Editor’s Update: If you see my face

God is great, beer is good and people, well ...

By Dave Natzke

The old joke is that few people understand federal milk marketing orders, and most – if not all of them – are either lying or dead. The same could be said for the entire dairy situation these days.

For example:

• How can we go on a supply reduction program like Cooperatives Working Together, at the same time Dairy Farmers in America is asking producers if they’re willing to increase their base in California because milk supplies are insufficient to meet current market needs?

• How can USDA’s recent monthly World Ag Supply and Demand Estimates and Dairy Outlook reports regularly estimate strong milk production will keep a lid on prices, at the same time USDA’s Dairy Market News reports milk intakes are insufficient to meet desired levels?

• How are such messages – sending such mixed price signals – to be interpreted?

• How can producers/processors go from being winners/losers and losers/winners in relatively short periods of time and expect to maintain any resemblance of business continuity?

• Given the track record, how can we keep going to the government for solutions? And given the track record, how can government not be a bigger part of the solution?

The cry for government involvement in the dairy industry has reached a fever pitch. The situation has amplified the cry from those who have sought more government oversight all along, and created converts among those who just want somebody to stop the economic pain.

The pain has been intense. By my estimates, U.S. 2009 income from milk sales will be down more than $12 billion – from about $35 billion in 2007 and 2008, to less than $23 billion in 2009. Divide that by 9 million cows, and the decline equals about $1,300 per cow. Based on daily and monthly losses, that’s in line (or maybe even a bit conservative) with what many dairy farmers and their accountants tell me. Divide that by 61,000 commercial dairy farmers, and you’ve got equity shortfalls and shrinking assets. Add it up, and a lot of capital for future investment has been lost.

But even given these numbers, I can’t help but be wary of asking the government to have the keys to the survival kit. No doubt, dairy needs some short-term intervention to stop the bleeding, because most of the Band-Aids – internal and external – have not worked. But to implement long-term programs and policies based on current conditions could be a drastic error – if not for us, for the next generation.

Although my wife, a pastor, has “preached” end-of-life planning for years, she has had a couple “teachable” moments this summer, the result of untimely deaths by people who did no planning. The time to structure things (either a funeral, business plan or dairy policy) is not when the situation is bleakest or death is imminent. Planning is best when memories are intact, vision is clear and minds are sharp. If the past four years haven’t provided a “teachable moment” in dairy, I’m not sure there will ever be one.

To survive, there must be cooperation – cooperatives and otherwise. Undoubtedly, processors suffered huge financial pain when milk prices were high, and memories can be long. When they hear of producer pain, they remember their own, too. Extreme volatility is seldom good for anyone, except those extremely good at managing it. Being good at biology and business at the same time is not a given, whether it be a dairy farmer or a cheese maker. Currently, the empathy on both sides is in short supply.

The survival kit must include reasonable expectations. If farmer pay prices are to be based on end-product pricing, then there must be accurate monitoring of end-product prices. Guaranteed cost of production for processors must generate some reasonable guarantee for producers. Ethical and legal standards must be met. The cost of the “license to operate” must return some of the premium from the marketplace.

Some say those pieces of the survival kit are already in place. If so, it’s apparent it’s 1950s medicine for 2010s health needs.

In a column I wrote last December, I declared my year of 2008 as “the death of certainty.” Ten months later, “certainty” certainly has not regained life.

We are an angry bunch, we in the dairy industry, reflecting the political mood everywhere, it seems. Angry social and economic conservatives are no better or worse than angry liberals. Unfortunately, it seems many have embraced the hit by the All American Rejects as their theme song: “If you see my face, I hope it gives you hell.” Now there’s something to aspire to. (My wife, on the other hand, has selected Billy Currington’s “God is great, beer is good and people are crazy.” Clergy have their own issues.)

As I write this, cheese prices have gone up about 11¢/lb. in seven days. Maybe, by the time you get this magazine, things will have improved and people will start talking to each other, without yelling.

Speaking of other issues, the economics of print media has obviously changed editorial strategies of some major publications.

First, there was Time magazines’s article Bryan Walsh, in the Aug. 31, 2009 issue (“The Real Cost of Cheap Food”), in which the author blamed modern ag for obesity, antibiotic resistance and degradation of animal life. Whether you agree with him or not, the article was not identified as an “opinion” piece, and offered little or no substantiation to its claims. In an interview later, Walsh stated the article was not meant to be an unbiased news report, but rather reflected the magazine’s strategy to use the author’s opinion to serve as a “conversation starter.”

On Sept., 17, 2009, The New York Times’ series, “Toxic Waters: Health Ills Abound as Farm Runoff Fouls Wells,” addressed what it considered shortfalls in water quality regulations related to dairy farms. This one hit especially close to home for me, because it addressed a 2006 incident in which a dairy operation owned by my cousin, Dan Natzke, of northeast Wisconsin, was alleged to have caused drinking well contamination due to a leak in a manure transfer line.

The negative publicity at the time was enormous. It has started again. Never mind that on Sept. 21, 2006 the Wisconsin Department of Natural Resources issued a release stating: “…investigators probing what caused the contamination of drinking water wells … have concluded that the leaked material from Wayside Dairy’s transfer line was not the cause of the contamination, and the Department of Natural Resources plans no enforcement action against the dairy for that incident.”

For those of you who know Dan Natzke, either through the dairy industry or in other arenas of his life, you know he doesn’t need a third-party defender; the way he lives his life is defense enough.

New journalistic tactics, with the decline in print advertising, are designed to generate high website traffic to enhance web-based advertising revenue and web user fees. As I noted in a previous column, DairyBusiness Communications has also built website traffic – in large part by posting almost daily news and market updates, and providing business and production management articles producers can access when it is convenient for them.

But any article that hits a nerve will really generate website traffic – facts and truth sometimes be damned. Within 24 hours after the article was posted on the New York Times website, hundreds of comments were posted – many anti-animal agriculture and anti-dairy.

So we have a new breed of journalists – heretofore delegated to the editorial/opinion pages – who are “conversation starters.” Frankly, passing gas at a wedding reception will start a conversation – if all you want to talk about is “stink.”

I may be beating a dead horse (oops, sorry Humane Society, I was just using an old metaphor), but with the new breed of “conversation starters,” it’s even more critical that dairy producers join the conversation.

At a Glance: Numbers

Regional cows, milk

Ten states in the Western DairyBusiness readership area (Arizona, California, Colorado, Idaho, Kansas, New Mexico, Oregon, Texas, Utah and Washington) are among the 23 states which USDA records monthly milk production data. In August 2009, cow numbers were down about 127,000 from a year earlier. January-August 2009 milk production, at 59.226 billion lbs., was down 823 million lbs.

The 13 “major” states in the Eastern DairyBusiness readership area (Florida, Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, New York, Ohio, Pennsylvania, Vermont, Virginia and Wisconsin) were down about 17,000 cows compared to a year earlier. Year-to-date milk production, at 59.178 billion lbs., was up 693 million lbs., offsetting much of the Western decline.

Cull cow slaughter

USDA’s National Ag Statistics Service estimated 238,900 culled dairy cows were slaughtered under federal inspection in August 2009, up about 11,100 head from July 2009 and 12,600 more than August 2008. January-August 2009 cull cow slaughter totaled about 1.992 million head, up about 217,400 head from January-August 2008.

CWT: Round 8

Recently completed audits showed 74,114 cows (producing 1.5 billion lbs. of milk) and 2,958 bred heifers were removed through Cooperatives Working Together’s 8th herd retirement program. About 78% of the milk and 75% of the cows came from CWT’s Southwest and West regions.