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Letters to the editor: The cost of production

Published on 08 June 2010

Demand cost of production

Dear Editor,

Farmers why do you think you don’t deserve the cost of production for your milk?

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Don’t let the co-ops, government officials or anyone else for that matter tell you that you don’t deserve it. They have kept us broke for far too long now, don’t accept a plan that does not factor in our cost of production.

If the co-op and milk companies really cared about the farmers and their members why would they not have endorsed a bill that supports anything less than cost of production? Why would we vote for a plan that uses the same old broken pricing system that is causing the problem? Demand cost of production – stand up for yourself. We are all busting our backs to feed Americans safe, quality food. We deserve nothing less.

Read all the proposals that are out there and then reread S1645; this is the only one with cost of production. Let’s put the money into the farmers’ pockets for a change not the processors’ and handlers’. The consumers will not suffer with this plan either. We have only one shot at this, we need to make sure we get what is rightfully ours – cost of production. We all know that if we don’t get cost of production in the first try, how many years will it take to revisit the Farm Bill to change it 10 years or 20 years from now.

The old saying look to the left, look to right, one of you won’t be here next year. Well, if we don’t get bill S1645 passed, none of us will be in business.

Robin & Dave Fitch
Dairy farmers
West Winfield, New York

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Farm insurance is not a solution

California dairy producers have been selling their milk below the cost of production starting in 2008 for the past 24 months. In 2009 all the cooperatives and private plants in California imposed production bases for production in 2007. We reduced production by 5 percent and still have not seen any price relief.

This state has lost $17 billion due to lost revenue from the dairy industry due to low farm prices below the cost of production. California lost 109 dairy farmers in 2009. California dairies average around 1,000 cows per herd but still have smaller herds of 200 cows. They have all been below the cost of production. Scales of economy have not had any positive effect against these low milk prices.

The prices are fixed below the cost of production through long-term contracts months in advance. Cooperatives and private processors’ costs are covered by a make allowance so they can afford to sell cheap and long. These low prices determine the dairy farmer’s price of milk. Many dairy-related businesses have been affected by these low milk prices; they also are having difficulty getting credit from banks, as are the dairy farmers.

Dairy food companies such as Deans and Kraft are making record profits as they drive dairy farmers out of business. They took our equity and next it will be our property.

International Dairy Foods Association and National Milk Producers Federation are wheeling the power in the halls of Congress and the White House. They are now proposing income insurance for dairy farmers instead of an established milk price floored at the cost of production. This program is seen as a snake oil policy by many dairy farmers and dairy experts. They want to terminate the dairy price support program, MILC payments and the Federal Milk Marketing Orders, to be replaced with a completely free market takeover. Please help save the U.S. dairy farmer by calling your members of Congress and opposing this bad dairy policy by NMPF.

All indications, according to experts, are that milk prices are now fixed below the cost of production through 2010.

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Secretary Vilsack must take immediate action to raise the support price to the cost of production under his authority. The support price should be floored to at least $17.00 per hundredweight to keep the dairy farmers above this level.

A new method of pricing milk to the dairy farmer must be established that equates to the cost of production, if we are to sustain a dairy industry in the U.S.

The long-term solution must be S1645 (Specter-Casey Dairy Bill). This is the most comprehensive dairy bill that has been presented. This bill prices milk by the USDA Economic Research Service (ERS) cost of production, balances imports and exports and allows the implementation of a two-stage supply management plan. This bill does not cost the government anything.

Loren Lopes
Dairy producer
Turlock, California

Price-makers not price-takers

I have been an active participant in finding solutions to the current dairy crisis. I have traveled to Washington, D.C., three times in the last 12 months; spoke at dairy meetings, Department of Justice hearings and an official New York State Senate Ag Committee hearing.

I have looked long and hard at the answers to this crisis that threatens this nation’s long-term food safety, food quantity and food sovereignty. Farmers have been told the free market will provide for us a fair price.

Milk buyers have merged into giants and our dairy co-ops with the power of Capper-Volstead Act claim they can’t truly bargain for milk prices based off cost of production or increases in standard of living because they will be in violation of anti-trust. We are told that we have to take this 30-year-old price, and a whole generation of the few farmers left today have been brainwashed into this mindset. This mindset affects our ability to find adequate solutions to this crisis because we have been trained to be “price-takers.”

Why can’t we run our dairy business like every other market-oriented business where we set our product price based upon our production costs? Other businesses have this power, but dairy farmers do not with our daily perishable product and the government setting minimum prices off the Chicago Mercantile Exchange (CME) and influenced by the National Agricultural Statistics Service (NASS) survey.

I have become a strong supporter of S1645 The Milk Market Improvement Act of 2009 because this bill fits this philosophy in doing business off our basic costs. It doesn’t guarantee a profit; it only covers the minimum costs of producing milk in the U.S. with price discovery calculated by researchers at the USDA ERS.

The ERS numbers for our costs are variable economic models from markets like oil, fuel, labor, insurance, feed, etc. In fact, one could argue this price discovery is a lot more market-oriented because it is broader and more diversified than what we have today compared to the CME trading surplus cheese, which is less than 1 percent of the cheese marketed. This type of pricing would get us off the perpetual treadmill of playing catch-up, taking on long-term debt and always having to milk more cows to try to get out of the hole.

The other distortion of the bill comes from the belief that the bill will flood the market with milk. I say, yes, that may be true in the short-term but the bill has two great mechanisms for supply management. The first program assesses all milk up to 2.5 percent of production to fund the Commodity Credit Corp in order to buy product off the market. However, if the oversupply grows worse, 100 percent of all extra milk could be paid zero dollars in order to fund the CCC sufficiently.

I also believe that it will take some time, but all good businessmen or women will make intelligent decisions and dry cows off, sell some cows or reduce grain levels instead of producing something with a zero return.

The best part of this whole idea is that it is 100 percent farmer funded with no more handouts from Washington and our taxpayers. The school lunch program, food banks and the needy benefit from this program of supply management.

Let’s support this great idea that will revitalize rural America’s small businesses instead of starving it. Large milk-buying conglomerates have hoarded the wealth from milk for far too long. I have heard politicians claim they want to “spread the wealth around this country” through taxes, but I say it is time for rural America’s small business to do this in an economically efficient way. PD

Brian Gotham
Dairy producer
Edwards, New York

May 1, 2010 correction

In the May 1, 2010 article titled, “Crossbreeding study participants share observations, opinions,” written by Janet Bosch, Vern Becker was not properly identified. Vern Becker is a dairyman in Eden Valley, Minnesota, and was one of the study participants who toured the California herds that were milking crossbreeds.

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