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Dairy producers speak out:
No supply management; yes Goodlatte/Scott

Maury Cox, director of the Kentucky Dairy Development Council talks about how conditions differ throughout the country as he expresses support for the Goodlatte/Scott amendment and opposition to supply management. Looking on are (from left) Howard Straub, Michigan dairy producer; LuAnn Troxel, Indiana dairy producer; Jeff Mulligan, western New York dairy producer and Daniel Brandt, southeast Pennsylvania dairy producer. Photo by Sherry Bunting
Special for Farmshine

MADISON, Wis. – “One of the reasons that a supply management program will not work is that our circumstances differ throughout the country,” said Maury Cox, director of the Kentucky Dairy Development Council. The former dairyman interacts with the state’s 830 dairy producers and allied industry representatives and keeps close ties with other dairy producer groups as well.

While dairy markets and production environments may differ throughout the country, producers from Pennsylvania, New York, Kentucky, Indiana, Michigan, and Wisconsin came together here Thursday during the 2012 World Dairy Expo to share a common thread of agreement: They support the Goodlatte/Scott amendment to provide margin protection without supply management.

They spoke about why the dairy title in the proposed Farm Bill would be bad news for dairy farmers and they urged policymakers to support the bipartisan amendment offered by Rep. Bob Goodlatte (R-Va.) and David Scott (D-Ga.).

The Goodlatte/Scott amendment failed narrowly in the House Ag Committee several months ago, but many members said they had not had time to fully review it or to speak with constituents before the committee vote on the Farm Bill. Now that the Farm Bill has not yet come to the House floor for debate, the Goodlatte/Scott amendment can still be considered at the full-House level.

But its success will depend on whether dairy producers will pick up their phones and start contacting their members of Congress to ask them to support the Goodlatte/Scott amendment and oppose the Dairy Security Act as it is currently written in the proposed Farm Bill.

Maury Cox joined nine dairy producers who spoke during the press conference in Madison, Wisconsin, last Thursday. He explained how producers and processors in the Southeast give up $1.50 to $1.75 per hundredweight in farm milk value to – in effect – “pay” to bring in additional milk supplies from other regions to satisfy unmet fluid milk demand in the Southeast.

“Dairy farmers in my neck of the woods face very different situations than dairy farmers in Maine or California. The Southeast U.S. is a milk production deficit area, like Wisconsin,” Cox stated. “We cannot produce enough to meet our local demand. The Dairy Market Stabilization program (proposed in the Senate Farm Bill) would be a double whammy for southeast dairy producers.”

Under the proposed supply management program, when participating producers from the Southeast would be told to cut back production (or penalized for not cutting back), they would at the same time be paying $1.50 to $1.75/cwt. to bring other milk into their region to meet the demand.

New York and the greater Northeast is also milk-deficit, as pointed out by Jeff Mulligan, who milks 1200 cows in western New York. “New York is going through a tremendous growth called the ‘Chobani Paradox,’ and our Governor even had a Yogurt Summit recently to figure out what we can do to help our producers increase production to meet the growing demand,” said Mulligan.

“I don’t understand how our state Senators can be working to loosen state regulations so we can increase production while the federal government is looking to add regulations on us in Washington,” he said, adding that he doesn’t have time to sort through all the dairy bills, but he knows one thing: “I do not want the government to tell me how much milk I should be producing, and I certainly do not want them to penalize me if I do not comply.”

“The common thread here is that there should be fairness in dairy policy,” said Daniel Brandt, who farms with his family on a 350-cow dairy near Annville, Pennsylvania and has served as a board member for the Dairy Policy Action Coalition (DPAC). “Some parts of the country are milk deficit and some have extra milk. If we put in supply management (as currently written in the proposed Farm Bill), we are going to lose that fundamental fairness of markets and opportunity. “

Brandt and others referred to the proposed Dairy Security Act and its Dairy Market Stabilization Program as being “more of a socialist idea.”

“Why should dairy farmers have to accept a supply management program in order to get a safety net through margin insurance?” he asked. “There is no other commodity that must do that.

“The alternative is the Goodlatte/Scott amendment,” said Brandt, calling the amendment a “win-win for producers and taxpayers because it saves taxpayer dollars while reducing risk for the dairy farmers.”

Brandt cited facts about the amendment, saying it will save taxpayers approximately $47 million over the next 10 years and offers catastrophic loss coverage to dairy farmers without resorting to supply management penalties.

The amendment provides the “cat” coverage and buy-up options with no administrative fees, unlike the dairy title that is currently written in the proposed Farm Bill. “The current bill will charge $100 to $1000 or more in administrative fees, depending on the size of the dairy,” said Brandt. “But more importantly is the Goodlatte/Scott amendment will save taxpayers $9 million more over the next 10 years than the current House-proposed dairy title.”

Lastly, said Brandt, “The Goodlatte/Scott amendment does all this without requiring producers to cut production by as much as 8%. This can save the dairy farmers a lot of revenue.”

While the milk-deficit Southeast U.S. is mainly a Class I fluid beverage milk market, and the Northeast is seeing a growing Class II yogurt production replacing some of its Class I demand loss, Wisconsin is mainly a Class III cheese manufacturing market. These areas, too, are milk-deficit.

In Wisconsin, for example, producers have worked more closely with processors in recent years to develop a specialty cheese market and to invest in processing for that demand.

