Would controlled milk production work in the U.S.?
FOND DU LAC – As the number of dairy farms in Wisconsin continues to drop and milk prices continue at a level below or close to the cost of production, some dairy organizations in the state are beginning to say “Enough is enough!”
Prompted by the flood of milk on the market that led to some dairies dropping their producers, members of the Wisconsin Farmers Union have been looking to Canada for ideas on how to stabilize milk prices.
Last week Farmers Union hosted a series of meetings around the state featuring two dairy farmers from Canada who explained their supply management system that has helped to stabilize milk prices since the early 1960’s.
According to Farmers Union President Darin Von Ruden, all of the meetings were well attended by Farmers Union members as well as by members of other dairy organizations including National Farmers Organization, Organic Valley and Dairy Business Association.
The idea for the meetings was set in motion following a survey in which Farmers Union polled its dairy farmer members and found that the majority of the 1000 farmers responding indicated they were receiving a pay price that was below the cost of production. Farmers also indicated they were interested in finding long-term solutions that would allow the next generation to join the business.
Von Ruden said, “It is especially compelling to see what the Canadians have accomplished considering we have a complete failure of dairy policy in this country. The biggest part of that failure is that we have no ability to control the supply of milk and match it to market needs.”
Ralph Deitrich, chair of the Dairy Farmers of Ontario and Canadian dairy producer Murray Sherk were on hand at the Wisconsin meetings to explain the supply management system that has helped to stabilize their milk prices.
Both farmers said the system was developed as a means for Canadian dairy farm families to allow the next generation to carry on the business.
Deitrich said, “Since the program began in the 1960’s Canadian milk prices have been relatively steady and the number of farms has also remained steady.”
In all there are 11,000 dairy farms in Canada with the majority of those farms in Ontario and Quebec. Many farms in Canada have 30 or 40 cows and the largest has 1400 cows.
There are two organized pools of milk in Canada and all milk that is produced goes into a pool resulting in the same pay for every dairy farmer.
“In Canada, a processor would never send letters cutting off production from individual farms because the processors are not negotiating individually with producers but rather buying from the pool,” he explained.
He said the program began over concerns that farms located near cities had a distinct advantage because of the availability of nearby markets. As a result, farms located further from cities were struggling to survive.
Deitrich said if U.S. farmers are interested in developing a similar program they will need to begin with some strong leaders who are then backed by producers.
While surveys have indicated Wisconsin producers would prefer to establish a system that does not require financial assistance from government, Dietrich says for a supply management program to work the government must be involved.
Obtaining the support of the government is critical, he said, adding that it is important to show elected officials how the dairy industry benefits the community, supports other industries, and drives the over-all economy.
“Everyone in your community – electricians, plumbers, equipment dealers and others is impacted when farmers do not succeed,” he points out.
The Canadian program is financed by a check-off system that includes transportation, research, promotion, and Dairy Herd improvement testing. The check-off rate is based on production and is the same for every producer.
Some of the Wisconsin producers were concerned over the high cost of buying quotas that might discourage new producers from entering the dairy business.
Sherk explained, “We have a program for new producers that allows free quota for the first ten years for half of the farm. There is a waiting list to get into it.”
He said the majority of the transfer of quota, however, is between family members as the farm is passed on from one generation to the next. Only farmers can buy quotas, not investors.
A concern expressed by representatives of the Dairy Business Association was whether the Canadian system would limit the ability to export milk to other countries.
Sherk said Canadian farmers are not interested in the export market but rather are working to increase milk and dairy sales within their own country.
“Exports provide the lowest return so we’re not interested in that,” he said. “Yes, demand will grow as the world population grows but it will be in places like Africa and Asia and what will they be able to afford to pay?”
Deitrich adds, “If we are going to be a wildly exporting country we would be shooting ourselves in the foot. We believe it is better to develop more dairy products and create more markets for our milk.”
The two Canadian speakers also advised, “Whatever route you take be sure you get the bankers involved. In Canada, bankers are more willing to loan money for modernization because of the stable prices.”
Don Hamm, president of the Wisconsin National Farmers Organization, points out that some of the problems with over-production in this country have been the result of the guaranteed loan programs. He notes that while the programs were intended to help farmers get affordable loans, all they have done is encourage bankers to loan more money for dairy expansions.
Both the NFO and Farmers Union have been concerned over expanded production that results in the inability of farmers to negotiate a fair price for their milk.
Von Ruden points out that outside investment has led to expansion of many farms and the start-up of several new CAFOs which has in turn flooded the market. On top of that, commercial giants like Walmart are investing in their own infrastructure to process dairy products.
He acknowledges that many factors have contributed to the glut of milk on the market that has led to the low milk prices in recent years. Cattle genetics and improved feed rations, the advent of sexed semen and improved management practices have resulted in almost double the production per cow over the last three decades.
Von Ruden says that all of these changes have led to farmers receiving an even smaller portion of the profit in milk. He cited figures compiled by the Wisconsin Center for Dairy Profitability showing that dairy farmers received as little as 3 cents of profit for every gallon of milk sold after taking into account their cost of production.
Farmers Union plans to continue the its efforts in encouraging dairy producers to join together in finding solutions to the instability of the industry.
Von Ruden says nothing will improve until farmers start talking among themselves, to their processors and to their organizations. He concludes, “It’s time to dairy together.”