Stabilizing Dairy Prices?

Groups Organize to Create Supply Control

Steve Taylor
Correspondent

BERKSHIRE, Vt. — “We have supply control now. It’s called low milk prices.”

That’s a wry take on the ongoing debate over whether the U.S. dairy industry would be better off with some kind of supply management system to deal with the chronic problems of wild price swings and inadequate economic returns for producers.

Opposition to any mechanism that would restrict a farmer’s freedom to produce whatever volume of milk he or she chooses runs deep, and proposing something like the quota systems used in the Canadian provinces is sure to fire up the rhetoric.

Against that backdrop and in the midst of a deep depression in U.S. farm milk prices, a group called Dairy Farmers Working Together is partnering with the Holstein Association USA and the California-based Milk Producers Council to put forth a “Dairy Price Stabilization Program” that would essentially create a base-excess system that sharply penalizes producers who boost production one year to the next.

The plan is sure to face the same political hurdles similar ideas have run into in the past, and getting it through Congress and signed by the president would appear to be akin to rolling a large boulder up New Hampshire’s mile-high Mount Washington.

But its advocates aren’t dissuaded. Amanda St. Pierre, a dairy producer in East Berkshire, Vt., says dairy farmers across the country have said that milk supplies have to be brought into balance with demand before other price issues can be resolved.

St. Pierre is a member of Dairy Farmers Working Together.

Holstein Association USA CEO John Meyer says he’s “optimistic that the program will stabilize the peaks and valleys of milk prices that have been so difficult for our nation’s dairy producers.” And Rob Vandenheuvel of the Milk Producers Council adds that the plan “doesn’t dictate how much any particular dairyman can produce, but rather provides a tangible financial incentive for dairies to manage their milk production.”

Here are the highlights of the proposed program:

- Production bases would be assigned to each farm based on their production history from April 1, 2008, to March 31 of this year. The bases would be divided into quarters and would move upward or downward depending on the most recent quarter’s output.

- Bases would be assigned to the owner of the farm and could not be sold. They could, however, be transferred or combined for multiple dairies. Bases would terminate if the farm discontinues operation.

- New entrants would build their base with their first year’s production.

- Farms that expand production beyond their base would be assessed $2 to $3 per hundredweight on all milk sold in a given production year. Money from these penalties would be distributed to farms that didn’t exceed their base.

- Farm Service Agency offices would run the program, and participation would be mandatory for all dairy farms producing milk for the commercial market.

Holstein CEO Meyer hopes to have the proposal fine-tuned and ready for presentation when his association holds its annual meeting in Sacramento, Calif., in late June, and if it’s approved there the work of finding sponsors and getting it through Congress will begin.

Right now is a good time to go for a dramatically different approach to milk pricing, in the view of Gordon Cook, a Hadley, Mass., dairyman and head of the Holstein Association’s legislative affairs committee. It’s a now-or-never chance to address the continual chaos in milk pricing, especially as new technologies such as sexed semen threaten to flood the industry with more cows and unneeded milk, he feels.

Without farm milk production restraints, Cook told the Wisconsin-based dairy marketing newspaper The Milkweed, low prices will drive many farmers out of business and dairy will come to resemble the poultry industry with just a few very large operations.