September 5, 2017 at 3:32 p.m.
Holstein Assoc. USA proposes dairy price stabilization program
Holstein Association USA, a 30,000-member organization consisting of adults and juniors, is proposing a dairy price stabilization program that would revamp the way dairy producers in the U.S. are paid for their product.
"What we're told from our membership is that they want more predictability in their pricing and it's very important we try to do something," said John Meyer, CEO of Holstein Association USA.
Earlier this year, the association's legislative affairs committee created the dairy price stabilization program draft, which consists of a moving base system.
The U.S. Secretary of Agriculture and an advisory board chosen by the Secretary would predict fluid dairy markets and determine a price that would be above operating costs. Each producer would have an initial base production determined from raw milk marketings from April 1, 2008 to March 30, 2009. If producers wanted to increase their milk base, they would be charged a "market access fee" of about $2 to $3 per hundredweight for a 12-month marketing period. After this 12-month period, a producer's base is recalibrated to the higher production amount creating the farm's new base. The market access fees collected would be redistributed to other dairy producers who did not produce over their base. New producers entering the dairy industry would have the market access fee deducted for their first year of production, which then becomes their base production amount. A thorough explanation of the proposed program can be found on the association's Web site, www.holsteinusa.com.
"One of the reasons we think milk price has to change is because the landscape of the dairy industry has changed considerably since our current system for pricing milk was established," Meyer said.
Three major changes in the dairy industry Meyer pointed out were the business models being used by some milk cooperatives and processors, the amount of dairy ingredients in products being imported from other countries, and the development of sexed semen creating more heifers and more milk in the U.S.
"In 2010, over 160,000 extra heifers are expected to enter the nation's milking herd," Meyer said. "There are things that are really different today than what we saw years ago."
Without the implementation of a supply management program, Meyer said it's possible the dairy industry would only be run by a few 100 farms producing all the milk, and only a couple cooperatives buying the milk.
"Our association wants to do all we can not to allow for vertical integration in the dairy industry. We've already seen the impact of vertical integration in industries such as pork and poultry," Meyer said. "We really have to come together because this is a national problem. This isn't a regional problem."
The low prices and Holstein Association USA's proposal have generated discussion from both sides of the fence. Randy Schweer - a dairy producer and Holstein Association USA member from Watertown, S.D., who milks 90 cows with his wife, Diane, and their children - supports the dairy price stabilization program proposed by Holstein Association USA.
"What we've been doing (for dairy prices) ... is not working," Schweer said. "We need to revise the system."
Schweer said if some sort of supply management program isn't implemented, an increasing number of dairy producers will go out of business.
"It's the cycle that's been happening and will continue to happen," Schweer said. "The past usually repeats itself unless you make a dramatic change."
If this program were implemented, Schweer said it would help all types of dairy producers - big, small, young or veteran.
"Right now it's affecting all farms," Schweer said about the low milk prices. "Nobody is saying, 'We're in the clear.' (The low prices) are having a broad spectrum affect on everybody."
Another Holstein Association USA member, Randy Gross, manages a 3,600-cow dairy in Elkton, S.D., and is not in favor of Holstein Association USA's proposal.
"It increases government intervention in the day-to-day way we operate our business," Gross said. "It gives away our decisions as people who operate businesses and as entrepreneurs."
Gross also said he doesn't support the program because other supply management programs in other countries have distorted local and worldwide markets. He also thinks it would be more difficult for younger producers to get started in the dairy industry.
"The reduction in revenue in that $2 to $3 (market access fee), it just doesn't pencil out for adding any cows to grow the business and add somebody in," he said.
Another negative consequence Gross saw would be lower prices at cattle sales.
"Even adding one profitable cow could put you over your base," he said.
Although Gross isn't in favor of Holstein Association USA's proposal, he isn't satisfied with the current milk pricing system.
"I would like a lot of energy and discussion to go into this and hope it would result in revamping, restructuring or eliminating our federal milk marketing order," he said.
Whatever the proposal, Holstein Association USA thinks the dairy industry needs to stay unified.
"It's really critical that the dairy industry work together on one plan and go forward to stabilize prices," Meyer said. "Too often the dairy industry brings mixed messages to our elected officials in Washington and it makes it hard for those people to determine what's to be done, if anything."
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