Since starting my new position at Wisconsin Farmers Union, the Dairy crisis has been at the front of my mind. That’s not surprising. Each day brings another story about dairy farmers going bankrupt, getting a 30-day termination notice, or opening a milk check that won’t meet the cost of production. Ask any dairy farmer and they’ll tell you prices are low because there’s just too much milk on the market. In fact, at nearly every meeting I’ve been to in the last three months--from the UW Agricultural Outlook Forum to the annual meetings of Dairy Farmers of America and Organic Valley--there has been at least some acknowledgement of the glut of milk pouring out of U.S dairies. That is why I was troubled to hear from Cornell University dairy economist Andrew Novakovic at the Cooperative Network’s Dairy Issues Forum that we are not over-producing milk at all. Instead, he claims, we are producing to meet an increased demand for butterfat which is causing an oversupply of skim milk powder.
Even as a newcomer to Wisconsin Farmers Union and the dairy industry in general, such a claim seems ridiculous. At a time when dairy prices are in a three-year trough, millions of gallons of excess milk have been dumped, and the dairy industry is scrambling to get restaurants to cram more butter and cheese into their products, how can anyone, much less a dairy economist, claim that we are supplying to meet demand? And more importantly, why?
The comment was made during a presentation by Jaime Castaneda of National Milk Producers Federation about international trade. Jaime emphasized the importance of export markets, which quickly turned to blaming Canada for the financial stress of the U.S dairy industry, an argument that is at the core of NAFTA renegotiations. Jaime pointed out that although Canada has a supply-managed system, they sell surplus skim milk powder on the world market, putting them in direct competition with the U.S. While this is a valid trade dispute that deserves attention, it is somewhat of a red herring when it comes to the dairy crisis.
During Jaime’s talk, a dairy farmer pointed out that, with or without expanding exports, the problem is still that we produce too much milk. He seemed to be leaning in favor of managing oversupply when Dr. Novakovic jumped in and said that we are not actually over-producing milk, we just have too much skim milk powder and nowhere to sell it. This argument effectively shuts down any mention of supply management by claiming there is no oversupply to manage, and supports the narrative that we can export our way out of the dairy crisis if we simply reclaim our coveted market for skim milk powder from Canada. But to what extent will this actually solve the problem?
The total milk production of Canada is one tenth of U.S production, and Canada exports about 12% as much skim milk powder as the United States. That certainly creates competition in the global marketplace, but not enough to have a significant effect on dairy prices as export-enthusiasts like Jaime Castaneda want us to believe. If Canada were to stop exporting skim milk powder tomorrow, we would see a marginal increase in U.S milk prices. But that would send a market signal to dairy farmers to expand to capitalize on the higher price and soon the market will be just as flooded as it is today. The point is we cannot possibly increase exports fast enough to keep up with Dairy farmers’ ability to crank up production at even the slightest spike in milk price. There has to be a mechanism in place to pump the brakes when prices fall below a certain level.
Supply management is not some new or revolutionary idea. In fact, National Milk Producers Federation had a mild supply management mechanism in their Foundation for the Future program in the 2012 farm bill. It passed the House and the Senate, but was removed at the eleventh hour by then House Speaker John Boehner. Jaime recently claimed on a WAXX radio segment that it was removed because it was unpopular among dairy farmers. Well I know a few hundred Wisconsin dairy farmers who came to a recent series of Canadian supply management workshops who said they think we need a similar program here. Several of them attended the Ellsworth Cooperative Creamery annual meeting in March and voiced their support for supply management to Jim Mulhern, President of National Milk Producers Federation, who brushed them off with something like, “we tried it once and it didn’t work so we are not going to try it again.”
National Milk Producers Federation has an obligation to listen to dairy farmers, not shut them down when they say something that goes against their export-oriented agenda. At the same time, more farmers need to make their voices heard and demand long-term solutions to the dairy crisis. If you are a member of any cooperative, but in particular one of National Milk’s member co-ops, you have a right to leverage your collective voice to demand federal policy that provides a fair, livable and predictable pay price. That’s what Wisconsin Farmers Union is pushing for. Because at the end of the day, farmers are doing the most important job there is: feeding people and fueling our society. I think it’s high time you get paid for it.