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Just 18 months ago, dairy market was humming along Tuesday, June 9, 2009
Agri News staff writer
Eighteen months ago, the economy was humming along. Milk prices were good, the dollar was cheap and the economies in China and India were booming. Australia and New Zealand were coping with the impacts of a drought and the European Union was subsidizing exported milk. United States milk exports were strong.
Now, the opposite of everything is true, said Gordie Cook, who milks 62 cows in Hadley, Mass. Cook is director and chairman of the Holstein Association USA, Inc., legislative affairs committee.
Exports have shrunk, with the extra milk hanging over the market like a dark cloud. Buyers are buying hand-to-mouth and it's becoming a lot easier to produce a heifer than ever before with sexed semen.
"It's not good in dairyland right now," Cook said.
The bleak outlook for the future has convinced Cook that it's time to try something else: Supply management.
"We have to be able to keep the amount of milk that we make within a reasonable level of what we use and what can be absorbed by the marketplace," he said.
Two percent too much milk causes a 30 percent decline in price and 2 percent too little milk causes a 30 percent increase in price. That 60 percent swing is killing people, he said.
"I believe in capitalism and I kind of like being able to do what I want to do, but when I perceive what the future holds, it's not good," said Cook, who also sells genetics.
Unless something is done soon, there won't be anybody left to save, he said.
Sens. Arlen Specter, D-Pa., and Bob Casey, D-Pa., have introduced the Federal Milk Marketing Improvement Act of 2009.
"This bill will address the increasing costs of milk production and help to protect our dairy producers' crucial industry," Specter said in a press release.
The bill requires the agriculture secretary to determine the price of all milk used for manufacturing purposes by using the national average cost of production.
Holstein Association USA is also working with a lawmaker to turn its draft proposal into a bill.
AMPI chief executive officer Ed Welch said AMPI producer members have long supported a supply management concept. It's the first resolution in their book, he said.
The wild milk price swings of $10 milk to $20 milk are not good for the industry, he said.
Several times, food companies have asked him for five-year price stability. Companies are willing to pay a fair price, but they aren't willing to endure the volatility.
The volatility in milk prices over the last 10 years have encouraged food companies to reformulate recipes with non-dairy ingredients. Even when prices fall, they are reluctant to switch back to dairy products because they don't know how long the price will be consistent.
One example is the McDonalds double cheeseburger. It was a No. 1 seller on the menu, but it was taken off the menu and replaced with a double burger with cheese when the price of cheese jumped.
"We'll never get that double cheeseburger back on the dollar menu," Welch said.
The Holstein Association plan is a good base to start from, he said. Dairy producers need fair, profitable prices and food companies understand that dairy producers need to make money.
Others are concerned about the opportunity to grow the dairy industry through adding cows or producers.
Clint Fall, the president and chief executive officer of First District Association in Litchfield, spoke at the Minnesota Dairy Leaders Roundtable meeting on June 1 in Arden Hills.
Fall said growth in the state's dairy industry motivated First District to reinvest in its sole plant in Litchfield. The cooperative wants to see the existing infrastructure remain sustainable and is concerned about the impacts of supply management. |
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