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1309 PD: Dairyman's own no-surplus milk formula

Paul Prior Published on 25 August 2009

As dairymen begin to work smarter and realize they must work within the laws of supply and demand concerning the production and distribution of their milk products so as to make a profit, various brainstorming ideas have been presented to eliminate unreasonable amounts of surplus milk or surplus milk altogether.

Background
Before World War II, our grandfathers fed extra milk above reasonable human consumption needs to dogs, cats, pigs and calves. Grandma put the extra milk on the garden for fertilizer and raised champion produce. With the coming of World War II, the demand for milk products increased. The butterfat percentage in whole milk was reduced to 3.2 percent in order to extend the milk farther. Out of necessity an increased capacity in milk products, packaging, disruption and extended storage resulted. The idea that milk products were only good enough for human consumption, and pricing it accordingly, was developed and remains today. Dairymen began to work harder and more efficiently, and the net results were increased production per cow and a surplus of milk products, which have routinely plagued the dairy industry to this date and has resulted in roller coaster feast-or-famine scenarios like the one we experience today.

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Dairymen forgot the overflow principle of feeding milk to pets and livestock or converting it into fertilizer. We started feeding warehouses with milk products above reasonable balancing and emergency reserve milk (BERM). These surpluses depress the price of milk both as surplus milk products go into and come out of warehouses.

Clearing out current and future surpluses
Below is a proposed flow diagram of the production packaging and distribution of milk into six different classes, which will ensure no surpluses above reasonable BERM levels in any class.

If a milk-producing area or order is short of milk, such as Florida, any unneeded classes of milk would not be used nor blended into their blend price. In milk-producing and marketing areas or orders where there is a surplus milk production, all six classes of milk should be used to create the blend price for that order. Co-ops could re-blend as needed. A form of a quota system could be used where the previous three normal or high-demand years establish a producer's percentage quota for each class. If a producer wanted to produce milk above his quota he would get the animal feed or fertilizer value for his milk. For example, $5 a hundredweight to -$.50, respectively. This producer could produce all he wanted for these classes.

A minimum of milk should always go to the "animal feed and fertilizer classes" in high milk- producing areas or orders, insuring production capabilities, facilities and markets remain open. For example, the "animal feed class" should have a minimum of .5 percent (1 truckload out of 200) and perhaps .001 percent (1 truckload out of 1,000) to go for the "organic fertilizer class." Adulterated and spoiled milk would go to this class, and this class would receive minimal, if any, return. But this official class would be an important pressure relief valve for marketing surplus milk.

Picture in your mind six different milk silos or classes of milk. I offer the BERM percentage level (balancing an emergency reserve milk) only as a suggestion, and these suggested BERM percentage levels should be adjusted as economic models are studied and deemed appropriate.

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Silo/Classes
I. Fluid milk
A. BERM percentage = 1 percent (3.5 days of annual consumption above milk needed to fill fluid system to 1/3 shelf life)

B. Any fluid milk more than A above would go to classes II to VI below.

C. No surplus milk results for use in this class.

II. Soft milk products
A. BERM percentage = 2 percent (seven days of annual consumption above milk needed to fill soft milk product system to 1/3 shelf life)
B. Any milk more than needed above would go to classes IV to VI.

C. No surplus milk results for use in this class.

III.Cheese
A. BERM percentage = 4 percent (14 days of annual consumption above milk needed to fill the cheese marketing system to 1/3 shelf life)

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B. Any fluid milk more than A above would go to classes IV to VI.

C. No surplus milk for cheese production would result.

IV. Manufactured milk for human consumption (butter, powder, casein)
A. BERM percentage = 6 percent (21 days of annual consumption above milk needed to fill manufactured milk system to 1/3 shelf life)
B. Any fluid milk more than A above would go to classes V to VI.
C. No surplus milk for manufactured milk for human consumption would result.

V. Animal feed (presently animal feed is in Class IV and receives the same price per hundredweight as Class IV.) This class of milk should be priced competitively as to its value, with feather, blood, soybean, meat and bone meal, etc.)
A. BERM percentage = 50 percent (half-year annual consumption above milk needed to fill animal feed class system to 1/3 shelf life)

B. Any fluid milk more than A above would go to class VI.

C. No surplus milk for manufactured milk for animal consumption.

VI. Organic fertilizer/"Joel Class" (Joel 3:18, "the hills shall flow with milk")
A. BERM percentage -- none as the milk will be applied as fertilizer to fields as they are worked or irrigated. Also, this milk could be stored in lagoons or mixed in with dairy compost until sold or applied to fields.

B. No surplus milk to go anywhere else.

C. No surplus milk to depress prices below profitable level.

The organic fertilizer or "Joel Class" of milk is to be marketed and reported in a positive manner. Formally this milk was termed as dumped or land-filled milk and was reported in a negative, counterproductive public relation way, which has angered both producers and consumers. This official class and means of reasonably using surplus milk needs to become accepted as a valued tool in marketing our milk profitably.

In the past, dairymen have worked harder and more efficiently and have done a great job of producing a lot of milk. We now need to work smarter, learn the principles and language of economics (supply, demand, point of diminishing return, marketing, etc.)

Perhaps applying the above proposed system of six different classes for milk use will result in no milk product surpluses and stabilize milk prices so a reasonable return on investment to a good dairyman and his family will be the outcome. PD

Paul Prior
Owner Priority Dairy
(801) 489-7309

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