Dairy Producers: Time to Produce for the Market

February 9, 2010 07:10 AM

Supply management panel draws large crowd at World Ag Expo

By Catherine Merlo, Dairy Today

A standing-room-only audience of 175 dairy producers and industry representatives came in out of the rain today at World Ag Expo in Tulare, Calif., to hear a panel discuss the need to control the nation's milk supply.

Led by California producer Doug Maddox, panel members Gary Genske, Syp Vander Dussen and Marv Hoekema discussed the viability of a growth management plan to bring U.S. milk production into balance with demand. 

Price volatility is not new nor will it change on its own, said Maddox, who also serves as president of Holstein Association U.S.A. 

"Dairymen are going to have to stand up and do something different,” he said. "Our industry has changed. Can we adapt? It's time to produce for the market instead of marketing what we produce.” 

Maddox supports the Holstein association's proposed supply management plan, known as the Dairy Price Stabilization Program. The plan calls for a national, mandatory program that sets a base for milk production and assesses producers a fee if they exceed it. 

Genske, an accountant, said a supply management plan was needed, since making a profit in the dairy industry was becoming more difficult. He estimated 2009 U.S. dairy losses at $10 billion, including a loss of $1.9 billion in California. "Synergy” losses for related dairy businesses across the nation last year reached $90 billion. 

He compared those numbers to the projected $2 billion loss to Florida's citrus growers from recent freezes. 

Even 2008's high prices did not generate sizeable profits, Genske said. While his clients' 2008 prices averaged $17.53/cwt., their production costs reached record highs of $17.41/cwt. The clients of Genske, Mulder and Company represent 12% of the nation's milk production. 

"Do we keep things the way they are, or do we at times [under a supply management plan] cut back production 1% or 2%?” Genske asked. 

The number of U.S. dairy producers has dropped some 80% since 1982, from 297,000 to 62,000 today, said Vander Dussen, who also supports the Dairy Price Stabilization Program. "There are fewer producers to sacrifice today,” he said. 

The dairy industry rarely stops to ask itself where or how it will market the extra milk it produces, said Vander Dussen, a Southern California dairy producer who also serves as president of the Milk Producers Council. "Every other business would ask that,” he said. "We can't get away with it anymore.” 

He criticized dairy cooperatives, saying they had no incentive to resist the current system. "The extra milk we produce goes to powder, which is the lowest value,” he said.  Vander Dussen also called National Milk Producers Federation's four-pronged strategy to solve industry woes "just a delay tactic.” 

Vander Dussen said the Dairy Price Stabilization Program offered incentives and disincentives for producers. "It's the only program on the table,” he said.

 Hoekema said no growth management plan could work until the milk price discovery system was fixed.

 "The continued lift in make allowances has shifted nearly all the risk to milk producers,” Hoekema said. "Pricing is now set by a handful of firms, and their behavior moves the market.” 

Other pricing problems for the industry, Hoekema said, are that USDA's system is full of non-reconciled reports, and cheap imports of milk protein concentrates continually flood the market. 

Tuesday marked the first day of World Ag Expo. The three-day event was expected to draw 100,000 visitors from around the world. It ran through Thursday. 

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


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