Hitting the road with Dairy Together
Dairy Together Roadshow events have been packed as research data was unveiled on several supply management programs that might provide options for improving the dairy economy.
With the first stop in Oshkosh on March 27 and another in Eau Claire on April 2, the month-long national Roadshow involving several farming groups presents options and engages farmers and policy makers toward long-term dairy reform. The Farmers Union, working with the National Farmers Organization proposed possible solutions to the dairy crisis following analysis from ag economists.
"This event is about agriculture organizations working together to find solutions to the dairy crisis," Wisconsin Farmers Union (WFU) President Darin Von Ruden told the group in Eau Claire. "If we do nothing, the handwriting is on the wall for many of our nation’s dairy farmers."
As the WFU started digging into the dairy crisis a few years ago, they learned farmers were ready for change, Von Ruden added. He encouraged people to be open to evidence that things can be different and invited them to mesh ideas "with others on the table."
"There’s more than one approach for reforming our dairy economy, each with its own pros and cons," Von Ruden said.
Last winter, WFU enlisted the help of University of Wisconsin ag economist Mark Stephenson and Cornell economist Chuck Nicholson to conduct an Analysis of Selected Dairy Programs to Reduce Volatility in Milk Prices and Farm Income.
After a tough stretch for dairy farmers, or what Stephenson calls "the long slog," it was a good time to take a look at "what if something had been done differently," Stephenson said in a video on dairymarkets.org, which was shown at the Roadshow event.
After an unusually good year for milk prices in 2014, prices have been in a downturn since 2015 which in turn has had a big impact for dairy farmers, created a lot of challenge for farm profitability and accelerated dairy farm exits, "not just here in Wisconsin, but in other places around the country, " Nicholson noted.
Figures from the U.S. Department of Agriculture (USDA) show the impact of dairy farm exits. In 1970, there were 670,000 dairy farmers in the United States. By 2018, there were less than 40,000 dairy farmers left and the USDA projects there will be fewer than 18,000 by 2036.
One of the goals of the analyses was to take a look at what might have been if things had been done differently during the 2014 Farm Bill. A number of programs considered many years ago looked at doing something about milk production growth, finding a better way to manage that and slow it down, Nicholson explained. Those programs formed the template for programs looked at in the analyses, Stephenson added.
Analyses of dairy programs
The researchers looked at two versions of a Dairy Price Stabilization Plan (DPSP) — one operates all the time, and the other is triggered when the milk:feed ratio drops below a certain level. The program functions the same way in both scenarios.
"One says you can grow milk production a certain amount per year and if you want to go above that you’re going to pay something called a “market access fee” per hundredweight of milk," Nicholson said in the video.
The other program the economists looked at involves dropping below a certain margin level that would trigger the program and require producers to reduce their milk marketing.
"If they market any milk above that required reduction, they are going to get paid what's called a marginal milk price, or very low value for it," explained Nicholson.
Both versions of the DPSP show significant improvements to the dairy economy compared to the baseline scenario. The benefit of the continuously operating program is more stable, but at slightly lower prices, while the program triggered by a drop in milk:feed ratio has a slightly higher all-milk price, it also has greater volatility. It requires the least government expenditures of all the scenarios analyzed.
In looking at these programs, the economists looked at what actually happened with milk prices and production, the baseline, and compared that to what would have happened if something had been done differently with the 2014 Farm Bill.
The analyses studied milk prices, variation in milk prices, net farm operating income, farm numbers, broader impacts such as how much running the program would cost the government and what happens to domestic demand for dairy products when programs are put in place.
"The bottom line of what we found was generally pretty positive in terms of thinking about what these programs could do," Nicholson said.
The analyses showed a reduction in variation in prices and also some price enhancement. It showed an increase in net farm operating incomes and reductions in the rate of farm exits. Government expenditures for running the programs were also reduced. However, the one thing that could be considered a downside was decreased domestic consumption of dairy products, Nicholson explained, which some people might "look at with a bit of concern."
Along with the dairy price stabilization plan, the farm groups proposed a Family Dairy Farm Relief act, a two-tier dairy pricing program and a structural management system as possible ways to ease the dairy crisis.
The Wisconsin Farmers Union explained the mechanics of the family dairy farm relief act, a voluntary program that would base emergency relief payments on different tiers that recognize variations in operating costs for different size farms. Emergency relief payments would be calculated and disbursed through local farm services agency (FSA) offices. Participating farmers would sign up at the local FSA office and authorize the farm's receiving dairy plant to submit the farm's individual milk production records to the FSA office each month.
Monthly payments would be set according to a farm’s level of production, with smaller farms receiving relatively higher payments per hundredweight. The plan is modeled off of the Maine Dairy Relief Program, which was implemented in 2004 and has effectively slowed the loss of dairy farms in the state.
The program is intended to be a short-term bridge to a more market-oriented approach that does not require federal payments.
While the Family Dairy Farm Relief Act could provide short-term relief, WFU Government Relations Associate Bobbi Wilson echoed the point that it would be only a lifeline until long-term solutions can be implemented.
“What we’re hearing from farmers is that they’d rather have a fair price from the market than a handout,” Wilson said.
The National Farmers Organization (NFO) focused on a structural management system as a way to maintain small and medium-scale farms. The plan would call for modifying the existing Federal Milk Orders to include a two-tier pricing premium where each dairy farmer would receive a premium on the first level, or tier, of production. An extra $4 on the first 1 million pounds produced each month would be paid and the remaining amount would be re-allocated equally.
The two-tiered pricing program would level the playing field for all size dairy farms, would not require more money from the government and would not increase consumer cost.
But can it be done? According to the NFO, the two-tiered program would require all milk in the U.S to be pooled all the time and would require all areas of the country to be in a Federal Order or a new Nation wide Federal Order.
The biggest benefits of this system include preserving farmer freedom by allowing all farms of any size to compete under the payment system, along with adding no cost to consumers or taxpayers.
When farmers at the Oshkosh event asked about exports, tariffs and other issues affecting dairy farmers, Dick Bylsma with the NFO, said trying to fix everything in "one fell swoop" wouldn't provide a chance of anything getting through.
"We have to do it brick-by-brick," Bylsma explained. "The first thing we have to do is if we lose all of our family farms, … your cows get absorbed by bigger farms, your land is farmed by bigger farms — there's little chance of coming back. Step one is, we have to stop that from happening so we have something to fight for. Does our proposal fix everything? No. We're trying to fix step one – the loss of family farms."
WFU Special Projects Director Sarah Lloyd said, “We know that to get anything changed at the federal level, we’re going to need people power. It’s very encouraging that we’re packing the rooms for these meetings — now we need to spread the word to our elected decision-makers, implement our people power through our co-ops, and get everybody on board — processors, veterinarians, seed sales representatives. These proposals are strong enough to make a difference and move the industry away from consolidation.”
Find handouts, videos and more resources about the proposals, details on upcoming events, and a sign-up to keep informed at www.dairytogether.com.
The last Wisconsin stop for the Road Show is on April 4, 12 to 2:30 p.m., at UW Platteville Pioneer Farm, 29200 College Farm Rd., Platteville. Includes lunch. The Road Show treks onward to Michigan, Minnesota, New Mexico and California. Farmers also gathered for Road Show stops in New York and Vermont.
Those wishing to attend should RSVP at www.dairytogether.com, or by calling WFU at 715-723-5561.