I have always had faith that, whatever the circumstances, somehow things will work out. The past 18 months, though, have surely tested that faith. I know that I am not alone. I have heard fellow dairy farmers, industry professionals and agribusiness people alike label the milk price/feed cost squeeze of 2009 as the worst crisis the dairy industry has ever faced. And even though prices are a little better now, many of us are still feeling the aftershocks of this financial upheaval.
But I have hope.
For the past 18 months, the dairy industry has been talking about the need for change. The comment has come from producers both large and small, regardless of management style, regardless of location: our industry is broken. When milk prices dip, farmers milk more cows and sell more milk because production is the only thing we can control. When milk prices climb, we milk more cows and sell more milk, hoping to profit from the higher prices. We have not been able to collectively respond to market signals and, so, supply is often out of balance with demand, resulting in maddening volatility in our milk prices.
We've bemoaned that volatility, only to be told that we must learn how to live with it, because it won't be going away any time soon. We've been told to forward contract if we don't like the volatility. Many of us have shied away from forward contracting due to poor experiences or lack of experience. That leaves the traditional approach of riding out the waves by saving during the highs to survive the lows. Unfortunately, that approach failed many of us during 2009. There's simply no way to save enough to survive 12 months of such drastically unprofitable conditions.
I think we all realize this and are ready to fix our broken system, but we haven't had a solution that seemed likely to work for everyone.
Until now.
On Wednesday, the National Milk Producers Federation presented its plan for dairy policy reform to the NMPF board. Our Young Cooperators Dairy Policy and Legislative Forum was held in conjunction with the board's meeting, so we were able to sit in on the presentation, discussion and vote. The experience is one I hope to never forget.
The emotion in the room as the plan was presented and discussed was palpable. The conviction in the voices of the board members as they voted was moving. In the end, 40 of the board's 44 members voted to support further development of the package of concepts titled Foundation for the Future; two board members voted against the resolution, one abstained, and one was absent. I agree with several of the board members' comments that this vote was one of the most important votes in the history of the Federation, but I haven't always felt that way.
When National Milk first unveiled its Foundation for the Future last November, I was skeptical, as I'm sure many dairy producers were or still are. The plan seemed complex and ineffective. But in the past seven months, National Milk's Strategic Planning Task Force has ironed out all the wrinkles, so to speak. The plan presented to the board and young cooperators is a package of reforms that I honestly believe will help dairy farmers better cope with volatility, help us respond to changes in demand and improve price discovery.
The plan includes discontinuing the MILC and Dairy Product Price Support programs and using those programs' funds to create a federally-subsidized margin insurance program. This margin protection program will also have supplemental insurance available for purchase, similar to crop insurance plans.
The second part of the plan is a market stabilization program that will kick in when margins (all milk price minus feed costs) drop below set levels, which usually occurs when the milk supply exceeds demand.
Finally, the plan includes a proposal for reforming the Federal Milk Marketing Order.
It was made clear during the meeting that there is still some fine tuning to be done on this proposal, but the basic elements of the plan are complete. The analogy offered to the NMPF board was that right now they've built the race car. But they fully expect that once the race starts, they'll have to make some pit stops along the way to tweak the engine or change the tires.
It was also made clear that the process of changing dairy policy has only just begun. The final details of the plan need to be fleshed out, policy proposals need to be drafted and dairy farmers from coast to coast and border to border need to understand the program and come together. Because if we don't present this to Congress with a unified voice, this plan will go nowhere and we'll be stuck with what we've got - an industry that's spiraling out of control. The comments we heard from the legislative staff we met with indicate that Congress is waiting for us to decide what we want. When we decide, they'll support us.
I believe we can do it.
Sadie and her husband, Glen, milk 70 cows near Melrose, Minn. They have two children - Dan, 3, and Monika, 1. When she's not parenting or farming, she's writing for the Dairy Star. Sadie can be reached at gsfrericks@meltel.net.