What’s Up With Milk Producers?

Speaking of agriculture, can anybody contribute any information on the subject addressed in this Christian Science Monitor op-ed? Apparently, dairy farmers are having a hard time making ends meet:

On the demand side, the federal Dairy Export Incentive Program is paying farmers to export their milk for below-market prices – yet another farm subsidy that neither American taxpayers nor our trade partners will countenance for long.

On the supply side, the Cooperatives Working Together program is buying and slaughtering entire herds of dairy cows, but only on the condition that the farmers who own them leave the business. So far, this year, 101,000 cows and 367 farms have been “removed.” Over the next month, those numbers will nearly double.

Harvey was notified about the next round of buyouts, but instead of applying he focused his efforts on trying to get an actual meeting with Mr. Vilsack. He wouldn’t even need much time, he says, he’d just like to show Vilsack his milk check and his stack of bills, and tell him that the cure to the disparity between the two is simple: Pay farmers a fair price for their milk.

In fact, that was government policy until the Agriculture and Food Act of 1981, which released dairy pricing to the free market. Farm milk prices were thereafter determined by trading on the Chicago Mercantile Exchange, an approach that ultimately favored larger, more capital-intensive dairies. Partly for that reason the United States has lost 80 percent of its dairy farms, 253,000 in all, since 1981.

The beginnings of the fair-price solution that farmers such as Harvey seek may exist in current legislation. Most hopeful is The Federal Milk Marketing Improvement Act, which would start to tie the farm milk price to the cost of production. And yet since the bill was introduced in April, it hasn’t moved. A similar bill introduced in 2007 never made it out of committee.

This Business Week article on a similar subject points to what I interpret as over-supply in the organic market and lack of diversification.

What role do European agricultural subsidies play in this drama?

My knowledge of this subject is rather dated, most of it coming from what I was told by a guy who used to work for me who grew up on a dairy farm. IIRC the greatest cost components in dairy farming are labor, feed costs, and replacement heifers. As more farms leave the business that last will only become more expensive.

Feed costs are directly related to oil costs so I’d suspect that the drop in oil prices this year over last will help dairy farmers out.

It sounds very much to me as though we’d better get used to higher milk prices.

6 comments… add one
  • PD Shaw Link

    I’ve been told in the last few weeks, that pork producers are losing their shirts. This is primarly due to high corn prices, plus lowered world demand due to swine-flu fears. If corn comes in as expected (an oversupply), then the price of corn will drop. But the pork producers were having trouble before swine-flu, so I suspect demand and trade issues are also in play. The government is being asked to buy excess pig supply for the second year in a row.

    Oh, you asked about dairy? Don’t know much, but maybe some of this applies.

  • Andy Link

    If there’s oversupply in the organic milk market, why does organic milk cost twice as much in my area – almost $6 a gallon.

  • Here’s my story:
    My name is Janice Grimes and my husband Todd and I are dairy farmers in Iowa.

    We, like other dairy farmers, are struggling to stay afloat. The price of milk has decreased so much that we went from being able to pay all our bills, to losing about $5000.00 each month. We have cashed in our retirements and life insurance policies. We’ve borrowed more money from the bank to continue operating and I was forced to return to work off the farm. This has left my husband to do all the milking by himself and it has taken a toll on us. We are living from day to day, not sure if we will go bankrupt and lose our farm, our home, and Todd’s parents’ house, which is also part of the farm. Our closest dairy friends are barely hanging on and we lean on each other for moral support. Last week, one of our dairy friends filed for bankruptcy and three other local dairy farms have also been lost due to the crisis. We couldn’t sell out even if we wanted as dairy cows are worth practically nothing at the market.

    The USDA has tried to help by instituting the MILC program. However, the MILC rate is based on the Boston Milk price. This is simply a joke. The Boston price is the highest in the country and although an adjustment is made for feed costs, it still only adds about 1000.00 to our income. It is simply not enough to ward off bankruptcy.
    The lack of money is now having a trickling down effect and there is loss of income and business to local veterinarians, hoof trimmers, dairy supply stores, feed mills and milk haulers.

