Farmers in the National Farmers organization have, for almost 60 years, been urging their neighbors to join their production together in order to build bargaining power. Now it has become obvious what happens when farmers do not price their product at the farm level.
During the national convention of National Farmers in Wisconsin Dells recently, an enlightening panel including agricultural reporters and an economist discussed the current dairy situation and what happens when agriculture is in the hands of global giants.
In early 2013 NFO's dairy director Brad Rach and Dr. Richard Levins, professor emeritus, University of Minnesota wrote a thought-provoking story in Hoard's Dairyman about what's happening in the dairy processing industry.
The story revealed, "Farmer-owned cooperatives have lost ground, and lots of it, to investor-owned corporations…One out of three of the top 12 processors are now foreign owned."
They warned, "The game has changed. Dairy farmers need to build bargaining power focused on pricing milk at the farm level."
Hoard's responded with an editorial on the topic, advising, "To hold our margins, we will have to work more collaboratively or we will reap an even smaller share of the retail food dollar."
They also stated, "There isn't a dairy producer large enough to go it alone over the long haul."
Those stories stirred a great deal of concern all across the country as producers began to realize that within the top 50 dairy processors in the U.S., the top four accounted for one-third of the total dairy sales.
Rach pointed out that since that story nearly a year ago, the Swiss-owned Nestles has taken over as the largest processor and the country's largest cooperative, Land of Lakes, has slipped to fifth place.
The panel discussion at the convention included responses from Mychal Wilmes, Agri-News (based in Minnesota) and Jim Massey, Country Today.
Wilmes said, "It is necessary now more than ever for farmers to take control of their production. It is alarming that such a crucial industry has become so consolidated and to a great extent in foreign hands."
He also points out that when farmers do not get their fair share, rural communities and schools also suffer. On a nation-wide basis, he points out that profit in the dairy industry is not going to producers but to the foreign-owned processors who take the money out of the country.
Wilmes notes, "Cooperatives are facing a serious challenge. They are losing market share. How can they remain vital at the local level and still compete in a world market."
He points out that when the cooperative effort began more than 90 years ago it wasn't easy. He notes, "They were called Socialists because they wanted to jointly market their product without antitrust constraints."
Wilmes also expressed concerns about other areas of agriculture, noting, "The Chinese purchase of Smithfield Foods is scary. We need assurances from Washington that laws that are on the books are enforced."
On a positive side he points out, "Consumers are our best ally. They are questioning their food. Why would they want to buy pork from China when the dog food they sold us killed pets?"
Wilmes warned, "We do not want to be a colony of these economic wizards of Wall Street."
Jim Massey offered his view, based on his experience as editor of Country Today. He said 20 years ago farmers were not encouraging their children to go into agriculture because of the economic problems farmers faced. He sees that changing today in Wisconsin, pointing out that Wisconsin has more processing plants than ever and that creates a competitive market for milk.
He said many specialty cheese plants, while they are small, are paying competitive prices for quality milk. He admits that in other areas of the country, where there are only one or two plants handling all the milk, farmers do not have that advantage.
Massey points out that Wisconsin is a model for other states when it comes to cheese plants.
"Fluid milk is another story," he says. "Per-capita consumption has fallen."
While some say the consolidations and mergers in the processing industry has led to large corporate farms, Massey points out that farms get bigger for many reason and that almost all Wisconsin dairy farms are still family owned. They have gotten larger as a means of bringing more family members into the business and having the ability to adapt technology.
Massey says dairy organizations have formed to promote education and to lobby for dairy, but he says the money needed to support these organizations still comes out of the farmer's milk check.
Dr. Levins provided startling figures about the profits of these large, foreign-owned corporations. He said when dairy producers want more money for their milk they are told they cannot pay more because consumers will not pay more. Yet, Levins revealed the net profit posted by these corporations including $11.6 billion last year for Nestle, ten percent of their total sales. The same was true for the other giants in the industry and most of those profits are being taken out of the country.
He states, "Dairy farmers need to build bargaining power focused on pricing milk at the farm level instead of going to the plants and saying 'What will you give me for my milk?'"
Levins said he is concerned about the direction the coops are taking. He says, "They are still focused on pooling farmers' money. If you think you can compete with companies like Nestle it's a losing game. You need instead to pool your milk."
Regarding help from Washington through farm policy, all three panelists agree that farmers have little clout in the lobbying area against the big companies with deep pockets to finance lobbyists.
All three panelists also agree that in Wisconsin, the specialty cheese business has helped. They also agree that the size of the herds is not a problem. Price is the issue.
Rach concluded by saying, "Discussions are going on out there about working together. They are not necessarily mentioning NFO, and that's fine."
He outlined next steps in light of the current situation:
· members need to take a greater role in spreading the word;
· build volume for bargaining power;
· promote and develop new leadership that includes younger members;
· promote and focus on the development of new markets. "Consumers want products from family farms, we have it."
· provide adequate staff for the future;
· find modern communication methods; and
· activate the national dairy committee to build blocks of production.