“Maybe some regions of the country want supply management because they are done growing, but we’re just getting our boots on again to improve the infrastructure and take advantage of the farming here,” said one Wisconsin dairyman who attended the press event. “Why would we want to put a cap on that?”

Wisconsin producers wondered what would happen to the recent market-driven investments and job creation in their state, “if we let this program (Dairy Market Stabilization) go through?”

Jerry Meissner, of Norm-E-Lane, Inc., a 2000-cow dairy near Chili, Wis., serves as president of Wisconsin Dairy Business Association (WiDBA ). He sees the dilemma as a producer and understands the frustration of the state’s processors.

“This program puts the USDA in charge of our farm decisions, adds regulations for all of us to live by, limits our exports, and would inhibit the future growth of our industry here,” said Meissner.

John Pagel, has four children and nine grandchildren at the 4500-cow Pagel’s Ponderosa in Kewaunee, Wis. “This is not only going to affect us, it will affect them (the next generation) in the future.”

Pagel stressed the importance of passing a Farm Bill, but not at the expense of future generations of dairy farmers. “If our dairy farms are going to move on and prosper, then supply management is not the right path.”

He reminded attendees that the Dairy Security Act / Dairy Market Stabilization Program is “full of unproven assumptions and predictions.” He explained that if participation is 25 or 30% instead of the 60% figure National Milk Producers Federation (NMPF) expects, then that would not make enough difference in the supply. “Those participating producers would see their milk checks keep shrinking until the price of milk goes up (or feed goes down).

“Participation is a five or six year decision,” Pagel observed. “That’s a long time forward, and you don’t know what the factors of your operation will be that far out.”

If supply management is passed in this Farm Bill and if it has low participation and does not work the way the assumptions say it will work, “I believe they will come back and make it mandatory,” said Pagel with a heavy dose of skepticism for the so-called voluntary nature of the NMPF plan.

“Europe is dismantling their program. Their supply management will be over by 2015. Canada is thinking about what to do with theirs. And now we (the United States of America) are going to add supply management to our industry? How does that make sense?”

Also from Kewaunee, Wis., Randy Hallet operates a 75-cow dairy farm. He gave three words to sum up his opposition to supply management: “Less discretionary money!”

“I am opposed to anything that takes money out of my son’s college fund… or out of my pocket, and then gives it to the government,” said Hallet, emphasizing that the results industry leaders say they want to achieve can be met by the Goodlatte/Scott amendment, without imposing a supply management program on dairy farmers.”

For Howard Straub of St. Johns, Michigan, the choice is clear: “Supply management just is not going to work,” he said. “We should be correcting the root problems in our industry, not adding a new problem. We should have daily electronic reporting like other commodities. We need the Goodlatte/Scott amendment because it would allow the dairy policy to conform more to what other commodities have: transparent markets, risk management, and no supply management.”

Straub observed that, “The Goodlatte/Scott amendment would allow farmers like me the chance to make the decisions we need to make at the farm level, rather than having the government make decisions for us.”
He also noted NMPF’s claim that their program (as written in the currently proposed Farm Bill) is “voluntary. But, do you remember the CWT program?” he asked. “That was voluntary, too, until the cooperatives said ‘If you ship milk to this coop, you will be part of CWT.’ I’m afraid that might be the case with this supply management (market stabilization) program as well.”

Straub pointed out that young and beginning farmers “will feel this stress the most.” He talked about two of his children who have farms of their own and the difficulty a supply management program would bring to their business decisions as young farmers each with about 100 cows.

“It would make a big difference on whether they could survive or not in the dairy industry,” he said.

In the global marketplace, Straub sees an even larger concern with supply management. “We can be suppliers to the world or balancers of the world supply,” he said. “What happens when we (are balancers)? We become the nation that nobody can rely on for milk. Guess what happens when we lose markets? It’s very hard to get them back.”

Straub urged fellow producers to “get together and to call their members of Congress to ask them to make sure the Goodlatte/Scott amendment is passed because without it, we’re headed for a disaster.”

Perhaps LuAnn Troxel of Troxel Dairy Farm near Hanna, Indiana, put it best when she said how much she loved the way the dairy industry “comes together at the World Dairy Expo,” while also acknowledging that “folks in Wisconsin may not be able to appreciate how it feels -- the isolation -- when there’s just a handful of dairy farmers in an area.

“We are the only dairy farming operation in our township, and there are only 18 of us in our county,” Troxel stated. “Sometimes we can feel a little bit like we are on our own. I love the dairy industry. I love the people in the dairy industry. I love the future we have before us. And I am opposed to supply management because I think it has serious consequences on our future.”

She noted that dairy farmers have always known how difficult it is to respond to market conditions of supply and demand. “We can't just turn the milk spigot on and off,” said Troxel. “I think that margin insurance is an excellent way to protect a dairy farmer from the volatility we naturally face. But what I don’t like is having it married to supply management. I am very comfortable with the proposed margin insurance when it is not married to supply management, and that is what we are talking about in the Goodlatte/Scott amendment . That I can support.”

She and Tom have a 130-cow dairy and four sons, the oldest of which is now part of the operation. “That is a real privilege for our family, but in order for that to be successful, we have to have additional income… that means we have to produce more milk or have another niche. Supply management throws and awful lot of stress on that situation.”