    I have been doing everything I personally can to bring attention to this crisis and to try and enlist the help of our government officials. I have written to every member of the Senate Agricultural Subcommittee, Secretary Vilsack, members of the newly formed Dairy Caucus and Iowa Governor Chet Culver. I have received little, if any, response.

    We had a glimmer of hope when the Senate Ag committee began to hold hearings on the dairy crisis. However, I was very disappointed in the speakers that provided the testimony. Where was the testimony from the dairy farmers? The dairy farmers that did testify were tied to large companies, the Farm Bureau or end processors. I read and heard that cooperatives and processors reported the following:
    • There are too many cows producing milk, thus there is an oversupply.
    • It’s too late to help the small dairy farmer
    • It is better to do nothing now and allow the market to find equilibrium.
    • The price support program should be eliminated as it is a burden to everyone

    The local dairy farmer is LOSING money every day. However, the price of milk has not decreased that much in the store. We KNOW that someone is making a huge profit and it is NOT US. It has to be the cooperatives or the processors, so why would the very people who are making money be testifying to the ag committee?
    We want our voices heard and we want you to know that the testimony pointed out above does not represent us and is not in our best interest. The cooperatives and the processors (creameries) are looking out for themselves at our expense.

    We would like the committee (and thus Congress) to adopt the following:
    • Double the MILC rate being paid to dairy farmers and make it retroactive to March as suggested by Senator Kirsten Gillibrand.
    • STOP the importation of milk products (milk protein concentrates) from other countries!! If the processors and cooperatives really want us to believe there is an oversupply of milk, then why are they importing it??
    • Secretary Vilsack has the legal authority to set the price of milk to the cost of production per U.S. Code TITLE 7 Chapter 26 SUBCHAPTER III 608c 18 (18). I know he is aware of this as Farm Aid, on June 18, 2009, delivered 13,000 petitions signed by dairy farmers asking him to do so. The National Family Farm Coalition sent a letter to him on March 2, 2009 requesting the same thing. We would like Secretary Vilsack to set the price of milk to production until the government can look into the situation and see what is truly going on with the market price.
    • Have Congress, the agricultural subcommittee or the dairy caucus look at long term reform for the dairy industry
    Consider passing the Spector-Casey Bill S-889

    I am sick and appalled that dairy farmers are committing suicide. I am saddened that the CWT program is sending hundreds of thousands of dairy cows to slaughter in an effort to decrease the number of cows in the system. This program is NOT working.
    I am begging you to please help the dairy farmers. We are an important part of this nation’s food supply. If the dairy industry collapses, it will affect all Americans. Dairy farms simply cannot continue to lose thousands of dollars every month.

    I’ve heard this crisis referred to as the “perfect storm”. For my husband and me, it has been the “perfect hurricane”. We will not be able to survive much longer. We need emergency assistance now (and we are talking weeks, not months). We cannot wait for “future” programs to be developed. Without immediate help, we will lose everything we have worked all our lives for – our farm, our home and our most important concern, our dairy cows who we birth, bottle feed, nurture, medically treat and provide comfort for in the hopes that the milk they produce will provide a living for us and will enter the American food system for all who consume dairy products.

    I would be more than happy to speak to you about this or provide any information that would be helpful.
    Sincerely,
    Janice Grimes

  • Thank you very much for filling us in, Janice. I’ll do what I can to get some attention on the situation.

    On the items you mention there’s one that I think I can offer a speculation on:

    STOP the importation of milk products (milk protein concentrates) from other countries!! If the processors and cooperatives really want us to believe there is an oversupply of milk, then why are they importing it??

    My guess is that milk protein is being imported from other countries not because of a lack of availability of milk to make it with but because of the cost of processing. I’m not sure what can be done about that.

  • D. Fischer Link

    The mpc problem is serious. The big companies are importing it illegally. We are just not enforcing our own laws. There importing dry milk as mpc if it was imported as mpc it would be regulated. This is my understanding. John Bunting goes into much clearer detail than my muddling. Check out his blog on the dairy industry practices. http://johnbuntingsjournal.blogspot.com/

    Yes I am a dairy farmer with my husband and right now we are losing about 4,000 a month. We work 7 days a week 7-15 hours days year around. I think for that much hard work we need to have a steady income not ride the markets that are adjusted by a few fat cats.

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