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Avoiding The Issue
Dairy co operatives are
beginning to recognize a need to manage their milk supply.
Federal regulation allows this practice, and is presently being
utilized by a couple of the larger
co operatives. Last year, U.S. dairy farmers produced 217
billion pounds of milk, 50.3 %
was produced by 2.9 % of our farms (about 1200). There
are approximately 40,000 dairy farms operating today, down
substantially from the more than 216,000 operating in 1988.
Each year we produce a growing
volume of milk, we rely heavily on export markets for balance
(about 17%), the value of our currency is strong by
comparison to others, we have no control over export markets,
(which often prove volatile), we exercise no form of control
over production, and find ourselves headed for trouble when
supply exceeds demand by more than 1 %.
Last year, farmers in
Northeast Federal Order # 1 dumped 170 million pounds of milk.
This year, by the end of July, 145 million pounds had been
dumped ..... during the first 7 months of the year, all at
farmer expense.
So why not reduce production?
Some think farmers are free market guys and don't want to be
told how much to produce. While that may be true of some it is
not true of the majority, especially now, in their fourth year
of producing milk below its cost of production.
The real problem is that
farmers have but two options, either produce more milk during a
downturn to keep up their cashflow, or go out of business.
Perhaps this ruinous practice was an oversight when Federal Milk
Marketing Orders were written back in 1937, market vulnerability
then was finding a reliable supply of milk. Today, conditions
are substantially different, our marketplace is oversupplied
with milk, yet we continue to operate under that antiquated
system.
Nonetheless, it amounts to a trap for the dairy farmer,
something which must first be recognized and then corrected in
order to move forward.
The main objective of those
Federal Orders was to; 1st), promote orderly
conditions in fluid milk markets; 2nd), improve the
income situation of dairy farmers; 3rd), supervise
the terms of trade in milk markets to achieve equality of
bargaining between milk producers and milk processors; and 4th),
assure consumers of good quality milk at reasonable pricing.
Most farmers I know would be
willing to scale back that few percent of milk production in
order to restore their economic wellbeing, but in doing so,
there is nothing to prevent milk from flooding in on top of
their effort; something which then comes at the expense of those
who reduced production.
We have been at this game
since just after WW II, from 1949 until now, government
intervention has amounted to a list of twelve programs which
have failed to secure a future for America's dairy farmer, all
while managing to avoid the real issue. (see program overview
pg.2)
In order to address the needs
of our dairy co operatives, and their producer members, congress
should revisit the Federal Milk Marketing Orders and make
corrections which encourage both the co operative, and farmer,
to respond to market signals. Dumping milk is an absolute waste
of farm assets, but to further complicate the situation,
reducing production will not only reduce the farmers cashflow,
it opens the door for others to circumvent the farmers effort to
correct it.
Since federal regulation gave
rise to such practice, it would seem the responsibility for
corrective action lies with congress. Therefore, we ask that
congress dismantle this trap to preserve our dairy
infrastructure in each of the Federal Orders, and also stop its
devastating impact on the rural community. Pardon me for saying,
but we have we been stumbling over this issue for nearly seventy
years, history, in this case, reveals there is no future in
hiding behind government programs.
Please revisit the Federal Orders and identify a
plausible path forward.
On behalf of dairy farmers,
their vendors, and America's rural community, thank you.
Bill Rowell
Dairy Farmer, Vt.
November 15, 2018
Overview of government intervention programs
designed to stabilize the price of milk:
1949, The Ag Adjustment Act,
price support.
1977, Price Support was
increased to 83 % of parity, which unleashed a flood of milk,
1981, Price Support was
reduced.
1982, Omnibus Reconciliation
Act.
1983, Refundable Assessment,
for not increasing production.
1984, Milk Diversion Program.
1986, Dairy Termination
Program, voluntary government program.
1988, Commodity Credit
Corporation, lowered purchase price.
1990, Reconciliation Act,
refundable assessment.
1997 – 2001, Northeast Dairy
Compact, supply management refund.
2002 – 2014, MILC Program,
milk income loss contract. (on Sen. Leahy's insistence)
2014, Margin Protection
Insurance Program began, Price Support was eliminated.
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