Time is running out
for dairy farmers
The following is a letter written by Arden Tewksbury, Manager of Pro-Ag, sent to all members of the United States Senate and House Agriculture Committees as well as many other members of Congress.
Time is running out for the majority of dairy farmers across the United States. The most recent milk price-feed ratio released by the United States Department of Agriculture for December 2012 was 1.65.
In a letter sent to various dairy farmers and consumers regarding a possible national milk hearing, Secretary of Agriculture Tom Vilsack reported the following; "In fact the USDA analysis shows that the average of the January through July milk-feed ratio in 2012 was the lowest since the USDA began collecting data used to measure the ratio in 1939."
In addition the latest national average cost of producing milk is $26.81 per cwt. The price paid to dairy farmers in Federal Order #1 (the Boston market) for 2012 was under $20 per cwt.
All dairy farmers across the United States need a new raw milk pricing formula that considers the dairy farmers' cost of production.
The fact that the United States Congress extended the 2008 Farm Bill for nine months will give the average dairy farmer an opportunity to pursue reliable and much-needed changes in dairy policies for all domestic dairy farmers.
We strongly supported the extension of the Farm Bill, as the dairy legislation that was being considered in the new proposed Farm Bill was not going to come close to correct the financial inequities facing the majority of American Dairy Farmers.
The margin insurance proposal that was being proposed in the new Farm Bill was never geared to change the raw milk pricing formula that dairy farmers have been victimized by since Order Reform became law in 2000.
This current raw milk pricing formula is identified as the "end product pricing formula." This formula begins with bidding done on a very small amount of cheese, butter, and powdered milk on the Chicago Mercantile Exchange (CME). The bidding is done five days a week.
It's been established that milk processors may buy and sell on the same market.
While the USDA does not directly use the results of the daily bidding on the CME, certainly the results of surveys that the USDA takes of milk processing plants regarding the price these plants charge for manufactured milk products strongly parallels the CME bids.
It certainly is time to develop a new raw milk pricing formula that allows the average dairy farmer an opportunity to cover their cost of producing milk.
The margin insurance program that is still being considered for the new proposed Farm Bill will cover only a portion of the dairy farmers' feed costs.
However, equally important is the fact that the cost of the margin insurance premium will be paid for by the American taxpayer. This cost to the American taxpayer is unjust, unneeded, and should be totally unacceptable to the United States Congress.
There is a better way to price raw milk to the American dairy farmers that would be fair to the dairy farmers, fair to the milk processors, and would be affordable to the American consumer. Such a pricing formula is contained in the Federal Milk Marketing Improvement Act (FMMIA).
This act has been introduced in the United States Senate by the late Sen. Arlen Specter and Sen. Robert P. Casey, Jr. (D-PA). The last version of FMMIA was introduced by Sen. Casey on Oct. 3, 2011.
Please remember the present pricing formula does not consider any of the dairy farmers' costs.
It's unrealistic to think that dairy farmers should continue to produce a wholesome (and much needed) supply of milk without any reference to the dairy farmers' cost.
The FMMIA calls for the US Secretary of Agriculture to establish the value of raw milk used to manufacture dairy products by using the dairy farmers' national average cost of producing milk as determined by the Economic Research Service, a division of the US Department of Agriculture.
This price would be a uniform price for milk used to manufacture milk products all across the United States. (Please remember the value of milk used for manufacturing milk products today is the same in all Federal Milk Marketing Orders).
This price must be increased slightly and then stabilized. The value of Class I milk (milk used for bottling, etc.) would be determined by adding existing Class I differentials (in the Federal Orders) to the value of milk used to manufacture milk products.
The FMMIA authorized the US Secretary of Agriculture to establish Class I differentials to milk produced, bottled, and sold in unregulated areas and/or state orders. (Such as California, etc.) The FMMIA also calls for a stand-by milk supply management program to be implemented only when needed.
Any oversupply of dairy products would be paid for by dairy farmers and the products would be distributed by several government agencies.
The continued accelerated cost of feed used for dairy cows, coupled with the high cost of diesel fuel is driving many dairy farmers to the verge of bankruptcy or forcing them to sell their farms.
In conclusion, all members of Congress must be mindful that diesel fuel used by dairy farmers in many areas is exceeding $4 per gallon.
I have many dairy farmers tell me their feed cost for their animals consumes nearly 60 percent of their milk check. This is unthinkable. A realistic percentage should be between 33-35 percent of their milk checks.
While many people praise the conversion of grain to ethanol, it appears that the conversion of grain to ethanol is one of the main reasons for the escalation of feed costs to our dairy farmers, and please remember that dairy farmers have no way to recoup these costs.
From what I observe in many segments of the news media, it appears that many milk processors are doing very well. Now it's time for the dairy farmers to have a fair chance to prosper.
Again, a special thanks to Congress for extending the 2008 Farm Bill.