The past week has been a tough week when it comes to the news of Wisconsin dairy farmers being notified that the market for Wisconsin produced milk was growing smaller by the hour. The week reminded me of a presentation I heard back in the early 1980s when I was serving as the Agricultural and 4-H Agent in Price County. The presenter of the workshop on the economic crisis that the United States was facing at the time described a recession as when your neighbor loses his job and a depression is when you lose your job. The presenter was attempting to stress the idea that there are levels of news and how those levels impact the receiver of the news.
Based upon the phone calls I received this week, many producers took the news that 90 Wisconsin dairy farmers had lost their milk market as if they had lost their market too and that the dairy industry in Wisconsin is in a depression. The phone calls from Wisconsin producers included many thoughts on who is to blame for this bad news for dairy producers and what should be done about the news. Many producers believe the Wisconsin Milk Marketing Board has failed them, that the USDA and Congress has caused more harm than good, that dairy cooperatives are only in business to benefit CEOs and a few others in management, and that Wisconsin’s Dairy 2030 program has brought cheap milk to Wisconsin’s dairy processors and nothing of benefit to those that work the land. Other calls placed blame with large dairy producers and the large food discounters that market milk products at huge profits. One caller pointed out to me at least twice on the phone call that County Market in Medford had mild cheddar on sale for $5.99 a pound and that the wholesale cheese market is at $1.43 a pound.
What are the facts behind the bad news for Wisconsin dairy farmers? According to Farm Futures magazine, there are some issues that could really impact milk production and farm milk prices based upon a study conducted by Texas A & M University. If 50% of the immigrant domestic labor disappeared, the U.S. dairy herd would be reduced by 1 million cows, and milk prices would skyrocket by 45%. If 100% of the immigrant labor would go away, retail milk prices would nearly double. The study pointed out that a 50% cut in dairy labor would cause a $16 billion loss to the U.S. economy.
Dairy imports are another issue. The recent Kerrygold butter issue in Wisconsin points to the idea that some consumers believe imported dairy products taste better, and consumers are willing to pay more than double for Irish butter rather than butter produced here in Wisconsin. Irish dairy imports have increased in the United States by over 40% in the past year. In 2000 Ornau imported only 2 pallets of butter into the United States. In 2017 over 30,000 tons of Kerrygold butter are expected to be imported into the United States. More pressure of imports of European dairy products is expected this year. The economic embargo of Russia by the EU and the United States has contributed to the sluggish dairy product price environment. The worst dairy crisis in over 30 years is being experienced by dairy farmers in Europe. This embargo comes just on the heels of the European Union tossing off the shackles of milk production quotas. The dairy quota system was in Europe for just over 30 years. The quota system was not supported by dairy producers after its failure to keep farmers profitable and in business. In Ireland the number of dairy farms fell from 65,000 in 1984 to less than 18,000 today. Loss of the quota system and of the large Russian market has resulted in massive amounts of dairy product inventory and low farm prices.
Another issue in the loss of dairy markets for producers in Wisconsin and other states is the actions by Canadian dairy processors and the government in Canada. In my research I found that there is a national import tax on dairy products brought into Canada, and each province in Canada is also charging a GST tax on dairy imports. It appears that the Canadian government has heard the cries of producers in Canada and action was taken rather quickly to protect producers from imports. The action may have been also taken to be part of a bargaining chip as there may be a review of NAFTA within the next year.
The 1980 grain embargo by the United States pushed our rural economy into a depression that drove down farm income, gutted farmland values, and moved many producers off the land. It took years to develop an action plan that eventually reversed farmland values and farm incomes. It is now another generation’s opportunity to tackle another food embargo, large inventories of farm products, and farm prices that are below the costs of production.
Bob Panzer farms in Chippewa County, WI and is a retired lender that offers farm management consulting in the Midwest and Great Plains regions. He may be contacted at 920-539-8728.