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March 2010 Archive for Dairy Today Readers Respond

RSS By: Dairy Today editors, Dairy Today

Thoughts and comments from Dairy Today readers.

Disagree With Dairy Talk's Stance on NMPF Proposal

Mar 22, 2010

The following letter is a response to Jim Dickrell’s “Dairy Talk” column in the March 2010 issue of Dairy Today.

 

I enjoy Dairy Today and think it is one of the good resources for today's dairy farmers, but you are so wrong in your assessment of NMPF's proposal, and what needs to be done to provide a more stable economic future for our dairy industry.

 

Despite your headline to your report on NMPF's proposal, there is nothing radical or visionary about it. Their proposal seems to be a duct-taped attempt to deny reality. There is no proposal to reflect rapid changes in the pricing system down to the dairy farmer in such a way that the producer can make responsible decisions on his/her productive capacity to maintain income and stability on the farm.

 

The risk management idea is almost laughable. First of all, why would we want to involve ourselves in an insurance program that will only be effective if premiums keep rising as the predictable market collapse comes closer? After all our experiences with insurance companies, both health and property, why go on bended knee to them when there is no reason, and when we neither need nor will get a federal subsidy, to make the risk management plan work?

 

So you don't care much for a supply management plan, obviously, since you keep disparaging it by referring to "Canada South." Current proposals for a growth management plan are not a quota, as any dairy economist worth his salt, like Bob Cropp, would be able to tell you. In this day and age, with the ability to gather production information accurately and on a 24/7 basis, we can have a system that is flexible and responsive to market conditions, like the possibility of a 7-billion pound export market.

 

We also need a marginal pricing system that only impacts the excess milk over demand and does not bring down the price across the country, as the present CME system does. None of these actions, properly administered, would prevent us from taking advantage of the export potential highlighted by the Bain report. It should be noted that the conclusions of the Bain report are contingent on a number of economic demand factors being reached abroad, particularly in the Pacific Rim. Further economic reporting from that region shows the possibility for the dairy product demand to occur to be extended by a couple of years or so.

 

The American dairy industry cannot wait that long, though we will have to wait for the 2012 Farm Bill for significant change. Yet another factor is the growing frustration of our banks and lending institutions that have many billions of dollars tied up in dairy farming and fear the real possibility of losing that equity at a time when they can least afford it. The bank industry is becoming a significant voice, with weight, behind an overhaul of the pricing and supply/demand structure of the dairy industry.

 

I bet you NMPF’s plan as presently formulated will not receive a positive vote from the NMPF board. These are exciting times as we teeter on the precipice, but there is great potential.

 

Again, thank you for an interesting magazine, but I can't agree with your assessment on this subject.

 

John Roberts

Butterwick Farm

West Cornwall, Vt.

 

 

Big Milk Companies Are a Detriment to Dairy Producers and Consumers

Mar 08, 2010

By Ann Hoerner, North Dakota dairy producer

  

Are 2010 milk prices better than during 2009? Yes, but they are still inadequate with the 2009 butt-beating all U.S. dairy farmers took. Back in the spring of 2009, I expected this to rebound sharply higher by July 2009, as the market had done in the past high price cycle, because we were so very far down.

 

How wrong was that? And it still is!

 

After reading a dairy blog this past year and hearing the different information out there that producers were discussing from all different parts of the U.S., I believe the market truths have changed forever as the monopolies in the dairy, beef and grain sectors grow ever larger, to the detriment of both producers and retail consumers.

 

I’m sure others noticed, as well as I, that during the last high cycle, retail prices in the stores responded much closer to the corresponding fall in farm prices than they did this cycle. This is in spite of diesel prices being half of what they were in the last high price cycle. 

 

Many stores never came below $5/gln. for milk. Record profits were posted by large milk companies and processors in the first half of 2009. Unfortunately, most of these huge milk companies and processors merged into one, which is a competing interest to the detriment of the dairyman and the consuming public.

 

I believe this trend will only get worse, and the days of milk prices moving very high are over, because the companies are too big of a monopoly in all sectors of agriculture and will not pass on the lower cost of commodities to the consumers, but rather rake in the excessive profit opportunity for themselves. This leaves us a market that is not truly free and can’t function, in my opinion.

 

The record profits reported by DFA/Dean Foods in the first half of 2009, at a time when their biggest expense, the procurement of milk, was experiencing the worst price disaster ever seen in this country in relation to expenses, and the very slow recovery bears this theory out.

 

It’s my opinion that the only solution is to work to compel the breakup of these big agricultural monopolies by enforcement of the existing anti-trust laws by the U.S. Attorney General.

 

 How could this be done? Obviously, not by the power of the producer. Rather, it will only happen if the voter/consumer becomes angry about the spread between farm & retail prices. That cannot/will not happen unless they know about this.

 

Perhaps producers should stop preaching to the choir and put their money and their story out to the consumer. This would involve consumer awareness of the farm price in the form of ads in big city papers paid for by producer funds.

 

The consumer needs to be made aware of what the producer receives for a gallon of milk. Producers need to make it their mission to keep them informed on what the farm value of milk is in each gallon of milk and each pound of cheese.

 

Inform and empower the consumer to encourage them to ask the why and how of this truth. The consumer will hold the politicians accountable who allow this manipulation of the market and the assault on consumer prices at retail, while the government, at the same time, doles out late-coming and inadequate subsidies, scoring political capitol at the expense of the farmers and the taxpayers/consumers.

  

No company large enough to influence the U.S. milk market should ever be allowed to store up product. This only results in market-dumping driving domestic prices down as soon as they start trending too fast or far upward.

 

Imported milk should be required to be used if we have a need. Of course, then they will just store domestic product instead to create the need to import. This would be unenforceable with a hopeless bureaucratic mess in play.

 

In lieu of that, how about a change in milk pricing rules that would tie raw milk prices to big national company profits? Establish a fair profit level for them and if they go above, so be it, but the same increase would have to be passed on to producers of raw commodities.

 

This mechanism would be self-policing, since each attempt at such shenanigans would only serve to increase their expenses. Consumers would benefit as well without the unfair spread at retail, and indirectly producers would benefit by increased consumption. 

 

I hope I’m as wrong about this was I was about a fast upturn in six months.

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