Cooperate for Real Change

June 5, 2011 08:00 PM
 

JeremyVisser 049Jeremy Visser
 

Sumas, Wash.
Visser milks 3,200 Jerseys and Holsteins near the Canadian border.

 

 


 

**Extended comments are highlighted in blue.

I have been doing a lot of flying the last couple weeks. One of my recent trips was to Omaha for NMPF’s National Dairy Producers Conference (NDPC). I made this trip with my wife and two little boys. I was continually amazed at how all my planes were completely full, not a spare seat on any of them. The flight attendants, when asked, told me that is the norm now because the airlines have cut back the amount of flights because they have fewer travelers. What a concept: to reduce supply to meet market demand. Of course, airlines are an oligarchy and we dairy producers are in a more competitive market.

At the NDPC, we were exposed to many panelists who were very bullish the export market and its many possibilities.

I am surprised that most within the dairy industry who speak out against some aspects of FFTF are in love with the idea of the export market but are unwilling to invest in needed product innovation to better serve the export market. In fact, many who speak so glowingly of exports have no intention to ever be involved in the export market. It is very risky to be in the export arena. There must be protections provided to those who service either the domestic market or the export one.

I am very excited by the prospect of eliminating end-product pricing and dairy price supports. It’s important to eliminate them to ensure that we make products that are in demand for real markets and not have the option of making sales to the government.

The removal of the MILC program will be a blessing to many farm families who work together and pool resources on a larger farm. Under MILC, they are comparatively punished for being over the cap. Additionally, the market signals are not received by those who are fully subsidized by MILC. I have no problem with people collecting whatever subsidies they can from the government, (you must take care of your family and business). I just have a problem with the government policy that mutes market signals to farmers.

Many people seem to be up in arms about the Dairy Market Stabilization Program (DMSP) and the margin insurance program. The margin program will assist farmers when the margin falls and is nationally weighted for price.

It will probably function much like the corn LDP and pay all dairy producers who sign up for it for 90% of historical milk produced. You can buy additional margin from the program if you desire. There is no insurance company involved--USDA will be self-insuring this program.

Sounds like a great program, right? The problem with this program is twofold. First, you can’t shut cows off quickly. If the market presents us with poor margins, we could be using a lot of it. Second, the margin program will allow people to continue making milk at a loss while collecting margin insurance. This will be problematic, because dairies will be less likely to reduce supplies to match demand. The solution is DMSP.

DMSP will allow the margin program to not drain the federal budget because it is quick-acting, and it will eliminate the time spent in periods of low margins. If 2009 taught us anything, it is that we will produce as much milk as we can all the time. There are even some of us who will try to convince ourselves we don’t need return on assets, equity, value opportunity or depreciation costs.

DMSP will put more control back on the side of the producers, which is why some processors are so adamant against the proposal. Would you prefer a milk price that is 97% acceptable and 3% nonpay, or 100% poor returns on milk and then turning to the government to try and get additional subsidy money to pay the bills?

Maybe we can get past our competitive nature and cooperate to get FFTF in place to help us all. More than likely, we will just continue to bicker among ourselves, saying your region gets more help than mine, or vice versa. Hopefully, we can get together and set aside our various phobias and differences and bring about real change for our great industry.

 

 
 
Visser's April Prices  
Milk (net mailbox) (3.5% bf, 3.0% prt) $18.34/cwt.
Cull cows $50/cwt.
Replacement springers $1,400/head
Alfalfa hay (milk cow) $250/ton
Corn (rolled) $340/ton
Canola $275/ton
DDG $275/ton
Soymeal $440/ton
 

 

Back to news

Comments

 

Rate this News Article:

Spell Check

Anonymous
6/28/2011 01:09 AM
 

   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

 
 
Close