My colleague and friend, Beef Today editor emeritus Steve Cornett, stirred up a bit of hornet's next last week when he took the dairy industry (and some in the beef industry) to task over rumors about a federally-subsidized dairy buyout.
Follow this link to read his blog: "Change for chumps.”
"You'd expect cattlemen of all stripes would get up in arms about a program that uses their taxes to subsidize dairy farmers to dump their beef into their already wrecked beef market,” Steve writes. And with cattle feeders losing $150 to $200 per head on every steer they sell nowadays, they'd have a legitimate gripe, he says.
Well, okay. But as this tsunami of a price crash washes over dairy farms in the next month, most dairy producers will be looking at losing maybe $80 to $120 or more per month on every cow they're milking.
Steve is right that it might take more than 300,000 cows in excess of normal culling to take enough milk off the market to turn dairy prices around. And he is also right in that these cows will come to market—one way or the other. They'll either come in a bunch through a massive CWT buyout, or they'll straggle in month after month after month as dairy producer equity erodes and their lenders eventually say, "Enough is enough.”
For the record, the National Milk Producers Federation (NMPF), which administers the Cooperatives Working Together program, flat out denies it has requested Federal bail out money to subsidize another CWT cull program. What NMPF has done is request that USDA meet its obligations, written into the 2008 Farm Bill, to properly operate the dairy price support program, implement the Dairy Export Incentive Program, and offer some flexibility in the Milk Income Loss Contract program.
What Steve doesn't mention, and what the National Cattlemen's Beef Association also fails to acknowledge, is that the European Commission is again subsidizing (dumping) European dairy surpluses onto the world market. Without that dumping activity, U.S. dairy products had finally became competitive on world markets over the last few years. In 2007, the U.S. exported about 10% of its milk solids at profitable prices. As the U.S. economic crisis went global last fall, those markets started to dry up. But it wasn't because of falling demand; it was because of the crisis in cash availability and credit markets.
So, in a very real sense, the crisis in U.S. dairy markets was precipitated by irresponsible U.S. non-oversight in the housing, financial and credit markets over the past decade. So maybe the U.S. government should be on the hook for correcting some of these errors.
Also, for the record, I have not been a big supporter of CWT efforts to kill cows. I am a believer in markets. That is why I have always felt that CWT efforts to build and develop markets through export incentives was the better direction to go.
But going that route this time is an impossible journey. The CWT export effort, funded from the 10¢/cwt voluntary contribution, will have to compete with the European Union's ability to pour millions of Euros into their dairy export subsidies. It is not a fair food fight.
Second, as Steve says, 300,000 more dairy cows are going to flood markets in the coming months. So the options are: Do you want to do this the fast, be it painful way? Or, do you want to do it the very slow, very, very painful way that will bleed dairy and beef producers for months on end?
--Jim Dickrell is editor of Dairy Today. You can reach him via e-mail at firstname.lastname@example.org.
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