Family dairy farming needs price protection

Wisconsin State Farmer

A commentary by Bradley L. Rach.

In an article published in 2016, Hoard’s Dairyman asked the question, “Are farmers on the endangered species list?”  At the rate we are losing dairy farmers in the United States, the question seems more relevant by the day.
No wonder dairy farms are disappearing right before our eyes.  America’s dairy farmers are enduring a pricing crisis that is as serious as any I have seen.  Milk is being sold at disastrously low prices.  Even that tragedy is overshadowed by loads of milk not being processed because there is no market at any price for it.
A closer look at dairy farm numbers tells a story that is even more frightening.  The farms we are losing are, for the most part, family operations.  The farmers leave, but the cows stay on as part of ever larger farms.  Even in times of falling prices, we see self-defeating attempts to “make it up in volume.”  
There will, no doubt, be calls for policy proposals to address the dairy economic crisis.  If history is any guide, those policy proposals will ignore the way past policies have, intentionally or not, given the advantage to very large dairy farms.  That’s why we at National Farmers have been developing a pricing policy that will save the family dairy farm.
The essence of our pricing proposal lies in what we call “Tier One Production Pricing” and “Tier Two Production Pricing.”  Tier One production is the amount of milk a family farm could and would produce.  If a farm produced more milk, the remaining milk would be called Tier Two Production.  If a farm produced less than the Tier One cutoff level, all of the milk produced on that farm would qualify as Tier One.
Once Tier One and Tier Two levels have been set, a milk price would be established that would lead to both cost of production and a reasonable profit being obtained by a family farm producing at the Tier One level.  Call this the Tier One price.
A cooperative would continue to sell all of its milk to processors as it does now.  But the proceeds of those sales would be distributed as follows:

  • Every farm would receive the Tier One price for all Tier One milk produced on the farm.
  • Then the cooperative would take the remaining money and divide that by the total amount of Tier Two milk produced by all member farms.  That would be the Tier Two price and it would be paid for all Tier Two milk produced by member farms.
  •  In the event that the market price received by the cooperative for selling all milk was higher than the Tier One price, all milk from member farms would be paid that higher market price.

All details aside, the intent of what National Farmers is proposing is to pay every dairy farmer enough to profitably operate as a family farmer.  In doing so, we preserve and enhance both opportunities for young people to get started in farming.  At the same time, we preserve and enhance the family farm structure that is so important to our relationship with consumers, our support of rural economies, and minimizes the adverse impacts that over production has on rural environments.
We also balance supply and demand in ways that are consistent with the national and global environment in which we must operate.  Notice that what we are proposing is unlike most supply management programs in this important way:  there are no quotas in this system.  It simply provides an incentive for farmers to remain family sized and a disincentive for unrestricted growth among very large farms.  Any dairy farmer is free to grow larger, but in doing so, that farmer must face the market on prices for additional milk produced.  At times, those prices will justify increased production and at other times those prices will not do so.
As we consider our policy options, let’s not forget what is at stake.  As we move toward fewer, larger farms, we lose opportunities for the next generation of farmers to get started.  There will only be room for a handful of very large, highly capitalized operations.  As we travel down this road, we will have fewer young farmers.  Many fresh new minds that could lead us in positive directions will find opportunities outside of dairy farming.  In the worst case, the remaining investor-owned dairies will become vertically integrated in ways we have already seen happen with pork and poultry production.
I will close by asking a favor of every dairy farmer who reads this article.  Please let us know what you think about our pricing proposal.  We need your ideas to make it better, and your support to make it happen.

Bradley L. Rach is National Dairy Director, National Farmers Organization, Ames, IA. You can learn more about the National Farmers pricing proposal at www.nfo.org.