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September 2009 Archive for Dairy Today Expo Extra

RSS By: Catherine Merlo, Dairy Today

Dairy Today's Catherine Merlo brings you the latest from the World Dairy Expo.

Supply Management Plan is Needed Now, Say Holstein Association Officials

Sep 30, 2009
By Catherine Merlo

Instead of trying to market all the milk the U.S. dairy industry produces, it would be better to produce the milk it can market.

That’s the basic philosophy behind the Dairy Price Stabilization Program (DPSP) proposed by Holstein Association USA, according to Gordon Cook, board member of the organization and Massachusetts dairy producer.

Cook has been one of the key architects of the DPSP, a supply management program that seems to be gaining widespread support from U.S. dairy producers – if not from a large number of U.S. dairy organizations.

I met Wednesday afternoon with Cook and John Meyer, president of the Holstein Association, at World Dairy Expo in Madison, Wis., to hear directly about their plan.

The DPSP proposes a national, mandatory plan that sets a base for producers’ milk production and assesses them a fee if they exceed it. The Holstein Association believes the plan, modeled by Cornell University, is a long-term solution to the price volatility that has plagued the dairy industry. The DPSP proposal would remove the incentives that encourage too much milk production. It would prevent severely depressed producer milk prices and reward producers who stay in line with market needs.

“This is the only bona fide plan out there” that attempts to address the supply-demand imbalance and price volatility, Meyer says. “Everyone else is vague in their ideas, with no details.

“The majority of people who produce milk for a living really relish this plan,” he adds.

The association is in the process of getting a DPSP bill written in Congress, and hopes that will be done this year.

Opponents have criticized the DPSP proposal, saying the higher prices it seeks would attract more dairy imports.

“We’re attracting dairy imports currently,” Cook says. “Some are coming in not even as dairy or even food products, to be used to enhance the yield of cheese.” Moreover, adds Meyer, some of those critics who use the “red herring” issue of imports “are people who are actually doing the importing.”

And those who oppose the DPSP because of its government connection – it would be administered by USDA’s Farm Services Agency – might want to consider that many in the industry are already involved with MILC and other programs. “We haven’t found any uncashed MILC payments,” Cook says.

Even so, Cook acknowledges that government involvement, imports and other trade issues have to be dealt with. The DPSP proposal is one step toward fixing the industry’s problems.

“Our plan did not address all the current ills of industry,” Meyer says. “We were told by officials in Washington that anything that required opening the farm bill would not get a second look. Our plan works in concert with all current dairy programs and the farm bill doesn’t need to be opened, so this proposal is a positive that could move forward quickly.”

What’s needed now, Cook says, is for “more people and producers to step up and . . . be more vocal about” the proposal, to stand up and tell their people who represent them on co-op boards” to support it. 

“Supply management and the DPSP program are long overdue,” Meyer says. “We’ve seen a groundswell of support for the program. We encourage people to contact their officials in Washington to support supply management and look for our bill.”

“Producers, whether they’re members of the Holstein Association or not, should look at the Holstein Association Web page and sign on as supporters,” Cook says.  “It would help a lot as we try to get support for this bill.”

One change made in the DPSP program since it took off in April involves the addition of a “new milk” term. Watch the video where Cook and Meyer explain the “new milk” addition to the Dairy Price Stabilization Program.

The DPSP proposal was born early this year in the Holstein Association, which counts 30,000 members across the U.S. As 2009 prices plunged, “those with a history in milk marketing were sitting on their hands,” Meyer says. “Our legislative committee said we needed to do something because those who should, aren’t.”

Catherine Merlo is Western editor for Dairy Today. You can reach her at cmerlo@farmjournal.com.

DFA’s Rick Smith Responds to Critics

Sep 29, 2009

By Catherine Merlo

For several weeks, critics have been calling for Dairy Farmers of America (DFA) to do more to help its 18,000 producer-members through 2009’s dairy crisis. An e-mail campaign is being waged questioning DFA’s “limited efforts” in helping producers survive this year’s financial disaster.

Rick Smith, DFA’s president and CEO, is all too aware of 2009’s toll on dairy producers – and the target the nation’s largest dairy marketing cooperative has become. But the industry’s problems are beyond the ability of any one organization to fix, Smith told me yesterday by telephone.

“There’s tremendous frustration, anger and fear out there among the producer population,” says Smith. “Dairy farmers are getting hammered, and they’re shell-shocked. It’s been extremely gut-wrenching because there’s nothing they could have done to prepare for the economics they’re faced with.”

It’s natural in this environment for criticisms to be expressed about major players in the industry, “whether they’re valid or not,” Smith adds, his voice growing hoarse during the 30-minute conversation.

“Almost anything we do, people will criticize,” he says. “We’re not going to get unanimity in the dairy industry. But we’re doing what we’re supposed to do.”

Reacting to the Crisis

The answer to the current down cycle isn’t popular or easy, he says. “We need the marketplace – supply and demand -- to be realigned,” says Smith.

From 2005-2009, the industry saw five years of production growth. “What absorbed that run-up in production was the unprecedented growth in exports,” he says.

But the “worldwide economic tsunami” coupled with China’s melamine scandal, hit hard in the fall of 2008. “We lost billions of pounds of exports overnight,” he says. “No one was prepared for the end of 2008.”

Many in the industry, including DFA, could see what was to follow. Beginning in January, the co-op warned producers and bankers about the storm clouds that were coming. As 2009 unfolded, DFA took several steps to help producers with the crisis, Smith says. Those ranged from setting up a member hotline to handle stress-related calls to issuing a special $9.5 million cash payment in July and early 2008 patronage checks in August. DFA also worked to encourage the two herd retirements that the Cooperatives Working Together (CWT) held this year.

