia in 2013, however the plant failed to generate the expected sales of product and has since closed. Dairy Farmers of America has purchased the assets of the JV, and as of this writing have yet to determine what will be manufactured at the shuttered facility in Batavia.

As mentioned previously, in 2013 Bonduelle made a significant investment in the processing vegetable industry in Western NY, buying the assets previously owned by Allen Canning, and prior to that, Pro-Fac Cooperative and Birdseye, among others. Genesee County based manufacturing includes plants in Bergen and Oakfield, and a major cold storage and repack facility in Brockport, Monroe County. These plants process green peas, snap beans, sweet corn, beets and carrots. Other nearby processors of vegetables include: Seneca Foods, who process beets, carrots and other root vegetables, squash, green beans, sweet corn, peas, and leafy vegetables in plants located in Mt. Morris, Livingston County, Marion, Wayne County and Geneva, Ontario County; Love Beets, a manufacturer of organic and conventional freshly cooked beets, located in Rochester, NY; Pride Pak, a newly constructed leafy greens packing facility located in Medina, Orleans County. Each of Genesee County’s many fresh vegetable and cabbage producers maintain significant investment in on-farm storage and processing facilities which prepare their fresh vegetables for the marketplace. These facilities employ a significant amount of the farm labor utilized on farms in the county, both in the fields hand harvesting product, and in the packing sheds and storage facilities. Cabbage, onions and potatoes are harvested, cleaned, packed and stored in very capital intensive structures on farms across the County. From there, these products are marketed directly to retail food chains, nationwide restaurant chains like KFC for coleslaw, potato chip manufacturers located in nearby Pennsylvania, and through brokers into more distant retail outlets.

Corn, wheat and soybeans have robust markets both within the County and beyond. Most of the major growers of grains in the County have invested in significant storage facilities on farm, which allows these farmers to dry and condition grain at harvest, store grain efficiently, and market grain at the best time to capture the best price. Some of these growers have also invested in processing capability, which allows them to grind corn into meal to service the dairy feed marketplace. 50% of the dry matter consumed by dairy cows is concentrated feed processed off-farm, and about half of that number is corn meal. There are also feed processing facilities located at Batavia, Alexander, Strykersville, Wyoming County, Caledonia, Livingston County (under reconstruction after fire) , which offer markets for corn. The single biggest corn market is the Western NY Energy ethanol plant, located in Medina, Orleans County. This plant came on line late in 2007, and has changed the way corn is priced and marketed in Western New York. At 22 million bushels of annual processing capacity, it could process 4 times the total output of grain corn produced in Genesee County. As such, it has created a new pricing basis for corn marketed in Western NY, and is therefore used as the measuring stick for the value of corn at any given point, as it can rail corn into the region as its source of last resort, setting the price of corn in the region. Soybean markets are simply distant to Genesee County.

Soybean processing is complex in that the output products are soybean meal, an animal and particularly dairy feed, and soy oil. The soybean complex, the relative high cost investment for new processing facilities, and barriers to entry due to competition with Midwestern legacy processing plants that can still use hexane or other solvents in their extraction process, have meant that no significant manufacturers have emerged to build soybean processing plants in New York State. Soybeans therefore move to Ohio and the Midwest, resulting in backhauling of soybean meal, or to a major export port and processing in Hamilton, Ontario. There are a few soy processing facilities in the region of Western NY that process soybeans through an extrusion process or by heat treating, but they are not significant markets for product produced by the fastest growing acreage crop in New York State. About 30% of soybeans produced are exported, and in addition to the Hamilton, Ontario outlet, export opportunities may exist at the Port of Oswego and South to ports at Norfolk, Va.

Wheat is marketed in similar fashion to soybeans, with the exception that there is a somewhat major local market at Star of the West Milling in Churchville, Monroe County. The remaining major markets for wheat (mainly soft red winter, and sort white winter varieties) are in Port Colborne, Port Hope and Wellandport, Ontario.

