What the Dairy Industry Really Needs
Editor’s note: Caught between the high price of feed and fuel and the low price they get for their milk, local dairy farmers lose money every time they milk a cow. Statistics show that nationwide, dairy farmers lost $10.05 for every hundred pounds of milk they sold in July; in August, -$9.52; and in September, -$9.40. It’s a wonder any of the small, family farms we know in our area can stay in business! (If this keeps up, some will not.)
Now, the 2012 Farm Bill, which purports to address this problem, is once again before Congress. In June, the Senate passed its version of the Farm Bill, but the House failed to do so before adjourning for elections at the end of September allowing the previous 2008 farm legislation to expire. Both versions of the 2012 Farm Bill would replace several existing dairy price support programs with one margin insurance program based on the difference (the margin) between feed prices and milk prices.
Under this voluntary insurance program, farmers who opt in would receive payments when the price of milk drops too low in relation to the cost of feed. However, the participating farmer also would be required to reduce his milk production when there is too much milk supply in the U.S.
With this as background, here is an op-ed essay from Nate Wilson, a former dairy farmer of 40 years from Sinclairville, NY, Chautauqua County, who contends that this “solution” is not what dairy farmers need.
[Reprinted here with permission]
In the November 15th edition of “Dairy Business,” the Northeast Dairy Foods Association (NDA) came out swinging at a key dairy provision in the proposed 2012 Farm Bill. Seems the NDA enthusiastically supports the taxpayer funded dairy margin insurance scheme in the proposed Farm Bill. But, the supply management portion of it—not so much.
In fact, NDA is down-right sour on any supply management provision; that smacks of interfering with what its member processors see as their God-given right to access ruinously undervalued farm milk. Accordingly, they have assigned their top hired gun, Bruce Krupke, to spearhead a public relations blitz on Congress in an effort to “do to death” any concept of this dreaded “supply management.” This would be accomplished by amending the current legislation with the Goodlate-Simpson Amendment. It would give the green light to taxpayer-funded dairy margin insurance while neatly tucking any pesky supply management horrors into an unmarked grave. While this fits the needs of NDA, there is a more taxpayer friendly, practical approach.
Solve the underlying problem! What is really needed is a total scrapping the entire dairy portion of the proposed 2012 Farm Bill and drafting a new version with what is really needed; reform of USDA's Federal Minimum Price Formula.
All the wasted motion around the current dairy portion of the proposed 2012 Farm Bill is being trotted out to mask the obvious: the current price formula used by USDA to calculate the federal minimum price results in prices paid to dairy farmers that are unsustainable. The pricing of U.S. farm milk is controlled by an elite group of multi-national dairy corporations manipulating cheese trading on the Chicago Mercantile Exchange's (CME) cheese-trading floor. The calculations resulting from this sham trading are then used by USDA as the basis of the Federal Minimum Milk Price Formula. This dysfunctional system uses less than 1% of total U.S. milk production to set pricing the remaining +99%. These CME manipulations have caused a roller-coaster chaos in farm milk prices for a generation, resulting in a steadily dwindling number of U.S. dairy farms and economic decline in rural communities all across America.
This is the very monkey-business cited by Sen. Kirsten Gillibrand, (D-NY) on August 15, 2011 at Westfield, New York; “There is no transparency or honesty in the (CME) pricing mechanism at all.... There is a disconnect between the price of (farm) milk and how we come up with it through the price of cheese in Chicago. I think there is a lot of corruption and anti-trust behavior that is there to keep the (farm) prices down.” Obviously, the sharp-eyed Senator spotted the elephant hiding in the room! Too bad her superior intellectual insight and profound common sense can't be duplicated on the rest of her less observing, less grounded Congressional colleagues.
What really has the NDA's knickers in a knot is the sudden rise of a vastly profitable yogurt industry in upstate New York. Suddenly traditional dairy processors are confronted with a brand new, aggressive competitor for a very limited milk supply. The milk supply is so limited because NDA's members have starved out Northeast dairy farms with unsustainable pay prices. The NDA's member processors’ greed has worked too well; Northeast farm milk prices are ridiculously low, and for this exact reason, these dynamic yogurt makers chose to set up in Upstate New York. An extravagant mark-up on yogurt products gives these johnny-come-lately yogurt guys very deep pockets. Now, after decades of having things their own way, the traditional NDA members obviously fear this new shoe may tend to pinch.
By NDA's own supply projections, the Northeast will have to expand its milk production over the next 24 months by 20% of New York’s recent annual total: an additional four billion pounds—the production equivalent of 180,000 additional dairy cows! (Right... Given current conditions in the Northeast dairy industry, it’s probably best if one does not hold one’s breath awaiting this!)
An increased demand for more milk in the Northeast is not in doubt. The question is: who is going to pay for it—the NDA milk processors or the U.S. taxpayer? NDA wants the taxpayer to fund their addiction to cheap milk, but heaven forbid that the supply of it be, in anyway, interfered with! That would throttle NDA member profits!
For years U.S. dairy farmers have supported the idea that their milk price formula should reflect their production costs. Dairy farmers want their milk-checks derived from an honest price discovery of their milk. What they need is a fair, transparent USDA milk price formula that cannot be tampered with by unscrupulous milk handlers or processors. They (dairy farmers) are overwhelmingly against this taxpayer-funded dairy margin insurance scheme currently before Congress! Their opinion on this matter has been totally ignored and distorted by the management of the nation’s largest dairy cooperatives, who are lobbying hard, through the National Milk Producers Federation, for passage of the proposed 2012 Farm Bill. As milk processors themselves, co-op management has just as much to gain in taxpayer-funded cheap milk as do NDA members.
NDA members and managers of processing co-ops are determined to do whatever is necessary to insure that operations can continue without paying the region’s dairy farmers a sustainable price for their milk. They are perfectly willing to abandon the region’s destitute farmers to eke-out a continued mere meager existence, totally dependant on the charity of the U.S. taxpayer.
A prosperous dairy industry and supporting rural communities can only be maintained by financially stable dairy farms. For farms to be financially sound they need a sustainable price for their milk. A sustainable milk price is a price that reflects the farmer's legitimate production costs and a modest profit to fund a cost of living. Profit to a dairy farmer is simply take-home pay. Its been a long, long time since most of them have seen much, if any of that.