Farm and Food File: Will changing the milk system help?

It’s simply isn’t true that only nine people in America understand the nation’s arcane federal milk price formula. Only four people understand it.

Well, that might be squeezing the truth a bit, suggests friend, fellow ag journalist and New York dairy farmer John Bunting.

“Everyone that gets a milk check understands how the farm price of milk is calculated,” he says when I reach him mid-morning July 26 in his milking parlor. “What most lack, however, is the vocabulary to explain it.”

Fair enough

I’ve been hanging around dairy barns for 50 years and dairy policy for 30 years and the only constant across ‘em all is the instant cream you can have with your instant coffee during the morning milking.

Changes

Everything else — average herd size, somatic cell counts, butterfat levels, federal milk orders, the number of dairy farmers — has changed dramatically.

And even more change is in the offing if Collin Peterson, the Minnesota Democrat who serves as ranking member of the House Ag Committee, can convince his colleagues that today’s cobbled-up component price system (where a portion of milk’s farm value hinges on elements like protein and butterfat levels), subsidies and unregulated production need a radical makeover.

Peterson’s plan is a blueprint designed and promoted by the National Milk Producers Federation, dairy’s Big Coop Boys. The NMPF plan, labeled Foundation for the Future, ditches most of today’s price determinants for a new, three-legged payment scheme.

Components

The key legs are:

• “margin insurance” to replace federal price supports and direct subsidies in times of low prices;

• a “supply management program” to match milk supply with milk demand and;

• some way that allows manufacturers to “negotiate” milk prices with producers.

Cost estimates of the Peterson-NMPF plan are modest. Early Congressional scoring shows it close to a wash to today’s federal programs. That fact, however, works against any change because why flip today’s complicated, but working, dairy price regime on its head if little or no savings are achieved?

Argument

NMPF officials, now in the middle of six-week nationwide tour touting the plan, claim the radical changes are needed to account for today’s fast moving markets.

“We’ve been trying to chase prices for 60 years,” NMPF president and CEO Jerry Kozak told an Olympia, Wash., meeting July 12, “and it’s not working.”

Kozak prefaced his statement by noting the new program is “designed to address the margin between milk prices and feed costs,” the massive disparity that knocked milk producers to their aching knees in 2008 and 2009.

The NMPF boss may not know just how accurate that vision is: a livestock enterprise first built on, then expanded by, cheap feed — especially corn — is a business model that will be less viable every passing year and doomed to increasing chaos in the next decade.

Moreover, already compounding that high-cost future is even more expensive forage, $4 diesel and a certain-to-occur water crisis in America’s largest dairy state, California.

Hopeless

As such, re-jiggering an already complicated milk pricing system with an income insurance plan, an ill-defined supply management scheme that’s doomed to leak and transferring market power from producers to manufacturers (can anyone say meatpackers?) is like rearranging the deck chairs on the Titanic — it will keep you busy for a while but it won’t alter dairy’s long-term future one degree.

That future will surely see cows move away from today’s capital-intensive, feed-intensive milk factories to nearly as productive and far cheaper forage-based dairy farms. They will be diverse, local, more sustainable and profitable because they won’t run on $7 corn and $400 alfalfa.

As such, any overhaul of dairy policy should include a clear vision of what will work for farmers 10 years from now and not just what works for dairy giants today.

(The Farm and Food File is published weekly in more than 70 newspapers in North America. Contact Alan Guebert at www.farmandfoodfile.com.)

2011 ag comm

About the Author

Alan Guebert was raised on an 800-acre, 100-cow southern Illinois dairy farm. After graduation from the University of Illinois in 1980, he served as a writer and editor at Professional Farmers of America, Successful Farming magazine and Farm Journal magazine. His syndicated agricultural column, The Farm and Food File, began in June, 1993, and now appears weekly in more than 70 publications throughout the U.S. and Canada. He and spouse Catherine, a social worker, have two adult children. farmandfoodfile.com More Stories by Alan Guebert

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