Observations on the Dairy Crisis

Is the Worst Over?

Dick Wanner
Lancaster Farming Staff

Is the dairy crisis over?

Maybe.

Will farmers’ milk checks in the near future cover their costs of production plus a profit?

Could be.

Are dairymen still upset about the beating they’ve been taking in the marketplace?

You bet.

Once they’re caught up with their bills and making money again, will they go back to business as usual, letting their co-ops determine how much they get for their dedication, hard work and investment?

What’s your guess?

My guess is that because dairying is an all-consuming business/way of life, a dairyman who’s at peace with his suppliers and his creditors is going to go back to business as usual. That the talk of revolt will fade away. That the dairyman’s fate will once again be in the hands of people and organizations who may or may not have farmers’ best interests at heart.

I came away with these impressions after a two-hour meeting this past Monday night between Pennsylvania State Senator Michael Brubaker (R-36) and a group of about a dozen dairy farmers who had attended a rally the Monday before in Gordonville. I was invited to attend as an observer, with the understanding that I wouldn’t name names or get too detailed about any heated exchanges that might take place.

Which puts limits on me as a reporter, but opens up some opportunity as a commentator. Both the meetings were organized by Rick Stehr, a dairy nutritionist with REB Consulting.

There were no heated exchanges during the most recent meeting. Lots of intense feelings were aired, and one of the farmers shared details from his latest milk check, but everybody was pretty much in agreement about two things: 1) something has to be done, and 2) the worst may be over.
Let’s give a hopeful cheer for 2.

As for 1, the farmers told the senator they were unhappy about the spread between the farm gate price for milk and the price of milk and milk products at retail. (Turn to the Jim Dunn’s Dairy Outlook on the first market page to see a chart comparing farm and retail milk prices since 2000.) The farmers want their price to include the cost of production. There is currently a bill in the Senate, S. 1645, known as the Casey-Specter bill, that would require the U.S. secretary of agriculture to base the price of Class II milk on the farmers’ cost of production. Brubaker said he hopes it passes. I had the sense that very few thought it would.

Keep your fingers crossed.

There was discussion about the CWT program, which is on track to send a million cows to slaughter by the end of this year. That will definitely affect the farm gate price of milk. But who controls the CWT money? The issue of control is best explained by what “CWT” stands for — “Cooperatives Working Together.”

Personally, that’s a scary thought, but much less scary than a government program to thin the national dairy herd.

Imports of MPCs, milk protein concentrates, were condemned. Food grade MPCs are used to make cheese, because they let eight pounds of raw milk do the work of 10 pounds of milk without MPCs. But, the question was asked, are they safe? Who knows what’s in them? Where do they come from?

They mostly come from New Zealand, was the response from someone who had done some research, where the mandated somatic cell count (SCC) is 400,000. And there are only two MPC plants in the U.S., one of which has only recently started production. If MPCs are valuable to the dairy industry, then the only way to get them is to import them.

Personally, I think if U.S. dairy farmers want to sell milk at Class II prices to MPC plants, then they should be pressuring their co-ops to build such plants.

SCC was another topic of discussion, and there seemed to be general agreement that the present 750,000 standard is too high. Other dairy nations, like New Zealand, are mostly working with a 400,000 standard. One farmer asked, “If we had only culled from herds with SCCs above 400,000 would we have been sending bred, untested heifers to slaughter with the CWT program?”

My personal reaction was, “Bingo.”

Supply control was another topic of discussion. If you can control the supply you can control the price. One farmer told about discussions with his friends in Canada, which uses a government-run quota system to keep milk prices under control. If a dairyman wants to produce more milk, he has to buy quota, which is expensive. He told about two brothers making a good living, supporting both families with the milk checks from a 71-cow herd.

I think there are three ways to control milk supply. Let the government do it. Let the market do it. Or let the co-ops do it. I like the third alternative, but only if the co-op owners, the farmers themselves, can somehow keep control of the co-ops.

Which brings me to my final point, controlling the co-ops. I had a number of calls after the “gollespiel” article appeared in last week’s Lancaster Farming.

The farmers told about their unhappiness with the farm-to-retail price spread. They talked about imports, MPCs and dismal export sales and how co-ops, specifically DFA had taken control of the market to the detriment of dairymen everywhere.

I asked them all this question: “When and how did you lose control of your co-ops?”

It so happens I know the answer to that question. They were out milking, plowing, planting, cleaning out the barn, sanitizing their lines, paying bills, talking to their nutritionist and their banker, fixing their tractor ...

You know where that line of thought goes. Dairying is a tough job. Who has time to keep track of the day-to-day things that are happening at the co-op?
Good question, but that’s where you lost control.

Not that all the blame can be laid at the farm gate. Every U.S. secretary of agriculture since 1922 shares a major burden of blame, guilt and inattention.

The Capper-Volstead Act exempting farmer cooperatives from certain provisions of the Sherman Antitrust Act of 1890, and the Clayton Antitrust Act of 1914, was passed in 1922. While Capper-Volstead freed co-ops to allow farmers to work together (before Capper-Volstead, if two farmers got together to pool their milk for sale to a processor, they were technically criminals), it also gave the secretary of agriculture the power to step in if he saw evidence of monopolistic practices on the part of any single cooperative or any group of cooperatives.

Which leads me to my final question/comment/observation: How’s that working for you?

Dick Wanner can be reached at rwanner.eph@lnp.com or by phone at (717) 419-4703.