One of the largest dairy cooperatives in the northeast is implementing a new supply management program in 2020. Beginning in January, producers will receive less money for their milk if they produce more than their contract allows. AgDay’s Clinton Griffiths explains more in the video above.
Each farm will receive a base production level based on their highest volume of milk sold over the past three years. Anything above the base will be penalized, according to AgriMark’s Doug DiMento.
"If you go over the base there's a $5 per hundredweight penalty — which is a, you know, stiff penalty," DiMento told Vermont Public Radio. "It's designed to just slow down milk production, not totally stop it, but just slow down the growth so it can be at a manageable level."In a letter sent to member earlier this month, cooperative officials explained that farmer increasing their milk production while regional demand is decreasing is causing financial strain for Agri-Mark.
"The co-op profit is barely above the breakeven point through August as we have experienced significant losses on excess milk and the downturn in world trade, especially on whey products, continues to create losses in this area,” the letter said. "We are at the point now where we can’t allow our members to grow without some type of supply management program."
According to DiMento, producers were not surprised by this development. In fact, this is the third step Agri-Mark has taken in the past four years to curb oversupply. The first, was to close membership. Then in 2017 they expanded their butter plant in Massachusetts, but still production continued to grow, DiMento says.
The program, which was voted on by the board of directors, excludes produces who sell 2 million pounds of milk or less per year. According to Jenni Tilton-Flood a Maine producer and AgriMark member who will qualify for the program, of the 855 farmer owners throughout New England and New York, 400 of them milk less than 60 cows.
“Our production, our processing, and our commitment to our communities and back into our Co-Op is one of the engines that keeps our region moving along, in a sustainable and forward thinking way,” she says. “This is a big leap for us, but this is not new- there are many other Co-ops and entire states that work to balance their capacity and their production; their supply and their demand- to me, this isn’t about penalties or curtailing growth, it’s about solidifying our foundation as we build our future.”
For more Dairy Report coverage, watch: