Dairy Pricing Association marks 10 years
TAYLOR – Ten years ago a group of farmers reasoned that getting some milk production out of the system would help their prices. They organized voluntary checkoff money from a group of like-minded members to purchase dairy products, formed a cooperative and then partnered with food pantries that could distribute them to people in need.
This month that grassroots group, Dairy Pricing Association, celebrated the milestone of ten years with a donation of 125,937 pounds of non-fat dry milk powder to help ease hunger around the world while also creating upward pressure on the Class 4 milk market – a part of the market that has recently increased in its importance to the farm milk price received by dairy producers.
The cooperative group was formed after two dairy farmers put their heads together and talked about the U.S. milk pricing system in which a small amount of excess dairy product exerts so much downward price pressure that it hurts dairy farmers.
The Dairy Pricing Association, (DPA) was organized as a non-processing, non-handling co-op, making it non-competitive to all existing processing and milk handling cooperatives. It was created under the Capper-Volstead Act of 1922. It makes all producers common with one another for the purpose of creating a floor price for their milk production.
At that time Robin Berg was a dairy farmer on his Darlington farm – now he has switched to beef – and had studied the market for years, looking for a way to help farmers get a better price. Berg observed that a small amount of excess production caused dire price consequences for the farmers who produce the raw product.
“At that time a 2 percent oversupply caused the price to decline 40 percent, meaning that $20 milk went to $12. A wise businessman isn’t going to allow 2 percent to destroy 40 percent of his price,” Berg told Wisconsin State Farmer back then.
The price crash that got his attention happened in just 60 days in 1999 and Berg began thinking about what it would cost the industry to remove that 2 percent in order to preserve profitability and keep dairy farmers in business.
After Black River Falls dairy farmer Tom Olson saw some initial publicity on Berg’s idea, the two men met and worked out a plan to form their own organization. They would get farmers to kick in money from their milk checks and those funds would be used to purchase cheese or other dairy products that would then exit commercial channels and go to hunger relief organizations. It didn’t happen overnight but their work created the Dairy Pricing Association and their group is now marking ten years.
Another buyer in the room
In the beginning, the dairy products that were taken out of the system by DPA went to Feeding America – the nationwide organization that runs hunger relief programs – based on the assumption that the disappearance of dairy products would positively affect milk prices. The co-op’s first shipment of cheese was donated to Second Harvest Food Bank in Madison.
When Berg and Olson made the connection with Feeding America – with its fleet of trucks and volunteers as well as a distribution system all over the country – they felt that they found the last piece of the puzzle. With that linkage in place, none of the dime per hundredweight that farmers contribute to this effort would have to go to transportation. That could all be taken care of by the humanitarian groups.
Feeding America officials were excited to have all the dairy products that the new farmers’ cooperative could donate. And with the DPA on the scene it created “another buyer in the room” to help remove dairy products when they are in oversupply causing milk prices to sag.
Cyndi Hammond, a dairy farmer in Taylor, Wisconsin, who has served as administrative assistant to the group for all ten years, said that over the past decade the group has not only aided food pantries and soup kitchens, but has directed aid to victims of natural disasters. Through March 2021, the DPA has cumulatively removed from the marketplace and donated almost 10.5 million pounds of raw milk equivalent.
Helping ourselves by helping others
The producers who have joined the DPA over the years believe as the co-op’s founders did that it’s better to buy back product and donate that food back to the hungry than to continue to see an erosion of price that is wrecking the dairy economy. The checkoff paid by DPA members builds a fund that buys up dairy products to give it to the other charitable groups that they have formed alliances with over the last decade.
Under the DPA’s program, funding from the farmer checkoff is used to purchase products that disappear in just a few days through the hunger-relief or charity organizations.
“It is truly amazing what we have been able to accomplish in the past decade as a group of less than 400 dairy farmers from 13 states,” said Olson, the DPA president. “Just imagine the impact that would be possible if money already collected from the 30,000 U.S. dairy farmers for industry programs could be refocused in this way to ask a price for their production. We call it helping ourselves by helping others.”
Ten years ago when the DPA was created, there were 53,167 dairy farmers in the United States.
The concept of the group, said co-founder Berg, is based on the fundamental problem with the dairy industry. The system is operated backwards – producers don’t know they have “overproduced” until after the product is in existence. And that product in storage “overhangs” the market and often leads to price crashes. Berg’s idea was that removing the amount of milk that is causing that price depression will right the system and help farmers get a better price.
Hammond remembers that the DPA’s first shipment of purchased dairy product ten years ago (see photo) came out of Meister Cheese in Muscoda, Wisconsin because one of the group’s first members shipped milk there. Back then, their purchases fit on a shipping pallet.
This past January the group purchased two semi-truckloads of milk powder for repackaging and distribution by Christian Aid Ministries based in Berlin, Ohio for their programs in Haiti, Nicaragua and Liberia and one semi-truckload in March for Catholic Charities, based in Alexandria, Virginia and HEART in Shakopee, Minnesota. That value of the powder donations totaled $147,478, Hammond said.
A year ago, when the pandemic disrupted dairy supply chains and forced some farmers to dump milk, DPA stepped in to support the plummeting cheddar cheese market as it hit a market price of $1 a pound. As the plight of farmers who were dumping milk unfolded, the farmers’ group purchased five semi-loads of 40-pound cheddar blocks – totaling 205,585 pounds and valued at $238,867.
They purchased that cheese in April 2020 and donated it to several groups including the Catholic Charities group, Ruby’s Pantry in North Branch, Minnesota and Operation Food Search in St. Louis, Missouri for distribution in their extensive food pantry networks across the country.
About the time these purchases were made by DPA, the Class III market began to turn around and the dumping of milk on farms began to cease.
Olson told the Wisconsin State Farmer that the DPA has been an “educational adventure.” Farmers involved in the effort have learned a lot about hunger relief organizations and also about the dairy pricing system in this country. Initially, cheese (Class III) was the price driver behind farmers’ milk prices and so those were the kinds of products the DPA was purchasing and getting to food banks.
In the last several years, prices for Class IV milk – the butter and powder segment – have become more important because they impact the villainous producer price differentials (PPDs) that farmers have come to hate. Olson said as the result of those changes in the overall milk pricing system, his organization has changed the products they buy. They now aim to purchase more powder because removing that product will impact farmers’ prices more.
On the side of hunger relief groups and food pantries, the have found that there are different times of the year when they have ample supplies of what they need to feed the hungry. But in the last year, due to the coronavirus pandemic, the pressure on food banks has been tremendous.
“We are always looking for new linkages with others who are trying to help farmers by getting food to the hungry,” he said.