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Dairymen call for new pricing plan

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BRIDPORT FARMER MARIE Audet and other members of Dairy Farmers Working Together are supporting a milk-price stabilization plan that they hope will reduce volatility in the dairy industry compensation system. Independent photo/Trent Campbell

By KATHRYN FLAGG
ADDISON COUNTY — Dairy farmers around the country are rallying behind a price stabilization program that some dairy farmers hope could help reduce volatility in bulk milk prices, which plummeted this winter to a low of roughly $10 per hundredweight, $7 or $8 below the cost of production for Vermont farmers.

But with milk prices projected to rebound somewhat this fall, advocates for the new program say farmers need to move fast before rising bulk prices dissuade some dairymen from pushing for change.

“It’s no doubt it’s going to be a very hard struggle to change things,” said Cornwall dairy farmer John Roberts. “It is always difficult to change the status quo, especially in an industry where the producers, the processors, the handlers quite frankly have, to a degree, competing interests.”

The proposed milk stabilization plan, which is still in the draft stage, would establish production “bases” for farmers in the industry, which proponents hope would cut back on the oversupply of milk, which drives prices down. Volatile prices, according to Bridport dairy farmer Marie Audet, boil down to mismatched supply and demand in the milk industry.

“The reality is that 2 to 4 percent oversupply decreases a farmer’s milk check by half,” Audet said.

The plan already is backed by Holstein Association USA, which includes more than 30,000 members, and the Milk Producers Council. Most recently the Vermont-based Dairy Farmers Working Together (DFWT) group, of which Audet is a member, also signed on with their support for the program.

The groups are backing what Audet called a two-pronged approach to righting the milk supply.

First, she and other farmers hope to work within the existing framework of the Cooperatives Working Together (CWT) program to cut back on milk production. CWT has traditionally used herd buyouts to achieve that end.

But Audet said the herd buyout approach isn’t working anymore: she thinks all the farmers who are willing to take a buy-out, sell their cows — and leave the dairy business — already have.

So she advocates for a “milk diversion program” instead, which would offer farmers a chance to reduce their annual milk production by 10 to 30 percent, and still get paid for the milk they do not produce. That would trim the oversupply of milk on the market that is driving down prices for all farmers — and would also offer some dairymen, who want to keep farming but who are struggling financially, an influx of immediate cash from the CWT program.

Unlike a similar program tried in the 1980s, the milk diversion plan would also include an escape clause should prices recover and a farmer wish to ramp up production again.

After matching supply with demand, Audet said, the milk price stabilization program would move on to its second objective: keeping supply and demand in check by establishing a production “base” for each dairy farm.

Every quarter, a board made up of regional farmers and representatives of consumers, milk processors and the USDA, would determine how much milk needs to be produced to meet the demand for the product, and adjust a farmer’s base as necessary.

The plan isn’t a Canadian-style quota system, but farmers would be rewarded for staying within their allocated production amount, and would be penalized for exceeding production.

New farmers could either buy a farm, taking over the previous farmer’s “base,” or could start from scratch — though in that case, Audet explained, they’d be charged a market access fee for their first year of business.

“It’s a cost of doing business for that first year while they establish that base,” she said.

Roberts, who also is involved with DFWT, agreed that the current pricing system has to change, but he said that achieving any changes is going to be an uphill battle.

Roberts also said that many farmers have a short attention span, and he worried that when milk prices climb this fall as they typically do, the incentive for changing the milk pricing system will disappear.

But he also acknowledged that the current downturn in prices is the worst the industry has seen in decades, and has affected dairymen across the country more broadly than low prices have in the past. Plus, he said, the price of cows has hit rock bottom, so even farmers who might have chosen to get out of the business have had trouble doing so.

“The rest of us have to keep the pressure on,” Roberts said. “I think what’s encouraging about DFWT are a lot of them are younger farmers who are determined to make this work.”

Audet has been working with DFWT since 2006, when the group emerged after another big downturn hit the dairy industry. She remembers that after just a few phone calls organizers had a room full of dairy farmers collectively interested in working for change.

“It’s just kind of snowballed from there,” she said. “We’re talking to farmers from around the country. More and more … farmers are ready to embrace (a change).”

EXTREME VOLATILITY

Audet said that willingness comes because volatility in the dairy industry has grown more and more extreme in recent years. Thirty years ago, in 1979, farmers were paid 40 cents more per hundredweight of milk than they are earning right now, she went on.

“We’re working just as hard as ever, but we haven’t figured out a way yet to get paid for it,” she said.

She said that the milk price stabilization plan is still in its early phases, and that the current draft needs more work — but she’s encouraged that so many farmers have already been able to unite behind one plan.

Looking to field more questions and input from farmers, DFWT is organizing a national conference call at the end of the month to keep farmers talking. Organizers hope that the June 30 call, scheduled for 4 p.m., will include thousands of farmers — and send a strong message that farmers are ready to unite. Farmers can register by calling 1-800-217-7379 on the day of the call.

“This is all grassroots,” Audet said. “Nobody’s done this work for us. It’s come from farmers across the country talking.”

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