Creative solutions needed to solve low milk prices

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For the first time, the idea of supply management has gone mainstream.

After being battered by low milk prices for more than a year, producers are now considering options they never would have considered before. As the saying goes, “Desperate times breed desperate measures.”

Stated more optimistically, we are beginning to “think outside the box.” That was the way Herman Brubaker, chairman of the board of Dairy Farmers of America, couched it at DFA’s annual delegate meeting on March 25. Brubaker and other DFA leaders mentioned the possibility of controlling production, on a voluntary basis, in order to bring supply and demand into better balance. Since DFA is the nation’s largest milk-marketing co-op, we can now say that the idea of supply management has gone mainstream.

As of press time, the staff of the National Milk Producers Federation — a trade organization that represents 31 dairy co-ops and about 70 percent of the nation’s milk supply — was investigating a three-pronged approach to the problem of oversupply, including:

  • Milk reduction. Such a program would be voluntary and incentive-based. It would encourage producers not to increase production.
  • Cow reduction. Such a program would be an industry initiative. Therefore, without the resources of the government-funded “whole-herd buyout” of the mid-1980s, the scope may be relatively limited. Funding for this and the milk reduction component would have to come from the co-ops or voluntary contributions paid by producers.
  • Export enhancement. 

Details are still sketchy. As DFA President and CEO Gary Hanman pointed out in late March, the proposed program is still in the “infancy” stage.

But at least the industry is looking for creative solutions. We can sit back and complain all we want, but complaining is not going to get the job done. 

Don’t look for the government to come and bail us out, either. The government is under a lot of financial pressure right now, especially with the war in Iraq.  And, the government was plenty generous last year with several pro-dairy provisions in the Farm Bill. The cost of the federal dairy program could be as high as $2.9 billion this year — up considerably from $291 million in fiscal year 1998 and $480 million in fiscal year 1999.

Meanwhile, milk production continues to rise. Each month, some of the key western states, like California and New Mexico, post milk production increases on the order of 4 percent to 7 percent, which means they are that much higher than the same month a year earlier. On a national basis, milk production has increased about 2 percent.

Against these increases, consumer demand for cheese and fluid milk has stalled. For the first time in 13 years, per capita consumption of cheese declined in 2001 — down 0.7 percent from 2000.

While many new and exciting initiatives are in the works to increase consumer demand, such as placing milk vending machines in schools, we cannot count on these programs to bring about a dramatic change in consumer behavior over-night. Changing consumer behavior is a long-term process.

With the current initiative by the National Milk Producers Federation in place, now is the time to voice concerns and suggest solutions to your co-op leaders. Out of this process will hopefully evolve some creative solutions to low milk prices.



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