Real Dairy Leaders Needed, Wanted

Nor' east Thinkin'

In-fighting, conflicting policies sour dairy industry's future

Published on: May 19, 2009

After this afternoon’s teleconference hosted by the National Family Farm Coalition, I’m more convinced than ever: America’s dairy industry is suffering greatly because of the lack of cohesive leadership.

 

I don’t milk cows. But I do perch in a dairy barn “catbird seat”, and listen to what’s going on.

 

After hearing three Congressmen say this spring that the dairy industry is so fragmented that “we don’t know who to listen to,” I’m convinced that nothing will be done until the industry is reorganized and reprioritized so that the future of U.S. dairy farmers comes first.

 

Cooperative leaders may be so “in bed” with processors and major marketers that they’ve forgotten their first priority. It’s not unlike the short-sighted CEOs of ill-fated General Motors and Chrysler.

 

Staying in good graces with the likes of Dean Foods – who will get their supplies from wherever they can buy them cheapest – is their highest priority. Crafting a dairy policy that safeguards against catastrophic milk price drops clearly conflicts with it.

 

Groups like the International Dairy Foods Association have strong, well-funded voices in Washington, D.C. While IDFA gives lip service to milk producers, it’s first priority is serving the dairy food manufacturers and marketers.

 

Then there’s the National Milk Producers Federation. It sounds farmer-friendly enough, until it comes to real policy issues. One month ago today, I posted a Web site story, “Imported Concentrates Undercut Dairy Prices”.

 

In that article, Peter Vitaliano, NMPF’s vice president of economic policy, downplayed the substitution impact of imported milk protein concentrates. The big picture, as he put it, is that U.S. dairy farmers produce 3% too much milk. The only way to get higher prices is to get a 3% (domestic) herd reduction via the Cooperatives Working Together program.

 

He anticipated no policy action would be taken on unrestricted and unregulated MPCs, even though he concluded that there’s much substitution going on that does impact milk prices. The reason: World prices for MPCs are lower than those of this country.

 

U.S. dairy and food manufacturers have ample incentive to substitute. And they’ve just that. Imports of high-protein (higher than 90%) MPCs climbed by 37% during third quarter 2008, according to the U.S. International Trade Commission. Imports of caseinates, another high-protein dairy ingredient, shot up by 43%. A NMPF report suggested it was due to U.S. demand “apparently not being filled by domestic product.”

 

Yet, U.S. surpluses of nonfat dry milk have skyrocketed, suggesting that imported MPCs displaced domestic dairy product. And a recent National Family Farm Coalition report contends that imported milk protein concentrates may be accountable for last year’s 50% drop in milk prices. In terms of market impact, imported MPCs is the same as imported milk, except that it’s dry and more valuable than milk.

 

To complicate the conflicting interest, the nation's largest farmer-owned cooperative, Dairy Farmers of America, holds dairy import licenses for MPC and caseinate protein products and works closely with Fonterra, New Zealand’s largest dairy cooperative. Most MPCs imported into the United States come from New Zealand.

 

A new ‘fix’?

 

Proponents of U.S. Senate Bill 889 want to create just two classes of milk: Class I (fluid) and Class II (all manufactured products). The legislation links a minimum price for Class II milk to average U.S. production costs, and adds a regional differential to create the Class I price. It includes supply management provisions, targeting farms producing more than 3 million pounds of milk per year.

 

National Farmers Union, the National Family Farm Coalition and other smaller groups are for it. Trouble is, the market’s biggest players aren’t.

 

Without support of the biggies, this legislation is likely to stay holed up in the Senate Ag Committee, where a similar bill languished last year.

 

But there’s a huge risk if the dairy industry doesn’t come together with a better milk pricing answer. America will lose far more dairy farms, and the rural financial network that they support. That would be extremely costly to America and U.S. consumers.

 

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