CHAPTER 3 THE AGRICULTURAL ECONOMY IN GENESEE COUNTY

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1 CHAPTER 3 THE AGRICULTURAL ECONOMY IN GENESEE COUNTY Genesee County is one of the most diverse and productive agricultural counties in New York State. Currently, the County ranks 4 th in farm gate sales across New York State, with annual sales estimated at $234.3 million. This represents over 4% of all farm sales in New York State. Its neighboring county, Wyoming County, ranks first, with $318.4 million in farm sales. Top NYS Farming Counties by Sales Rank County Value of Farm Sales % of NYS 1 Wyoming $ 318,412, % 2 Cayuga $ 289,235, % 3 Suffolk $ 239,818, % 4 Genesee $ 234,292, % 5 St. Lawrence $ 186,431, % Subtotal: Top 5 Counties $ 1,268,188, % New York State $ 5,471,639, % Source: US Department of Agriculture, 2012 Census of Agriculture As noted in the previous chapter, a large proportion of land in Genesee County is devoted to farmland, and the total available farmland has been increasing in Genesee County. In 2007, there was 183,539 total acres in farmland, which increased to 187,317 acres in 2012, the most recent available census year. Major crops by acreage include corn for grain and silage (30%), soybeans (7%), winter wheat (6.5%) and dry alfalfa hay (5%). These four crops comprise almost 50% of total farmland in Genesee County. Land devoted to these crops varies from year to year, but has remained remarkably steady over the past decade or so. Page 39

2 The remaining acreage devoted to farmland in the County shows 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 grown in the County, representing 11% of the County s land base. The remaining 40% of active farmland in Genesee County is made up of pasture, fresh vegetables, 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. Crops by Acreage, Genesee County 2012 Vegetables 11% Winter Wheat 7% Corn 30% Dry Alfalfa 5% Soybeans 7% Other 40% Source: US Department of Agriculture, 2012 Census of Agriculture Page 40

3 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 vegetable processing industry. Local food processing capacity remains important to the continued success of local agriculture. The locally based food processing industry, grown out of the ingenuity and cooperative spirit of Genesee County farmers, remains strong, as evidenced by the 2013 investment by Bonduelle, a French based firm, in buying assets formerly owned by the Pro-Fac Cooperative, Birdseye and more recently, Allen Canning Company. Bonduelle Processing Plant DAIRY/BEEF Dairy is a major component of the agricultural economy in Genesee 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 an acre of haylage and an acre 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. In 2009, there were 24,000 cows producing an average of 22,300 pounds of milk per cow. By 2014, there were 29,000 cows producing 24,000 pounds of milk per cow. Page 41

4 Dairy Trends 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Cows Avg. Milk Production ,000 22, ,000 24,000 Source: NYS Department of Agriculture & Markets The value of milk output, as measured by the statistical uniform price received in the Western New York order, is subject to significant price fluctuations. The price ranged from an average of $17.40 per cwt. in 2010 to $25.40 per cwt in With monthly variations, the price peaked as high as $26.87 in September of This variation in price affects farmers receipts. Assuming constant levels of production, revenues grew by $55.68 million between 2010 and However, more recently, the price of milk has dropped to levels not seen since In 2015, the average price was $17.30 per cwt, and 2016 s average price has been $15.12 per cwt through June of In other words, over the course of 24 months, the farm gate value of milk in Genesee County dropped by $71 million at static production Average Milk Price Received by Producers (price/hunderweight) Source: NYS Department of Agriculture & Markets WNY Market Page 42

5 Milk is still the single largest source of agricultural revenue for the County. County average farm gate sales were $236,952,000 at the 2012 agricultural census. Livestock, milk and poultry made up 63% of farm gate sales. Milk makes up 51.2% of total farm gate sales output, cattle and calves make up 10.8% and other livestock, mainly poultry and eggs, make up less than 1% of total farm gate sales. Wheat, corn for grain and soybeans comprise $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. Farm Sales, Genesee County Other Livestock Wheat, Cattle, calves Milk corn, soybeans vegetables Other crops/ hay Other AGRICULTURAL MARKETS: MILK Genesee County is blessed with robust markets for its agricultural output. Processing in the dairy industry, in particular, has grown substantially in the last decade. A healthy and robust dairy industry depends upon effective markets to purchase milk not needed to service the high-value fluid milk 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 the milk market include the O-at-Ka Milk Products Cooperative, Alpina, Yancey s Fancy Cheeses, and Upstate Niagara Milk Cooperative. O-at-Ka, located in Batavia, 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 United States, and their products include protein shakes, and drinks, muscle recovery beverages and weight gain Page 43

