Guest Column
By Nate Wilson
(March 2013) Last year, Congress attempted and failed to pass a comprehensive Farm Bill. The dairy portion of the proposed 2012 Farm Bill was called the Dairy Security Act. The heart and guts of the DSA was a taxpayer-funded dairy margin insurance scheme.
It was promoted as a solution to cover a dairyman’s losses whenever milk prices received would not cover feed margin costs. It had the U.S. taxpayer picking up the premium for the first $4.50 per hundredweight of the dairy farmer’s milk margin insurance cost. The 2012 Farm Bill passed the U.S. Senate, but stalled in the U.S. House of Representatives because House Speaker John Boehner (R-OH) refused to bring it to a vote, largely because it was seen as a budget-buster and the DSA had a despised milk supply management component attached to it.
The DSA is the brainstorm of the National Milk Producers Federation, a lobbying arm for the management of the nation’s largest milk co-operatives. “National Milk” as the NMPF likes to style itself, claims to speak for 80 percent the nation’s dairy farmers. For three years, National Milk has promoted the fiction that the DSA has broad-based, “grass roots” support among U.S. dairy farmers; however, when polled on the DSA, it is hard to find dairymen that support it.
Most scoff at the notion National Milk, in any way, speaks for them.
On page four of the March issue of the dairy industry monthly, The Milkweed, there is an article of significance on the DSA that was missed by the mainstream farm press. The article, Zero Grassroots Support for National Milk’s Dairy Plan at FarmFirst Convention, should be required reading for any member of the U.S. Congress responsible for the formulation of U.S. dairy policy in the upcoming attempt to pass a Farm Bill in 2013.
Here is a brief overview: In February, at the annual meeting of the newly formed FarmFirst Dairy Co-Operative, the guest speaker was Steve Etka, a representative of the Midwest Dairy Coalition. This is a Washington, D.C., lobbying group representing Midwest dairy co-operatives, of which FarmFirst is now the largest member. Etka’s speech expressed unqualified praise for the DSA and how there was hope National Milk might be able to resurrect it for inclusion in the upcoming attempt at a 2013 Farm Bill.
Mid-point in his remarks, Etka was interrupted by an irked female audience member who stood and called for a show of hands of the farmer delegates in the room. That done, she demanded to know who among them supported the DSA concept.
In a room filled with hundreds of effected dairymen, not a single hand remained raised; not one.
Diehard proponents of the DSA need to reflect on this cautionary tale and take a big bite out of the proverbial “reality apple.” As Rep. Boehner well knows, the U.S. Treasury is beyond tapped-out. Even if the DSA was sound public policy (which it is not), the U.S. government cannot afford it. Yet to forestall a financial collapse of remaining U.S. dairy farms, the problem of the current milk:feed cost ratio imbalance must be addressed.
While affected by last year’s drought, a serious problem with the ratio existed long before then. The prime cause in the U.S. milk:feed ratio imbalance is the Obama Administration’s obsession with the ethanol fuel mandate, which now consumes more of the U.S corn crop (43 percent) than all the livestock in the U.S. combined.
Ethanol now drives the price of corn, and dairy farmers are forced to compete for corn against this government-contrived ethanol monstrosity. For the remainder of the Obama presidency, it must be assumed the ethanol mandate will be sustained.
Therefore, the new reality is, the price of corn is not too high; the farm price of milk is too low.
The U.S. price of milk is determined by a USDA formula based on the price paid for cheese traded on the Chicago Mercantile Exchange. This CME trading has long been manipulated by cheese manufacturers to reduce the futures price of the cheese milk they buy. A small loss on a carload lot of cheese strategically traded on the CME can be recouped in millions of dollars of savings in future milk purchases.
This CME “gaming the system” was recognized and denounced by U.S. Senator Kirsten Gillibrand (D-NY) at a meeting with constituents in Westfield in August 2011. Gillibrand said “…there is a disconnect between the [farm] price of milk and how we come up with it through the price of cheese in Chicago. I think there is a lot of corruption and anti-trust behavior there to keep the [farm] price down.”
What U.S. dairymen desperately need is a reformed USDA milk price formula, divorced from CME chicanery, one that gives dairy producers a stable milk price derived from the marketplace. The formula needs to reflect regional milk production costs and a fair profit to fund farm family living expenses, not the DSA approach of an “insurance policy” that attempts to merely recoup farm losses with taxpayer money.
With such a new price structure in place, the proper role of government would then be limited to establishing a level playing field for honest price discovery between milk producers and dairy processors, rigorously refereed by impartial federal rules and oversight.
Nate Wilson, 65, is retired from 40 years of dairy farming on a small grassland farm in the beautiful hills of New York’s Chautauqua County. He can be reached at gksworks@gmail.com.