The Northeast Dairy Summit held on March 20, 2009 in Burlington, Vermont organized by Dairy Farmers Working Together (DFWT) gathered 250 industry leaders from across the nation. Farmers are becoming aware that consensus on otherwise divisive issues, which have held the dairy industry captive for many years, would allow political leadership to move forward with a long overdue national effort.
In addition to an economic crisis which involves the whole world, the United States dairy industry finds itself in a market struggle affecting every farm across the country. The milk industry as it has come to exist assigns responsibility for staying on course to industry leadership influenced by market demand and political oversight. A nation of wealth and power, this "Land of Plenty" now recognizes it is a nation of surplus milk.
Last year’s dairy export markets were favorable for the United States, accounting for over 10% of its annual production; presently those same markets struggle to absorb 4%. Global events such as weather create misfortune in some parts of the world while others enjoy market opportunities that typically command a higher price for milk products.
Our effort nationally has been to produce every drop of milk as efficiently as possible, and to recognize no market limits. During a market downturn, this practice of blindly producing creates an oversupply which then erodes price and builds inventory. We understand that fluid milk has a shelf life but tend to overlook the many products we enjoy which use milk proteins as an ingredient.
Standing in the shadow of a large and increasing inventory, farmers recognize that today's cost of production exceeds their pay. While using their equity to continue operating, farmers and vendors alike also recognize that a cycle of one crisis after another is leading them toward financial ruin. Here in Vermont, the dairy crisis is highlighted by its dramatic effect on the state’s economy.
Confronted with financial disaster, farmers and everyone associated with the dairy industry are beginning to speak with a unified voice. Using the crisis as an opportunity to find a solution, farmers agree on the following:
1. There is an oversupply of milk on the world market.
2. Farms are in distress across the nation.
3. Export markets up to about 5% appear viable.
4. Global markets beyond 5% are intermittent, exist briefly and disappear quickly.
5. Producing beyond the needs of a stable market invites disaster.
In fact, what farmers are saying is we need to identify the market, recognize the balance between supply and demand and manage the supply to meet the needs of the market. We can tolerate some fluctuation in the marketplace but not wide price swings that land us in the middle of one crisis after another, enough! Again, let’s identify the market and manage the supply.
Throughout history, man has recognized the value of tools, continuing to upgrade them as he proceeds along; in so doing, he places less value on yesterday's tools. The milk market relies on outdated tools which need to either be upgraded or replaced, and chief among them is survival of the fittest, a reactive form of supply management. This primitive backdoor approach to milk management is inefficient and comes off the backs of our farmers through the form of attrition – insolvency, bankruptcy, etc.
We could take a proactive approach to the problem; one example is Cooperatives Working Together (CWT), a national program which has the potential to be quite powerful if it were adequately funded and properly administered. There are many other management tools that could be valuable and perhaps we don't need to agree on which to use but we should agree that supply management would help stabilize the dairy industry and benefit our nation.
Management plans from across the country have emerged to face the process of evaluation. However our continued focus on a “one size fits all approach” to supply management has so far produced gridlock at our expense; evidence of which is the CWT program at 2/3 enrollment and our milk checks needlessly cut in half.
Selecting a management tool to address national needs requires that we first recognize diversity in the marketplace and then identify regional differences. In a broad sense, there are two regions of our country, Class I milk and Class III milk, which are defined by the type of market each supplies, giving way to a variety of expectations.
In the context of not participating in a national program to gain market share by squeezing out the neighbor, we need to first define neighbor. Our dairy industry and political leadership identify neighborhood by region of the country yet fail to adequately define neighbor by overlooking participants in the market from Europe, New Zealand, Australia, India, China, etc.
We are all responsible for today, all of us, and we are expected to provide the opportunity for tomorrow. We need to more clearly understand our national objective and the dynamics of a global market as we participate in the marketplace with neighbors from home and abroad.
Bottom line, full participation in the CWT program is essential; it is not a long-term solution to our problem, it's a vehicle to exit this crisis and provide some stability going forward. In the meantime, we have to develop a tool which better addresses supply management, perhaps one for each market to prevent the next crisis.
It's our future.
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