All dairy farmers need a new pricing formula
The action taken by Congress two years ago, which ended up taking money from all dairy farmers, must be changed. However, if the problem was rectified, then each dairy farmer in all eleven Federal Milk Marketing Orders should examine how big or how little a piece of that pie that they will receive.
For instance, take Federal Order Number One. If the increase to the Class I differential was 60 cents per cwt., then the affected dairy farmers would see an 18 cent per cwt. increase, and if the correction went to 80 cents per cwt., the dairy farmer would see a 24 cent per cwt. increase.
However, if you go to the Federal Order in Florida, where the Class I utilization is around 80 cents per cwt., then those farmers would receive at least an increase between 50 cents and 55 cents per cwt.
Now let’s pause, and examine what is wrong with this picture.
The picture means if we want to preserve the majority of dairy farmers, then we have to raise the value of all classes of milk. The pricing system was never correct before 1980, but it got even worse on April 1, 1980, when Congress interceded and froze the milk support price instead of it being recalculated on April 1st and again on October 1st of 1980.
In subsequent years, Congress interceded and continued to lower the support price for several years and ended up with a price that was $9.90 per cwt. when it should have been over $13 plus.
In addition, Congress introduced the milk diversion program which was not really helping dairy farmers in the long haul. Then Congress introduced the dairy herd management program, which was commonly called, “the buyout” program. None of these programs raised prices to dairy farmers in the long-term.
Other Senators, mainly from New England, suggested having $3 per cwt. increased to the Class I price in all Federal Orders. The proposal failed. Using present utilization figures, this would have meant a 90 cents increase in Federal Order One, and in the Florida Order, it would increase prices $2.40 per cwt. This never happened.
Then there were many people in the industry that wanted to consolidate all Federal Orders into one large Federal Order. This would help the dairy farmers in the Midwest, but it would leave farmers in Florida and in other areas that would have seen this action create a loss for other dairy farmers.
After many of these plans were either never implemented, or failed completely, now we move to the year 2000, when the granddaddy of all plans was implemented. I remember very well how John Hathaway from Ilion, NY and I testified for over three hours, giving testimony and answering many questions. It was IDFA who tried unsuccessfully to downplay our solid testimony, which was geared to bring the dairy farmers’ cost of production into the pricing formula.
Today we are still suffering from this hearing proposal by the cooperatives, which would not really raise the prices to our dairy farmers. Later on we identified the cooperative proposal, which became law, as the processors' dream and the dairy farmers’ nightmare. (We never visualized how bad it would get).
Now we are again suffering from the work of Congress when they changed the Class I differential. While we support the efforts of those that are leading the changes to at least restore the differential at a higher rate. Remember dairy farmers, that the USDA has recently reported the national average cost of producing milk for the year 2020 at $22.37 per cwt. The USDA figures surveyed at least 23 states and these states represent 90 percent of the milk produced in the United States.
Now, Mr. and Ms. Dairy Farmer, you must ask yourself: Why aren’t the figures used in tabulating my milk price?
Everything that is manufactured or produced in the USA has a direct cost. Someone please tell me why isn’t the dairy farmers’ cost contained in our pricing formula?
Arden Tewksbury is manger of Pro-Ag can be reached at 570-833-5776.