Marketplace holds answer to dairy’s dilemma

By Bill Bruins 
President, Wisconsin Farm Bureau Federation

Every dairy farmer understands that when the milk price goes up it eventually will go down.  If history repeats itself (and it usually does), today’s low prices will likely rebound next year. 

In the meantime, most of us spend considerable time ‘crying in our milk’ as our farms lose equity.  Many of us automatically turn to the federal government for help.  Some go as far as publicly saying that depression-era prices and skyrocketing input costs will result in all dairy cows disappearing in a matter of weeks unless the government gives all of us a profitable price!  While Agriculture Secretary Tom Vilsack recently pledged a billion dollars of federal support, he acknowledges that it will not move the dial much on prices. 

The thing to remember throughout dairy’s current dilemma is what gave us 20 dollar milk in 2008 is the same thing giving us 10 dollar milk in 2009 — the marketplace.

Yes, the government does have a role in regulating the industry, and it does set the basic price for our milk.  However, that price is largely determined by the marketplace’s forces of supply and demand. 

Some argue that the support price should be raised.  The last time that was tried under the Carter Administration, government warehouses soon overflowed with dairy.  The nation’s dairy herd needed to be reduced, so the government established the whole herd buy-out program at considerable cost to taxpayers.  Beef producers have never forgot what it did to their industry. 

Every time our prices dip, some farmers talk about a supply management program.  However, a government-controlled reduction in the supply of milk is doomed to fail when other dairy-producing nations will race to replace it. 

The fact is that we import more milk products than we export.  Even with our low prices, domestic processors (including our major cooperatives) can buy foreign products cheaper than U.S. raw milk.  Global trade is a fact of life for most ag products, including milk.  Last year the U.S. exported nearly 11 percent of its dairy production.  When the world economy tanked, demand shrunk and prices collapsed.  Soon our domestic prices were at support levels, causing dairy to flow into government warehouses instead of world markets.  The demand for milk protein remains strong, but we just can’t provide it for the right price.

Becoming a reliable supplier to the world market is vital to the long-term growth of the U.S. dairy industry.  Our domestic marketing policy served us well in the past, but the world as we now know it has changed.  Opportunities await; but only if we are willing to change. 

That change will hopefully come from revamping the way we market milk.  There are hopeful signs this will happen.  Secretary Vilsack says he supports reform to the milk marketing system and the American Farm Bureau Federation’s delegates have agreed to study what ails the dairy industry before making new policy resolutions. 

The Wisconsin Farm Bureau’s Dairy Committee, made up of 20 dairy producer members, will meet in August to set our organization’s dairy directives.  Farm Bureau’s members remain committed to not only find ways to ease the pain dairy farmers are experiencing this year, but to working on the long-term solutions that will bring positive and lasting change.