James Maroney - Leicester, VT

March 17, 2011

Jerry Kozak, President & CEO
National Milk Producers Federation
2101 Wilson Blvd., Suite 400
Arlington, VA 22201

Dear Jerry:

In the March 2011 Farm Journal, OK Republican Chair of the House Agriculture Committee Frank Lucas says he will defend the farm industry against what he calls a “constant barrage of irrational and unworkable regulations from the EPA.” Mr. Lucas’ underlying premise is that regulations stifle productivity and productivity is what the farm industry needs above all else. I have also just read NMPF’s “Foundation for the Future,” which to take effect depends upon 58,000 dairy farmers reaching consensus on “growth management” and government mandated participation. These two obstacles are high; but if Bob Wellington’s prediction for $20-25/cwt comes true, the crisis is over and what little appeal “growth management” has to farmers at $16/cwt will quickly fade.

Dairy farmers if they want to survive have learned to strive daily for production gains; but it is an economic fact that before milk prices can rise, supply must be reduced. For the government, the easiest and most effective way to prevent commodity prices from rising is to keep supply in surplus. Indeed, the central tenet of the Capper-Volstead Act of 1922 was not, as is popularly thought, to grant farmers an exemption from the Sherman antitrust laws to fix prices but to prohibit them under Sherman from limiting production in order to raise prices. This injunction is unimportant to farmers, who are not disposed to work for their collective interests and who insist upon their individual right to make production gains year over year.

For example, in the “Report of the Dairy Industry Advisory Committee” (March 2011) farmers and their representatives ignore the ineluctable force that individual overproduction—the one factor that is actually within the farmers’ control—exerts on their collective price. The Report concedes that farmers are producing more milk than ever but losing money: government proposes new and continuing mechanisms for relief. But there is no mention whatever of farmers voluntarily reducing supply and keeping it equal to or below demand so that prices will rise—and stay there.

There are, without resorting to dumping, many ways for farmers to control milk supply—voluntarily adjusting the SCC standard, voluntarily and proportionately culling the national herd, voluntarily and uniformly abstaining from the use of rBST, sexed semen Lutalace and other yield-boosting technologies—but these actions would require planning and collusion would invite federal scrutiny under Capper-Volstead.

Farmers want higher production, higher prices, lower volatility and margin insurance all without supply control or “irrational” regulation. Government wants surplus production in order to maintain low consumer and manufacturer prices and a reduced exposure to MILC payments: so the “Foundation for the Future,” the Sanders/Costa Plan and the Specter/Casey Bill are drafted to allow farmers to expand production with marginally higher trigger prices. Government and farmers will have expended tremendous effort and gained nothing.

But wait: if every dairy farmer’s first and most important objective is a higher, industry-managed, free market price, if as the “Dairy Industry Advisory Committee Report” says there is general agreement that for prices to rise it is essential to align milk production with commercial market needs but debate about how this is to be accomplished, if as virtually every dairy economist attests a reduction in supply of only 2½ % would double the FMMO price and if, as Farm Journal reports, the EPA’s regulations are such a potent threat to farm production, why not advise dairy farmers to take the path of least resistance and act in their collective, economic interests by supporting the EPA’s effort to regulate the industry? Be certain that regulation reduces production not 5% but 10% and cause the 40/60 utilization to shift supply out of low-paying Class II, III and IV markets into higher-priced Class I markets.

What is the point of NMPF spending millions to fight the government to get the status quo or of farmers spending hundreds of millions more to restart ever-escalating debt and ever-expanding capacity? For little or no expense farmers could enjoy a substantial price rise provided by their traditional adversary, which could not prosecute them under Capper-Volstead for conforming to the Clean Water Act. Why not go a step further to improve consumer milk quality by voluntarily culling chronically high-count cows from the herd to adjust the SCC to 150,000/ml, lowering veterinarian, feed and pharmaceutical costs and restoring the farmers’ beleaguered debt to equity ratios into the bargain? Might not the money thus saved and earned be better allocated to a public relations campaign to convince an increasingly skeptical public that milk prices are moving up because the industry cares about product and water quality?

Sincerely yours,


James H. Maroney, Jr.
/jm

6:09 AM Jun 28th