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NFFC urges passage of ‘Federal Milk Marketing Improvement Act’

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The National Family Farm Coalition (NFFC) and several of their member organizations have submitted a letter to Congress concerning the dairy provisions contained in the proposed Farm Bill. Arden Tewksbury, manager, Progressive Agriculture Organization, shared contents of the letter, below:

 

November 28, 2012

Dear Member of Congress:

As Congress reconvenes, the most important issue they will debate for dairy farmers is the proposed 2012 Farm Bill because of the serious financial crisis experienced by the majority of dairy farmers across the United States.

While we support the need for Congress to pass a new farm bill, we wish to point out the extensive inequities in the dairy provision of the draft bills, including the controversial taxpayer-funded “margin insurance” proposal.. Neither draft contains the proper remedy for the economic problems devastating U.S. dairy farmers.

The current Farm Bill dairy provision forcing taxpayers to fund the "margin insurance" program must be replaced by a milk pricing formula that uses the dairy farmers’ cost of production to determine the federal minimum price paid to dairy farmers for raw milk. This formula is contained in the “Federal Milk Marketing Improvement Act” (S-1640). Additionally, we recommend the inclusion of a stand-by milk supply management program included in the Farm Bill dairy provision, similar to the one included in S-1640.

It is absolutely essential that members of Congress comprehend that the cost of production and stand-by milk supply management provisions we recommend are designed to cost the taxpayers no money from the Treasury. This contrasts sharply with the irresponsible margin insurance program that will be funded by taxpayers.

According to the USDA’s Economic Research Service (ERS), the National Average Cost of Producing Milk for September 2012 is $28.50 per hundred pounds (cwt).  The latest national average all-milk price reported by USDA for September 2012 was $19.60 per cwt, leaving a shortfall of $8.90 per cwt, or $0.90 per gallon, for the average dairy farmer. The average U.S. dairy farmer produces nearly 4 million pounds of milk per year, so these dairy farmers would lose nearly $360,000 per year in gross income. This income is needed to operate their dairy farms and pay their support businesses and suppliers.

This inequity cannot continue. According to press reports, more than 100 California dairy farmers have recently gone bankrupt, and many more are facing that route due to rising business costs. Feed costs have risen significantly, thanks to the diversion of significant quantities of corn into the ethanol market and the 2012 drought. Current federal dairy policy excludes cost of production from the minimum farm milk pricing formula, and the inability of dairy farmers to recoup their high feed costs impeded them from securing the grain and forage they needed to feed their cattle, leading to the forced dispersal of many dairy herds.

Federal dairy policies have been hammering dairy farmers for more than 30 years. There were 600,000 U.S. dairy farms in 1976, dropping to 131,509 by 1992, and to 51,481 by 2012. It is unthinkable that Congress continues to formulate policies that will likely be responsible for a continued decline in the number of U.S. dairy farms. 

This crisis is not just affecting farmers and their families, but also the entire rural economy. The federal milk pricing formula leaves dairy farmers unable to cover their basic cost of production, but equally important is the loss of a substantial number of support businesses that fold when dairy farmers are not paid enough to cover the bills they owe these service providers and suppliers. The result of inadequate raw milk prices is the continued loss of a large number of feed mills, implement dealers, repair shops, and even some financial institutions. This is unacceptable.  

While our dairy farmers and support businesses have been needlessly experiencing financial losses, it is interesting to review some of the profits that have been reported by two of the companies that are heavily involved with the dairy farmers’ milk and/or dairy products. Per their third quarter 2012 reports, Kraft Foods posted a net income of approximately $470 million, while Dean Foods’ reported a third quarter 2012 net income of $36 million. 

No one begrudges companies’ making a profit - it's good to have profitable companies. However, existing dairy policies and the dairy proposals in the current Farm Bill drafts prevent American dairy farmers from covering basic farm business cost inputs, let alone making profits afforded to Kraft and Deans.

On behalf of family dairy farmers who are trying to survive and thrive in our rural communities, we urge you to take swift action to implement equitable federal dairy policies based on fairness and cost of production in the dairy provision of the 2012 Farm Bill.

Understanding the issues outlined in this letter, particularly the direct effect unjust low raw milk prices have on their own bottom line, the undersigned organizations strongly recommend that Congress debate and adopt our proposal for a new pricing formula for dairy farmers and the accompanying stand-by milk supply management program.

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