How Do you Stop a Crisis?
While it is recognized that markets fluctuate, our need for a milk market finds us producing for some that are volatile. Last year's export market of nearly 11% quickly disappeared causing an over supply of milk which invited our current situation. We need to identify stable markets for our product, manage our supply to meet demand, and discourage a market surplus through price.
You and I as milk producers are paid for 100% of what we produce, yet our rate of pay is being determined by the amount we over produce. Typically, a surplus of 3-4% will cut a milk check in half.
Example – Presently 100% @ $10 per hundred vs. 97% @ $20 per hundred by eliminating a 3% surplus
If you were paid nothing for market surplus, would you continue to produce it? The answer should be no, absolutely not. Presently we are producing for half pay, or in other words, we are producing 50% of our product for nothing. Figure your annual production @ $20 per hundred, now take 47% of that revenue and throw it away, that's what we are doing by not recognizing the milk surplus.
Cooperatives Working Together (CWT) is not a long-term solution to our problem, it's a vehicle to exit this crisis and provide some stability going forward. Federal order # 6 is a milk deficit region and therefore doesn't participate in the CWT program, Federal order # 30 is another region that lacks in participation, in fact, 1/3 of our U.S. dairy producers don't recognize the value of supporting this supply management tool.
Look at our situation from a national perspective, a farm producing 2.9 million pounds of milk per year or 29,000 hundredweight could invest 10 cents per hundred or $2,900 per year in a tool to stabilize milk prices but decides not to participate. Instead of numbers in the $18, $19, $20 range, milk is in the range of $10 or less per hundredweight causing a loss to the farm of between $250,000 - $280,000. The farm now stands in line waiting for a federal MILC payment.
A region concerned with losing farms and market share as a result of participating in supply management should recognize that a farm being pushed into insolvency will do little for the region, which includes the region's milk market. We need to focus on reducing market surplus in order to retain all of our farms rather than forcing them out for lack of managing our market. How do you stop a crisis? Stop fueling it.
Finally, don't over look the importance of your federal delegation, collectively they are one of this country's most powerful tools. Extend the courtesy of explaining our national dairy crisis to your senators and congressional representatives, express your concerns, ask them to become actively involved and work with members of the agriculture committee, their help is essential.
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