DFA also urged USDA Secretary Tom Vilsack to re-implement the Dairy Export Incentive Program (DEIP) for 2009-2010. The co-op has continued to support the $350 million appropriations sought by Sen. Bernie Sanders of Vermont.

Is DFA Doing Enough?

Even so, critics say those haven’t been enough. If the sharp drop in exports is behind the downturn, critics ask, why hasn’t DFA worked to put tariffs on the milk protein concentrates (MPCs) or casein products that are entering the U.S.?

“We’ve been supporting tariffs on MPCs for for five to seven years," Smith says.  “This is not a new issue. “

The major obstacle to import tariffs is “people on the other side,” Smith says, those U.S. companies that use the imports in their own products.  They are pushing for freer trade, something the dairy industry should also support because it represents opportunity in the world market. How can the U.S. oppose free trade when it seeks such a large role in global exports?

Also from the critics: Is DFA more interested in protecting its profits – and those of Dean Foods – than those of its producer-members?

“We supply Dean Foods less than half of their milk,” Smith says. “Other major dairy marketing cooperatives are also involved in supplying and pricing milk to Dean Foods. If there’s an over-supply of milk, it’s hard to get more for your product. “

DFA is price-competitive, he adds. “We want to have a constructive relationship with Dean Foods, but I work for dairy farmers, even if they feel we’re not working for them.”

DFA’s Next Steps

Smith would not venture an economic outlook, saying the industry had seen two false starts already.  In part, it’s hard to forecast since no one is sure about the inventory of dairy products that exist in private hands and whether it’s large enough to impede a recovery.

“I still think we’re just about there for prices to start moving,” he says.

Prices will eventually recover, Smith says, but it’s important to recognize that the status quo doesn’t work. “Farmers and co-ops need the tools and a system that doesn’t create this harm,  that can manage price volatility.”

DFA is working with the National Milk Producers Federation, which recently announced a four-pronged proposal to change the milk pricing system. The co-op is also continuing its support of the CWT program. And DFA is talking to the Holstein Association USA about its Dairy Price Stabilization Program. While Smith wouldn’t comment on whether he supports the supply management program, he says, “I commend the Holstein Association for the quality level of their discussion.”

In the meantime, one displeased DFA member tells me he will continue demanding more from the co-op. He will be writing more letters and taking other steps to get DFA to step up with more solutions. “That people have lost billions [of dollars in this downturn] is unforgivable,” he says.

The story will continue to unfold, but until then, there’s one area where Smith and his detractors may agree.

“It’s going to take more than one good price cycle to compensate for this down cycle,” Smith says. “Balance sheets – and psyches – have been seriously harmed. We’ll be dealing with the consequences of this downturn for a number of years.”


On Display at Expo: Pain Amid the Optimism

Sep 28, 2009
With World Dairy Expo – the nation’s largest annual dairy event – set to start today amid one of the worst dairy depressions in recent memory, I have to wonder what the mood will be here at the Alliant Energy Center in Madison, Wis., this week.
Over the past few months, I’ve talked with beleaguered producers all over the country who are worried about whether or not they’ll survive this year’s financial disaster. I’ve seen producers choke up as they wonder aloud how 2009’s downturn will affect their children’s future. Some have told me that prices are so far below the cost of production, it will take years to climb out of the hole. Others have talked about vanished equity, being behind on their bills and their disbelief at being broke.  I’ve heard of heartache and bankruptcies and suicides. 
And not a day goes by that I don’t receive e-mails, news releases and articles about the dairy industry’s financial crisis. Some of the senders offer short- and long-term solutions. Others point fingers, blaming failing programs and leadership. The turmoil is real and widespread.
So who wants to come to this dairy Disneyland in Madison? How many of you can afford to attend this year, especially if you’re from out of state? How many can set aside your angst long enough to make the trip to World Dairy Expo?
More than you might think. In all, 65,000 to 70,000 people will make their way to Expo this week, says John Rozum, sales manager for World Dairy Expo. “We’ve seen consistent attendance for 10 to 15 years, and through price downturns before,” he says.
The number of commercial exhibitors this year stands at Expo’s highest ever, with 750 companies and more on the waiting list, says Lisa Behnke, World Dairy Expo’s marketing manager. And sponsorships are equal to last year’s record amount, she adds.
The list of exhibitors includes 115 new companies who are making their first appearances at Expo. Many companies will focus on cost-saving, efficiency-increasing products and services for the dairy business.
“They understand that prices are down, that people may not be in the mood to buy, and that we might see a lot of ‘tire kickers’ this year,” Rozum says. “But our exhibitors want the industry to know they are still in business and bringing their best to the show.”
Rozum is especially excited by the newly expanded “America’s Dairyland” area, which has doubled in size from last year. Several new exhibitors have spaces there. “It’s a roomful of treasures,” he promises.
Both Rozum and Behnke are optimistic that producer turnout will be high.
“World Dairy Expo is not necessarily a pleasure trip for people,” says Behnke. “It’s business too. But it’s also a colossal shot in the arm for people. There’s an inherent optimism that they’re not the only ones in this [sinking] boat. People are enthusiastic when they’re here because they know they’re among people who totally know the dairy business. If they love this business, people are coming.”
“You can’t miss this year’s show,” Rozum adds. “If you’re in the dairy business, you’ve got to be here.”
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