MORRISVILLE – With fluid milk prices less than half of what they were a year ago, our nation’s dairy farmers are in crisis.
“These are serious times,” said David Rama, one of the organizers of a conference held on Friday at Morrisville State College which brought more than 200 farmers, vendors and consumers together to discuss the ramification of and possible solutions to the plight of the dairy industry.
After 30 years working with dairy farmers as an auctioneer, Rama said he’d never witnessed anything like what he’s seeing in the industry today.
“This is nationwide,” he said. “We’re talking about the systematic destruction ... and annihilation of an industry.”
Dairy’s problems stem from two issues, according to Rama and others who presented during the one day event. The first is the way in which milk prices are set on the Chicago Mercantile Exchange. The second, related to the under-regulated importing of milk protein concentrates which displace domestic dairy products and threaten the safety of our food system, he explained.
According to John Bunting, author of a whitepaper titled “The Dairy Farm Crisis 2009,” supply and demand are not factors in milk pricing. Rather, the price of milk is tied to the price set for block cheddar cheese on the Chicago Mercantile Exchange. This is not a true market, he explained, because there are “so few purchasers, that the activity of any one purchaser can affect the entire market.”
“This is a complex problem,” Bunting reported, explaining that production, and therefor supply, of fluid milk is also skewed because of external capital investment in certain areas of the country, particularly the Southwestern United States and California. And the problems have been further compounded by the worldwide financial crash last year which “eliminated both buyers and credit in some countries and the short term credit necessary for producers to function,” he explained.
Increased imports of milk protein concentrates, and the substitution of caseins and caseinates in cheese and other dairy products have only exacerbated the problem. MPC’s, which are used in making adhesives, are not classified as food products and therefor do not fall under the same import regulations as other imported dairy products.
In some cases, where these products are actually produced is a mystery. According to Bunting, one of the largest exporters of MPCs is Singapore, which does not have a domesic dairy industry.
The crisis is very real for dairy farmers, as many as 70 percent of whom are being forced to rely on credit to cover daily operating expenses, Bunting said. If those farms go under, it will cause further repercussions in the U.S. economy.
“Once you lose a farm ... it doesn’t come back,” said Chenango County Farm Bureau President Bradd Vickers, adding that the effects are devastating, not just for that individual farm family, but also for the community as a whole.
“The big issue is getting money into farmer’s pockets today, not down the road,” said Vickers.
What will it take to salvage the foundering dairy industry? Immediate action, according to Bunting. One of the first recommendations he has is that Secretary of Agriculture Tom Vilsack “immediately raise the floor price of class II and class III milk,” work with producers and ag lenders to mitigate damage to the industry and investigate price manipulation on the CME.
Bunting also recommended that imports of any and all food from “unknown origins” be halted, and that any food imported should comply with the same USDA standards domestic food producers must follow.
Imports of milk protein concentrates need to be better regulated as well, he said.
There also needs to be better enforcement of the National Pasteurization Milk Ordinance, which sets a standard for the acceptable level of somatic cell counts in milk, Bunting continued. The current maximum is 750,000 SCC, a level which the dairy expert said should be further reduced.
Bunting and others at the conference also support federal legislation introduced by Senator Kirsten Gillibrand which would double the amount paid to farmers under the Milk Income Loss Contract. The MILC program provides counter-cyclical monthly payments to producers when the price of milk falls below a certain level.
Another recommendation is to support the Dairy Price Stabilization Program, presented by the Holstein Association USA, whereby farmers would voluntarily comply with production limits with the hope of stabilizing milk and dairy pricing.
“Our plan is definitely a long term solution to this short term problem,” said USA Holstein Government Relation Specialist Lucas Sjostrom, as he launched into an explanation of his organization’s plan.
Bunting and the other presenters offered other possible solutions as well, including providing struggling farmers with low-interest emergency loans to help them avoid foreclosure, working to increase the accuracy of published USDA data and establish a three-part pricing formula linked to the cost of production, Consumer Price Index and CME.
Legislators and representatives from various state agencies were on hand to listen to the concerns voiced during the conference.
“Our dairy industry ... is the heart and soul of our upstate economy,” said Assemblyman Pete Lopez, who was one of those present. His goal in attending the event, he explained, was to take what he learned back to Albany so that he and his colleagues could put together initiatives which would not only keep New York’s dairy farms up and running in the short term, but also make them more sustainable in the long term.