We’ll know soon whether the National Milk Producers Federation plans to press ahead with its Cooperatives Working Together (CWT) initiative to boost milk prices. The NMPF board is scheduled to vote on May 9 whether to proceed with the plan or not. It will be “our official fish-or-cut-bait vote,” says NMPF spokesman Chris Galen.
Regardless of the outcome, it’s refreshing to see the dairy industry take matters into its own hands. From the very start, CWT was seen as an industry initiative, funded and coordinated by dairy producers and cooperatives — not the federal government.
When things go bad in a particular industry, does that industry have the right to expect a government bailout? In most every industry — from hardware stores to funeral parlors — the answer is “no.”
Businesses everywhere face a fundamental truth of capitalism: Survival of the fittest. They may fail, but at least they had the opportunity to succeed.
Recently, on a trip to the Netherlands, it became apparent why some Dutch dairy farmers choose to emigrate to the United States and why some choose to emigrate to Canada. It all has to do with their ability to manage risk. The more timid, risk-adverse individuals usually opt for Canada because that country has milk quotas. The ones who are willing to take on risk come to the U.S.
Business is fundamentally a risky proposition.
Some have tried to manage that risk in the dairy industry with risk-management tools. Yet, even then, things don’t always go according to plan.
From September 2000 through March 2002, producers who participated in the USDA-sponsored Dairy Forward Pricing Pilot Program received $14.02 per hundredweight for their milk, on average. That was 49 cents less than what they would have received had their milk not been under contract. However, since they met their objective of locking in a profit, they did not fail.
Furthermore, some producers locked in high milk prices with risk-management tools before the market dropped precipitously at the start of 2002.
Things go up, things go down. Most of the time, things don’t go according to plan.
Look at the U.S. stock market. Many had predicted there would be a rally following a swift military victory in Iraq. Well, the rally never materialized. Investors quickly re-focused their attention on less-than-stellar earnings reports from several large bellwether companies.
We can long for the days when the government stepped in and assured a decent price. If you take the dairy price support level in 1982 — $13.10 — and adjust it for inflation, it would be equivalent to $25.01 in today’s dollars.
Those days are gone.
Maybe prices will rebound on their own, especially if milk production starts to flatten out and we don’t see the big increases from month to month. But, the dairy industry will always have the satisfaction of knowing that it tried — through the Cooperatives Working Together program — to do something postive on its own.
And, yes, we are assuming that the NMPF board will vote on May 9 to proceed with the project.
CWT is the best attempt yet to step up the plate and take a swing. The pitch may be a high, inside fastball — but, hey, you never know.
In a risky world, you always have to try. You always have to do what you can and not sit back and wait for someone else.