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Letters to the Editor: Milk pricing system needs repair

Published on 05 August 2009

Fix milk pricing system first
Dear Editor,
The milk pricing system is in dire need of repair.

When evaluating the merits of potential growth management programs (GMPs), it is important to consider and fix what is wrong with the pricing system. Without addressing some needed repairs, it will be challenging for a GMP to have a sustained price effect. This is besides the lack of addressing imports and cow values in the current forerunning GMP.

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1. Continuous increases to manufacturing make-allowances over time have shifted nearly all of the dairy product price risk onto milk producers. This has encouraged plant expansion without regard to market balance or product price. At least a partial roll-back would redistribute some price risk towards processors and retailers.

2. Incomplete reporting by the USDA and NASS contributes to an increasing amount of uncertainty surrounding milk production and pricing. The influential milk production report does not count cows but continuously estimates production/cows. In the era of farm plans, there is no reason a hard count and reconciliation cannot be completed at least quarterly.

3. NASSprice reports for cheese and other products do not include 100% of product sold. Why doesn’t NASS report the price of every pound of cheese? Incomplete counts distort dairy price signals.

4. Supplementing the production report with a regular (quarterly) report on the sources and uses of milk would further identify balance of milk flows.

5. Use at least part of the CWT fee to fund a New Zealand-style export board that actually sells product instead of expectinga competitor, Fonterra, will help.

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To date, Federal Milk Marketing Order (FMMO) changes consolidated processing capacity into the hands of fewer firms and inequitably shifted the entire price risk to the milk producer. There is evidence that supplementing and/or replacing the FMMO in some regions with co-op/farmer-owned Marketing Agencies in Common (MAC) would achieve much better regional balance, but these need more study against the above changes. This antiquated system needs to be fixed first for any GMP to work. If they can’t give us fair reconciled product/production accounting now, how will they ever manage a GMP properly?

Troy Lenssen
Lenssen Dairy
Lynden, Washington

What we’ve needed and still need
Dear Editor,
I am a Cornell university graduate with 30-plus years of dairy farm experience. I have also been a staunch supply management supporter. I submitted a supply management program to my congressman in 1998.

It failed then because no more than three farmers could agree on it. Surprisingly so, it wasvery similar to the CWT programthat exists today.

With cheese and butter at or below support, this $11 dollar milk is going to last well into the fall or into next year. It will in all honesty correct itself, but it is going to putmany farmers out. The ones left will have accumulated an enormous mountain of debt that is going to take a long time to recover from.

The only reason CWT does not work well is the fact that it was not funded enough and it does not have all the support of all the milk. If it was funded at 25 cents per hundredweight by 95 percent of the milk in this country, none of this would have happened. 10 cents and a 65 percent participation rate is like making the D-Day invasion in a row boat.

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This country can support 9 million cows, give or take a few. It cannot support 9.3 million. Milk is going to stay low until the extra 300,000 cows are removed, not heifers or the calves, just the cows. Simple solution.

I was devastated that NMPF and CWT turned down a $400 million loan guarantee secured by Sen. Leahy (D-VT) for CWT to buy 400,000 cows early this year. The opportunity of a lifetime passedthe industry by. It not only would have mitigated the crash of ’09 but it would have done it in an orderly manner and it would have made milk worth a lot more today than it is. It also would not have upset the beef people as much as it is going to upset them when there is a wholesale exodus from dairying later this year.

It has always amazed me that the biggest enemy of farmers is farmers themselves. We cannot agree on the time of day. Big farmer hates little farmer and vice versa. California hates everyone east of the Mississippi, and the Midwest hates the Northeast and California. There are only 57,000 dairy farms left in the country to feed 300-plus-million people and some of the world when supplies are tight. You would thinkenough of us could find a way to agree long enough to stop these wild price gyrations.

Supply management is theonly thing dairy has needed and will need.

Marc Perosio
Dairy Producer
Groton, New York

Free market farce
Dear Editor,
I say to all critics who support the status quo. Do not condemn unless you have a solution yourself. We can measure the status quo because that’s what we have been doing for the past 25 plus years. Let’s see. We have destroyed farm families’ lives, lost diversity in our food supply, destroyed rural America by transferring wealth from rural America to big food, created mega farms that disgust consumers, imported food and blended it with American food which has resulted in food that has been slowly corrupted with dishonesty. Consumers are revolting against our big corporate food society, and we do not listen to them. Our food sovereignty is out the window with trade agreements that think we can compete with New Zealand.

New policy needs to reverse this. Pay farmers on a new price discovery that is based on our cost of production in this country, not New Zealand. Imports are manipulating and maintaining our low price. This keeps our food sovereignty. This transfers wealth from corporate America back to rural America.

Manufacturers are the only ones with a free-market system today; the farmer has a forced market system. There are few players in the market, and they practice Apex pricing. Manufacturers keep the price up on consumers when raw milk prices drop and raise prices when raw milk prices increase. Dairy farmers never benefit from true supply and demand with their perishable product.

There is a plan out there that does all this. It has been well thought out already by farmers and is not a knee-jerk idea. It is Senate Bill 889, the Milk Market Improvement Act 2009.

Supply management gets rid of Apex pricing on farmers, and consumers save money. I don’t like quota, but a two-tiered system with a base on the second tier that is only used when there is excessive oversupply sounds like a better food policy than what we have today. Wake up America, we are destroying ourselves in the name of free trade ignorance.

Bryan Gotham
Gotham Family Farm
Edwards, New York

We need to get together
Dear Editor,
My wife and I are subscribers from Delta, Utah. We have about 3,000 cows (at least for now). We have been reading your publications for a lot of years now. Keep up the good work.

I am writing to you because, like every other dairyman and woman, I am frustrated at watching my 40 years of equity disappearing at a frightening rate. What really bothers me is reading blogs and columns and seeing how predatory and mean fellow dairymen are to each other. All of us seem to be hoping our neighbors go broke first so we can survive.

I moved my family here 15 years ago from a town where we were only one of two dairies left not too far from New York City in Connecticut. Being a curiosity and having no support infrastructure is no fun. Coming to Utah and being involved in a developing industry has been a lot of fun and very rewarding, until now.

Our banks and our industry leaders are strangely silent. I think they have no clue what to do, so they are throwing us to the wolves to let us see capitalism at its worst. No matter where I look I see nothing happening to help improve prices. It seems that 300,000 cows need to die. It seems to me that all of us cutting back by some percent of production, five to 10 comes to mind, would be better than people going out of business. I certainly have cows the world would be better off without. I would have higher quality milk too.

I wish somehow you publishers of dairy industry journals could get together and try to get dairymen to agree to an immediate and drastic self-help program. We don’t seem to realize if we don’t hang together, we are going to hang separately.

I have spent much time calling and talking to and e-mailing co-ops and industry leaders. All I hear is why something can’t be done. We need to try some things to save ourselves, even if they are not perfect or fair. Our leadership is dithering while Rome burns. I have not had much luck with the popular press.

It seems they are more interested in preventing suicide, or telling us what started this mess, rather than leading the charge to do something about it.

John & Maria Nye
Dairy producers
Delta, Utah

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