Reform plan would calculate dairies' cost of production
By CAROL RYAN DUMAS
Three organizations have teamed up in support of the Federal Milk Marketing Improvement Act, Senate Bill 1640, introduced by Sen. Robert Casey, D-Pa., in October.
Progressive Agriculture, National Family Farm Coalition and National Dairy Producers Organization back the proposal as a means to guarantee cost of production in dairymen's milk checks.
Under the proposal, the secretary of the USDA would each quarter set a national minimum price for milk used in manufacturing based on the USDA Economic Research Service's average cost of production.
Getting a fair price for their milk is critical in keeping dairy farmers in business and maintaining a safe and adequate milk supply for consumers and processors, the organizations said in a Dec. 22 conference call.
The problem is that while processors and retailers enjoy healthy profits, milk prices to producers are $5 to $8 per hundredweight below the cost of production, said Paul Rozwadowski, a Wisconsin dairyman and the coalition's dairy subcommittee chairman.
"Everyone takes their share except the farmers," he said.
He said dairymen are going out of business at an alarming rate, with 7,000 exiting in the last two years.
"We're working here with a broken pricing system," said Loren Lopes, a Turlock, Calif., dairy farmer.
Feed is high, due in part to subsidized ethanol production, the cost of farmland is high and credit is tight, he said.
"There's a lot of emotion going on out here (in California). Farmers are scared and don't want to talk about it," he said.
S1640 would put a cost of production value under the price of milk so dairymen can get financing and stay in business, he said.
"If policy doesn't get changed a little more in favor of dairy farmers, at least half won't get refinancing in 2012," said Gary Genske, secretary of National Dairy Producers Organization.
NDPO has spent almost a year educating dairymen and Senate and House Agriculture Committee members on the issue, he said.
"It is critically important that everyone understands that even though our prices for milk have been higher, it hasn't covered cost of production," he said.
Under the bill, the government would not guarantee a price or a profit, but would guarantee the cost of production, said Arden Tewksbury, manager of Progressive Agriculture in Meshoppen, Pa.
While production costs are different in various regions of the country, a national average "pretty well shakes out," he said.
His calculations show at a milk price of $22.50 per hundredweight, the pay price, figuring in Class I differentials, would produce a pay price at a low of $22.28 in the Midwest and a high of $25.36 in Florida.
USDA already produces average cost of production numbers. Using that as a floor will give producers a chance to make a profit, Genske said.
S1640 also includes a supply-management program, in times of imbalances, at no cost to government.
Supporters say the bill rivals the Dairy Security Act of 2011, House Resolution 3062, introduced by Rep. Collin Peterson, D-Minn., in September. That bill mirrors a proposal put forward by the National Milk Producers Federation.
Genske, of the National Dairy Producers Organization, said only six members of the House and Senate ag committees support the Dairy Security Act.
"It's become quite clear that everyone on the House and Senate ag committees knows there's a new player in town," he said.
The chance of getting Casey's bill passed will depend on dairymen, Tewksbury said.
While more than 20 organizations sent a letter to senators in support of the legislation, it'll take dairy producers contacting their elected officials, telling them the problem and urging them to support the bill, he said.
The bill currently has no co-sponsors.
National Family Farm Coalition: www.nffc.net
National Dairy Producers Organization: www.nationaldairyproducers.org