Dairy group continues push for supply management
Updated: Thursday, January 17, 2013 8:51 AM
By CAROL RYAN DUMAS
National Dairy producers Organization started two years ago with a handful of producers who joined together to improve milk prices and has grown to more than 1,000 members.
Organizers believe most dairymen are waking up to the fact that they have to join ranks to manage the milk supply or many more will go out of business, said Bob Krucker, NDBO board member and a Jerome, Idaho dairymen.
"Dairymen are disappearing real fast because they're selling milk for less than it costs to make it. It's an economic disaster," he said.
Krucker doesn't blame processors for not paying any more than they have to for milk. The problem is there's too much milk that is not balanced with profitable demand, he said.
"Either we manage the excess production or excess production is going to manage the producers; it is now," he said.
The Dairy Security Act, passed in the Senate's farm bill and stalled in the House, proposes supply management, but it falls short of any effective change. It doesn't kick in until the margin between feed costs and milk price hits $4, he said.
"The triggering mechanisms in DSA are totally inadequate. Everybody's broke by then," he said.
If the milk price is $20 per hundredweight, an adequate trigger would be closer to a $10 margin. In addition, the program is voluntary and there'd still be a large number of dairymen over supplying the market, he said.
NDPO has come up with another proposal for supply management contained in its Dairy Industry Stabilization and Sustainability act of 2012, not yet in legislative language.
"Our proposal will control the supply of milk based on inventories of powder, butter and cheese," Krucker said.
When those inventories are above a certain threshold, still to be determined, any payment on milk production going into those commodities over a producer's historic base will be paid to a producer-controlled fund. That funding could be used for such market-clearing efforts as food donations, he said.
In addition, in times of no excess, payment on any production over a producer's base will be at the world price. That strategy takes into account that domestic demand is relatively flat. So any overproduction is going into products for export and should receive the world price instead of dragging down domestic prices, he said.
Another good idea but also flawed is DSA's proposal to price milk through a processor-surveyed competitive pay price instead of basing it on cheese prices on the CME. The problem is DSA sets no price floor, he said.
NDPO also wants pricing set by a competitive pay price, but its proposal would divide the country into six regions and set a minimum milk price at no less than 80 percent of that region's cost of production.
"Eighty percent does not guarantee a profit but gives a potential for a profit," needed to obtain financing, he said
Producers don't need legislation to reduce the milk supply, he said.
"This problem of oversupply is caused by the dairy producers, and it can be fixed by dairy producers," he said.
Resolution is not going to come from processors or the organizations that represent them that want to keep the status quo, including National Milk Producers Federation that represents large co-ops, he said.
NDPO is calling on producers to support themselves by joining the organization and supporting its policy proposals.
National Dairy Producers Organization: www.national dairy producers.org