Video: PRO-DAIRY’s Julie Berry interviews Greg Wickham, CEO, Dairylea

On behalf of DairyBusiness Communications, PRO-DAIRY’s Julie Berry sat down with Greg Wickham, CEO, Dairylea Cooperative, to discuss issues facing dairy this spring. Topics included the need for federal dairy policy reforms that include supply/growth management provisions, at a time when there seems to be regional differences in milk demand/supply; how the short-term milk surplus sends contradictory messages regarding long-term milk needs in the Northeast; and antitrust lawsuits and their potential impact on the ability of cooperatives to work for their producer members.

 

To view the video, visit http://www.youtube.com/watch?v=lynnWeYQoyI&feature=youtube_gdata_player

 

The video is also transcribed (with slight edits) below:

 

Q: Dairylea, among others, has said recently that it needs more milk to help meet the demands of the surging regional yogurt industry. At the same time, Western co-ops are penalizing dairy producers for surpassing production bases. With the regional dichotomy within the U.S. dairy industry, how can we implement a nationwide supply (or growth) management program, as proposed in the Dairy Security Act, the dairy title of a proposed 2012 Farm Bill?

 

A: Clearly, particularly the Northeast, Mid-Atlantic and Southeast, we hit more months when we don’t have enough milk, rather than months we have too much. However, when you’re putting a national policy program together, you have to have components that meet everybody’s needs around the nation. I think that’s what’s been carefully crafted in the Dairy Security Act. It’s very important, particularly to those dairy farmers west of the Mississippi, that there be a signal on the supply side when margins are going into a problem area as a result of supply-demand imbalances.

 

It’s much like the CWT (Cooperatives Working Together) program, where we recognized the need for the program, but regionally we could have asked whether the Southeast, Northeast and Mid-Atlantic wanted to participate on the same level as the other regions? Probably not, but from a practical perspective, you need to have national program to make sure you have the majority of the dairymen across the United States on the same page.

 

Q: Recently, there have been opinions expressed among some dairy farmers that co-ops have been a valuable stabilizing force for U.S. dairy producers, but have been slower to embrace a more global future for U.S. dairy. How would you respond to that criticism, and why?

 

A: The interest of agriculture in international activities – supply, demand and pricing – is at an all-time high. From a dairy perspective, starting realistically about 10 years ago, the dairy industry took a keen interest, and decided to do a number of things to help promote this industry within the international sector. The U.S. Dairy Export Council is a great example where processors, farmers and cooperatives have come together, to research what markets we are interested in, what markets are interested in us, what products do we need. If we go back 10 years or more, the U.S. was what I describe as an “anyhow exporter” – if we had a little extra, and it happened to be what you wanted at our price, and you showed up, we’d sell it to you. We really weren’t focused on what people wanted, what customers did we want. 

 

That whole thing has been turned upside down. We’re very focused. We had a long way to go from where we were to where we’d like to be, but we’ve made great progress in the past 10 years. The proof is in the pudding. The percentage of U.S. dairy production exported has risen from approximately 5% 10 years ago to 13% this year, and it looks like it will be relatively steady to increasing over the next few years. That wouldn’t have happened without the focus.

 

Q: A lawsuit involving the National Milk Producers Federation’s Cooperatives Working Together (CWT) herd retirement program, on the surface, appeared to be just another anti-livestock agriculture effort by an animal rights group. However, it also has the potential to challenge the ability of cooperatives to work to help improve prices for their producer members. Should co-ops be concerned? What are your concerns/fears related to this lawsuit?

 

A: Clearly, the antitrust lawsuits that are floating around the agricultural cooperative industry are of great concern, not only to the individual cooperatives involved in them, but also to folks representing the whole industry, like National Council of Farmer Cooperatives (NCFC). We believe the way Capper-Volstead was structured and intended in the beginning was to allow farmers to act as a group, much like a single company or business entity could act. Nobody tells General Motors how many Corvettes to make. They might make too many, or they might make too few, but they get to decide. All we’re asking, or think we have the right to do anyway, is to do same thing. From a cooperative perspective, we want to act as one unit, in concert, to give farmers the appropriate bargaining power in today’s economy that is so important, given the consolidation and integration that has taken place in retail and processing, and allow us to compete effectively.

 

We are concerned, and we will defend vigorously our rights to do what we think we are allowed to do.

 

Q: What other issues are facing the dairy industry in the Northeast?

 

A: One of the issues we’re facing this spring that is a bit contradictory and difficult to explain to people is we are entering a very exciting era, where processors are making substantial investments in the infrastructure – both in existing infrastructure and green fields, new plants. Without that investment, we could be the best producers in the United States or world, but if we don’t have any place to go with the product, that’s a problem. 

 

As we looked ahead, we saw a situation where, probably 3-5 years out, there might not be as much milk supply from the farm as the plant system could utilize in the Northeast or East Coast. That presents dairy farmers with a great opportunity, if they choose to partake in it – to expand.

 

One of the contradictory things we experiencing is that we’re in a temporary period, as is normal in the spring, when we have a little too much milk. This particular spring – because of the pressures of the world economy and what’s going on particularly in dairy-producing regions west of the Mississippi – there is a huge amount of pressure as to what type of discounting is necessary to place that extra milk, and the costs that are involved. These costs are literally double what is normal, even for us in the Northeast, which normally doesn’t have a huge problem. We’re talking amongst ourselves and our farmer members, explaining how other parts of geography in the United States are handling these concerns and costs, and how we’re trying to determine how we’re going to handle them.

 

That’s a pretty contradictory to the long-term message that this is a great area to be in the dairy business. Because of the investment in processing, growth will be fine, and we have places to sell the milk. Yet, this spring, we’re dealing with a little too much milk, a very temporary phenomenon, and it happens to be at an extraordinary high cost, which leads farmers to ask, “Which is it, too much or too little?”