The remaining existing markets for fresh produce in the County are by our local consumers. The buy local movement is alive and well in Genesee County, and the best resource for finding local, direct-to-market or you-pick farms is the “Bounty of Genesee County” brochure produced by Cornell Cooperative Extension, which can be found at this link:

Opportunities for Expanded Production of Current Markets

Probably the greatest opportunity that exists to increase processing capacity exists at mothballed processing facilities, particularly the former Mueller Greek yogurt plant purchased by Dairy Farmers of America (DFA). It is as yet unannounced what will come next at this facility. The challenge for the dairy industry today is that demand in the US is flat, in relative terms; fluid milk consumption is dropping, which is being offset by increases in cheese and soft product (yogurt) consumption. The major opportunities will emerge from new product introduction, reinvigoration of export demand, particularly in Asia, and emergence of new market demand in Latin America. Most of this opportunity will displace milk from Western US production, to be replaced somewhat from new market development of Eastern US production. More importantly, there is an emergence of milk component (protein fractionation, high value components and specialized nutraceuticals) manufacturing that may impact dairy markets in Genesee County. Two groups of producers, one in Cayuga County and the other in Livingston County, have made significant (over $100 million) in investments to build this type of manufacturing capacity. This could be the direction considered by DFA. Other opportunities for dairy are: continued growth in demand for the types for products that O-At-Ka is producing, and emergence of interest in specialty, locally produced cheeses, from the flavored cheddar type products produced at Yancey’s, to the goat and Jersey cow’s milk products being produced, and warmly received in local retail outlets, by First Light Creamery in East Bethany.

Interest in locally produced vegetables has spurred both an intense capital investment in the region in Controlled Climate Agriculture (intense greenhouse production), and in the potential for leafy greens production with the construction of the Pride-Pak facility in Medina. This facility will allow for the production of bagged leafy greens from Western NY fields, eliminating the need for individual on-farm packing facilities, and allowing for the aggregation of product from multiple farms in the region. This facility will open in September 2016, and addresses an intense interest on the part of regional retailers to find locally produced products to replace those from drought stricken areas of the far west (Central Valley and San Joaquin Valley in California, and Arizona) during the spring through fall growing period in the Northeast. Ironically, we are facing a drought condition here in Western NY this year, although droughts of this intensity are rare (once every 60 years) and usually not long lasting.

Corn markets will grow as feed demand grows, and as Western NY Energy continues to produce ethanol in the region. Some capital investment has occurred at the plant to increase efficiency, not necessarily to increase corn purchases. Since the demand for corn at this one location is 4 times the output of Genesee County production, more corn produced would likely find a home and displace railed in corn. This, of course, is driven by the breakeven production cost for Genesee County Farmers, and the alternatives for production of other grains, processing vegetables and oilseeds.

Soybean processing represents a significant unmet opportunity for market growth of Genesee County produced product, however the right combination of process, market development of all by-products, and capital investment to produce a reasonable return to ownership has not yet emerged.

Potential New Products and Untapped Markets

Genesee County producers face a unique opportunity in the coming years. By using their tremendous land base and entrepreneurial skills, producers can address emerging demand for locally produced vegetables, in particular. Consumers are demanding, and retailers are responding, to the emergence of location and producer based demand models that are disrupting the consumer marketplace. Bagged greens, fresh vegetables here-to-fore not produced in Genesee County, are beginning to be in demand by retailers. The question is simply, “can you grow this for us?” and “what price do you need to do so?” This opportunity will likely emerge in a bifurcated fashion: intensive agriculture in high capital investment ventures that produce greenhouse tomatoes, peppers, cucumbers, etc. and specialty items like mushrooms; medium to large scale production of leafy greens processed centrally at Pride-Pak and other facilities, grown on Genesee County’s excellent land base.

Small scale flour production to meet locally grown demand for the bakery industry, malting barley and hops production for the emerging craft brewery and distillery industry, and potentially small fruits production for flavoring in locally produced alcoholic beverages are all examples of markets that may emerge, that are dependent on additional capital investment for down-the-line processing.