Farmers Urged to ‘Carry the Torch’ for Milk Price Reform

Carolyn N. Moyer
Northern Pa. Correspondent

HARFORD, Pa. — Dave Rama likened the grassroots pleas of dairy farmers across the nation to the awakening of a sleeping giant. At a meeting held at the Harford Fire Hall on Tuesday, Rama spoke with conviction about the necessity of educating consumers, lobbying legislators and staying informed
“If we can educate the consumer as well as ourselves, the consumer will rally behind the producers of this country, whether they be dairy producers or whether they are growing plums, avocados or whatever it is. It’s really an assault on the entire ag industry. We need to realize that. Right now it’s very severe in dairy,” said Rama.

At one of several meetings throughout the Northeast, Rama, who runs an auction company in Delhi, New York, has teamed up with Holstein Association USA to promote a supply management plan devised by industry representatives.

During the past few months, Rama has met with top attorneys, legislators and producers from Maine to California and has made it a point to learn about milk pricing first hand. At Tuesday’s meeting, he set the stage for reform by outlining the many issues facing the dairy industry today ranging from possible corruption to misinformation to alleged market manipulation.

“There needs to be a cleansing, I call it a baptism, of this industry from top to bottom,” he said. “Everybody should be looked at. It is just common sense whether you’re talking about your government or your co-op or if you’re independent. You want to be checking all the time about what’s happening.”

Rama also spoke about a recent bus trip to Washington, D.C. where more than 240 farmers attended legislative hearings and got a first-hand look at the workings of government.

“The meeting in D.C. went very well. The support price was raised and the justice department has announced a series of meetings throughout the United States to continue the investigation of the dairy industry,” said Rama.

He then issued a call to action to all in attendance telling them that it is their responsibility to keep their eyes open and to be informed.

“From now on, we’ve got to be our own advocates,” he said.

Rama also spoke of the “smokescreens” that often cloud the issues.

“People send them out to confuse the issues,” said Rama as he alluded to the many mixed messages presented to the public and to legislators.

"There’s politics involved, there is lots of money involved and there is lots of misinformation.”

He listed challenges with imports including MPCs (milk protein concentrates) and casein that affect domestic producers negatively.

“In the last five months butter imports are up 129 percent. Imports, when they’re telling you there’s too much milk, that there’s too much product,” Rama said. “Folks, it doesn’t make much sense.”

Although Rama is a champion of the free market, he also sees United States agriculture being left behind.

“Industrialized countries are in trouble,” said Rama. “How can we compete with countries that don’t have our standards?”

Processors also take a huge role in the playing field.

“They see you (a producer) as someone who supplies raw product. They see people overseas as someone who supplies raw product. Whether you’re from New Zealand, China, or Paraguay, they couldn’t care less. They want raw product and they want it as cheap as they can get it,” said Rama.

He adds that the drive for cheap product often leaves American producers at the end of the line, creating an oversupply of domestically produced product.

“Is that good for the country? Is it good for the nation? Is it good for national security to buy all this milk overseas? That is what we have to drive home to the consumer,” said Rama.

While Rama admits he is not in favor of more government intervention, he recognizes that a level playing field will require strict guidelines.

“We don’t need the government running it, but we need parameters to abide by in this industry,” Rama said.

One favorable point is the introduction of a bill named the Milk Import Tariff Equity Act (s. 1542) introduced by Senator Charles Schumer (D-N.Y.) that will address import tariffs, specifically on milk protein concentrates. At this time, the bill already has nine cosponsors and has been sent to committee for further review.

To address price volatility, Lucas Sjostrom, government relations specialist and communications assistant with Holstein Association USA, presented their Dairy Price Stabilization Plan, which is designed to bring supply into alignment with demand. Sjostrom is quick to point out that this plan is not a total solution, but is designed to reduce the volatility in the marketplace.

“In March of 2009, our board of directors got together and decided what they were looking for is something that would work within our current system. We needed to get something done before the next farm bill,” said Sjostrom.

The plan is designed to attack volatility first, realizing that other issues including casein and MPC imports as well as the farmer’s share of the price of a gallon of milk also need to be addressed.

“This program hits on the main objective for now and then everything else can be built around it,” said Sjostrom.

In introducing the plan, Sjostrom concurred with Rama that too few players in a market can easily create a market imbalance.

“In economics, for a commodity market to work, you need to have many buyers and many sellers. If you didn’t know it yet, there are only a few people buying our product,” said Sjostrom.

In detailing the plan, Sjostrom notes that this is not a quota system like in other countries.

“You can still produce as much milk as you want,” said Sjostrom. “We simply give incentives to follow what the market is doing. Ultimately, we reward producers for making good decisions for the longevity of this industry.”

Contrary to the current climate where producers are told to grow larger to be more efficient, this plan would encourage producers to keep production at a manageable level, ultimately keeping prices more stable.

If the plan is adopted, an advisory board with two members from each of six regions across the United States as well as representatives from the consumer sector, dairy products and an economist would study the current market climate including the current domestic needs, government purchases for the nutrition programs and export opportunities. They would then announce two numbers each quarter. The first number would be the allowable milk marketings.

“This number will be the milk a producer will be allowed to produce without detrimentally affecting our national price of milk. This number might be zero at times, and might be slightly negative, but that’s going to be very rare. The only time it would be negative is if demand drops to where there is no market to sell our milk,” said Sjostrom.

The second number that will be announced is called the market access fee.

“This will be a deduction from the milk check per hundredweight for those who do go above and beyond that added growth and their allowable milk marketings (base),” said Sjostrom. “We don’t want this number to be an impossible number, but we do want it to be large enough that it makes farmers stop and think before they expand.”

After these numbers are announced, producers have a choice to either stay within their allowable milk marketings, typically one and a half to three percent higher than production during the same period last year, or to produce more than the allowable milk marketings and pay the market access fee.

Both options can work, depending on the producer’s goals. If the producer stays within his allowable milk marketings, he will receive a bonus check based on the pounds produced as an incentive. If he chooses to expand, he will need to pay a market access fee in the beginning, but will, in time, gain more base.

“Think of it as stock shares,” said Sjostrom, “You’re gaining more dividends the next time around.”

Sjostrom noted that bases can be transferred in whole from operation to operation. Bases would be initially established by picking one year, 2007, 2008 or 2009.

The estimated cost of implementing this program is less than two cents per hundredweight for producers and would result in a savings for government and tax payers. The plan would be administered by the Farm Services Agency. In addition, producers would operate on a 12-month rolling base which is updated quarterly. New producers would be accessed the market access fee only after their first full month of operation.

At this time, Holstein USA and supporting organizations are working to promote the plan as a simple, effective way to reign in market volatility.

According to Sjostrom, the plan has been well received among legislators to date. As they move forward, a draft of the bill will be submitted that will gain the support of both producers and consumers.

“The only reason we want congressional approval is to make sure that everyone participates and that no one is a free rider,” said Sjostrom.

Rama, in closing, warned farmers to continue to carry the torch of milk price system reform, even as milk prices rebound.

“We’ll see the milk price start to rise,” said Rama. “Don’t lose steam. We’ve got to fix it. You call, you e-mail, you write your senators and representatives and anybody that’s not your representative. The people we really need to contact are the people who really don’t know much about agriculture.”

He even suggests inviting inner city representatives, and policy makers to the farm to give them a first-hand look at our industry.

“Your story is a story of a nation,” Rama said, “And you’re being exterminated.”