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Dairy Farm Income Enhancement Proposals

Dairy Price Stabilization Act

Submitted by Kara O'Connor

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Posted by James Maroney on September 12, 2018 at 3:31 pm

I was in agreement with you until you got to this paragraph:

"The fundamental reason the government is involved and needs to be involved is actually very simple: milk is unique. As dairyfarmers,you produce a highly perishable product that has to be sold every day to a group of buyers that do not have to buy every day. Because of this reality, there is an unequal balance of power when producers and processors sit at the negotiating table. This is why decades ago, the government got involved in regulating the dairy industry. The reason for this government involvement is not to dictate the specific actions of producers, but rather to act as a referee between producers and processors."

The reason government became involved in dairy pricing is even simpler than you suggest: it is that 99% of any politician's constituents are consumers and only 1% are farmers and constituents have been told that milk is an essential food. Politicians are also certain that the supply of milk has always risen, which must mean that there is too much capacity in the industry. (The dairy industry has proved this to politicians over and over again for three generations). No politician wants to get calls from angry constituents when milk prices are rising, so for all politicians, their first duty is to consumers, not farmers. In other words, the federal government will never allow farmers to collude to control production because it would cause milk prices to rise. Proof of this is to be found in the Capper-Volstead Act of 1922 (see my submission in the list of submissions for a better explanation of the act.)

Posted by Josh Nett on September 3, 2018 at 11:07 pm

I feel that this proposal is well thought out but some time should be taken to bring the pricing statistics up to date. Also we should try to include actual cost of production on dairy farms in the last five years and incorporate those numbers into the proposal. That's a number most of us don't want to see but very important nonetheless. There are many good points in this proposal.

Posted by Christopher Baird on August 20, 2018 at 12:15 pm

That's a lot of pages. I admit I haven't read every word, but overall it's going the right direction, just very complicated. I propose a more elegant solution:

1. Set a historical base production for every farm. The obvious number to use is the previous year's production for a given month, but this can be slightly volatile, and penalizes new farmers, especially those that start out at less than full capacity. I suggest a mean of the 3 highest out of the previous 4 years of production. Less than 4 years of production history and a farm would be exempt from this system.

2. For every 1% increase in milk production over base production, all milk sold by the farm that month would be penalized $0.05/cwt. For every 1% decrease under base production all milk produced that month would get a $0.05/cwt bonus.

If demand exceeds supply and prices are high, the penalty for increasing production is negligible. If supply outpaces demand and prices are low, the bonus for shipping a few cows starts to look really good. This plan is virtually revenue-neutral, and while it would work best if adopted by everyone, in principle it could be adopted by any number of milk processors and have some effect, relative to the amount of the milk supply it covers. It's really just taking the current free-market pressures and making them immediately applicable to the individual farmer rather than eventually applicable to the industry as a whole.

Posted by mark mcafee on August 17, 2018 at 7:48 pm

Good job Wisconsin,

I like the graphs and the data. Well written.
I have one big problem with this plan. Where is the farmer control on the three critical elements of: Price, Supply and Import-Export ?

We have shortages of milk in locations around the USA right now, yet there has not be a rebound of pricing. The supply drops, yet prices stay low? There are systematic structural dysfunctions for price setting structures.

The idea that producers must have a right to produce as much as they want is not innate or an American free market idea. The reason that farmers produce more is to gain efficiencies and make more money on narrower margins. If farmers made money on what they have, they could grow with steady rate of market growth and not ahead of it.

Why not place farmers in charge of their destinies by using the Three Legged Milk Stool Model as presented by our very successful friend Nick Thurler of Ontario. The SMISA program places farmers in charge of their destinies.

Great work on the presentation....lots of compelling data and historical information.

Posted by mark mcafee on August 17, 2018 at 7:48 pm

Good job Wisconsin,

I like the graphs and the data. Well written.
I have one big problem with this plan. Where is the farmer control on the three critical elements of: Price, Supply and Import-Export ?

We have shortages of milk in locations around the USA right now, yet there has not be a rebound of pricing. The supply drops, yet prices stay low? There are systematic structural dysfunctions for price setting structures.

The idea that producers must have a right to produce as much as they want is not innate or an American free market idea. The reason that farmers produce more is to gain efficiencies and make more money on narrower margins. If farmers made money on what they have, they could grow with steady rate of market growth and not ahead of it.

Why not place farmers in charge of their destinies by using the Three Legged Milk Stool Model as presented by our very successful friend Nick Thurler of Ontario. The SMISA program places farmers in charge of their destinies.

Great work on the presentation....lots of compelling data and historical information.

Posted by Melissa Bravo on August 17, 2018 at 9:13 am

Kara,
This is a well written, well thought out proposal and should be at the top of the round table discussion by every State Dairy Task Force created in the next few weeks to review and narrow down options from each tier of the industry that resonate and reflect the needs of the majority of stakeholders.

I find this proposal's logic very meritorious to page 10-11. My observation at that point was that this would be an "excellent Phase II multi- year roll out to implement." But first, in any triage situation, we need (a quality (keep the wound clean) -quantity (stop the blood loss) -quota (prevent further casualties) to staunch the bleed.

Do you have something you could put forward for immediate interim relief for the small dairy producers who, without assistance, will not survive to see you vision come to fruition?

Thank you once again for bringing this proposal 18 hours across the nation to Albany.

Posted by Drew Brunell on August 15, 2018 at 11:35 am

I’ve read through all the proposals and like this one the best.
Why can’t USDA send out some sort of ballot to every dairy farmer in the US with options of change to vote on or to stay the same?
Nothing is going to change if we don’t control how much we produce. I really hope other producers take a look at these proposals. Now is the time for change.