6 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 United States. 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 in Erie County, is the area s largest processor of milk. Farmer-owned, it delivers significant value back to Genesee County producers. There are also several out of County resources, including 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 joint venture, and as of this writing have yet to determine what will be manufactured at the shuttered facility in Batavia. AGRICULTURAL MARKETS: VEGETABLES 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, New York; and Page 44

7 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. GRAINS/FEED 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. Half of the dry matter consumed by dairy cows is concentrated feed processed off-farm, and about half is corn meal. There are also feed processing facilities located in Batavia, Alexander, Strykersville (Wyoming County) and Caledonia 1 (Livingston County), which offer markets for corn. The single biggest corn market is the Western New York Energy ethanol plant, located in Medina, in 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 New York, and is therefore used as the measuring stick for the value of 1 This facility is currently under reconstruction after a fire Page 45

8 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. SOYBEANS Soybeans are the fastest growing crop by acreage in New York State. However, soybean processing is complex, and the markets are not convenient to Genesee County. The output products of soybean processing 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 are shipped to Ohio and the Midwest, resulting in backhauling of soybean meal, or to a major export port and processing facility in Hamilton, Ontario. There are a few soy processing facilities in the region of Western New York that process soybeans through an extrusion process or by heat treating, but these small processors are not significant markets for the product. About 30% of soybeans produced in the County are exported. In addition to the Hamilton, Ontario outlet, export opportunities may exist at the Port of Oswego and South to ports at Norfolk, Virginia. Page 46

9 WHEAT Wheat is marketed in a fashion similar 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. ADDITIONAL MARKETS 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. The brochure is included in the appendix, and can be found at this link: Brochure.pdf? OPPORTUNITIES FOR EXPANDED PRODUCTION OF CURRENT MARKETS Mothballed Facilities 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. Page 47

10 Dairy 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 investments - over $100 million - 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. Local Markets for Local Products 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. Consumers are demanding more locally grown foods, and retailers are responding to the emergence of location and producer based demand models that are disrupting the consumer marketplace. Bagged greens and 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. One aspect is intensive agriculture in high capital investment ventures that produce greenhouse tomatoes, peppers, cucumbers, etc. and specialty items like mushrooms. Interest in locally produced vegetables has spurred strong capital investment in Controlled Climate Agriculture (intense greenhouse production) in the region. Another opportunity is in the increased demand for medium to large-scale production of locally grown leafy greens processed centrally at Pride-Pak in Medina and other facilities. Page 48

11 The Pride-Pak facility allows for the production of bagged leafy greens from Western New York 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, which opened in the Fall of 2016, addresses significant 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, Western New York also faced a drought in 2016, although droughts of this intensity are rare (once every 60 years) and usually not long lasting. Other potential markets include 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. These markets are dependent on additional capital investment for down-the-line processing. Corn Corn markets will grow as feed demand grows, and as Western New York Energy continues to produce ethanol in the region. Some capital investment has occurred at the ethanol plant to increase efficiency, although that will not necessarily result in increased corn purchases. However, the demand for corn at this one location is four times the output of Genesee County production, and 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 Markets Soybean processing represents a significant unmet opportunity for market growth. However, the path forward is complicated. It is necessary to have the right combination of process, market development of all by-products, and capital investment to produce a reasonable return for owners. This situation has not yet emerged in Genesee County, and Midwest domination remains. Page 49

12 BARRIERS TO NEW MARKETS Ironically, a key barrier to new market development in Genesee County has been the success of the status quo. To expand into new markets requires risk taking and significant capital investment on the part of agricultural entrepreneurs. When what the County s farmers are currently doing works, and they are at least marginally profitable, then the likelihood of them being the source of new product and market development is low. Young people who are returning to production agriculture have found easy sledding in the early part of this decade. However, the market is changing, and farmers are seeing their returns from agricultural production declining to the mean or below since This has not dampened their enthusiasm, but has diminished the capital and investment interest necessary to get small scale specialty processing ventures off the ground. Borrowed capital is available for projects that have some means of providing equity, have produced business plans that project rational growth in sales and returns on investment, and have clearly demonstrated market research and potential. Locations for project development are numerous, particularly in Genesee County where an industrial manufacturing park specifically developed for agricultural processing exists in Batavia, and numerous other small shovel ready sites exist. The barriers simply are the lack of the right person, idea and capital to emerge simultaneously. This happens organically, but takes time and patience on the part of developers, financiers and producers of agricultural inputs. Page 50