This winter, Penn State Ag Economist Tim Kelsey and graduate assistants were digging through dairy farm data to determine what farmers were doing with revenues from Marcellus natural gas development. The bottom line is that they're still not sure.
They examined changes in dairy cattle numbers and milk production between 2007 and 2010 in 11 counties, using data from USDA's National Agricultural Statistics Service. Selection of the northern Pennsylvania counties was based on Department of Environmental Protection records of drilling activity.
Changes in dairy cow numbers seem to be associated with the level of drilling activity, says Kelsey. Counties with 150 or more Marcellus shale wells, for instance, experienced an 18.7% decrease in dairy cows, compared to only a 1.2% drop in counties with no Marcellus wells. Milk production in counties with at least 150 Marcellus wells fell 18.5%. Milk production in counties with no Marcellus wells rise about 1%.
Profound implications possible
Additional research is needed to understand what's occurring, he stresses. The available data can't pinpoint whether these declines resulted from existing farms simply downsizing their herds, whether some farms ended dairy production but shifted to other agricultural enterprises, or if they exited farming altogether.
He also noted the importance of knowing whether those farmers who are leaving agriculture due to Marcellus development are doing so voluntarily. "Are they taking the money, paying off farm debt and choosing a new vocation? Or are they being forced out of farming due to environmental or other concerns, such as negative effects on land, water or herd health, or consumer resistance to food originating near natural-gas wells?"
"Anecdotes from farmers, equipment dealers and bankers suggest that some farmers are using proceeds from Marcellus activity to strengthen their operations, which has the potential to benefit the agricultural economy," reports Kelsey. But that's no measure of what's really happening on most of the farms, he adds.
He hopes that future research can determine whether farmers who receive lease and royalty payments and choose to stay in agriculture are using gas-related income to improve their farms. That's hugely important to the local ag economy, he emphasizes,
"Declining cow numbers mean fewer dollars spent locally by farmers to maintain their herds," he explains. "And, lower milk production means fewer dollars coming to the local economy from milk sales.
"A variety of businesses depend on local farms for their success, including feed stores, veterinarians, machinery dealers, milk haulers and dairy processors. If farm numbers and associated ag activity fall too low, essential supporting businesses will go away.
"When a local ag community loses its sense of permance, an 'impermance syndrome' sets in with major effects 10 to 20 years down the road," adds the ag analyst. "It affects farmland preservation program priorities and local tax bases. Everyone wants to be part of a booming economy – not a declining one."
For a closer look at what's happening, watch for a feature in May's America Agriculturist issue.