Cooperative activities

Dairy Field, Jun 2003 by Kozak, Jerry

The past 12 months have been enormously difficult for America's dairy farmers and the cooperatives they own. The primary reason can be found by a quick price check: April's all-milk price was $10.90 per hundredweight, the lowest since 1978. Wholesale butter, powder and cheese prices have been struggling all year to stay above price support levels. The pressure on the bottom lines of both farmers and cooperatives has been intense. These record-low prices have not been reflected in significantly lower retail prices either, meaning that consumers are not being given much economic incentive to increase their dairy purchases - further impeding a recovery in prices.

The irony is that last summer started out in a much more promising vein. The president signed a very comprehensive and generous Farm Bill last May, one that provided the National Milk Producers Federation (NMPF) its No. 1 policy priority: extension of the dairy price support program. Unfortunately, in subsequent months, the U.S. Department of Agriculture has mismanaged several aspects of the price support program, and as a result, commodity prices for butter, and especially for cheese, have often dropped below the support price level.

The Farm Bill's new Milk Income Loss Contract program got off to a bumpy start, but has proven beneficial for many of the smaller farmers it was designed to help. But even with the price support extension and the MILC program, farmers of all sizes are suffering from crushingly low prices. The dairy futures market right now isn't holding out much hope for a price recovery either; the rest of 2003 looks equally as bleak.

That's part of the reason why NMPF and its members have undertaken an unprecedented new program to help strengthen farm-level prices by better aligning supply and demand. Through a new program called Cooperatives Working Together (CWT), most of the nation's major dairy cooperatives, along with independent dairy farmers, are now working on a three-pronged program to reduce milk supplies in the coming year. The NMPF board approved CWT on May 9, and we are hoping to formally launch the initiative this summer when we reach a target participation level of 80 percent of the nation's milk supply.

CWT will help demonstrate the economic clout that farmers can have when they work together to help themselves. The supply reductions we are planning will modestly boost farm-level prices by about $1 per hundredweight and, just as importantly, provide some additional price stability. This will benefit processors as well as producers, because everyone has had a hard time coping with the extreme dairy price volatility we've experienced in the past six years.

Drastic times call for drastic measures. We need the government to do a better job of operating the dairy programs for which it is responsible. The problem isn't the programs themselves; it's the poor management of those programs. But the best opportunity to provide some hope for farmers and their cooperatives is by joining together in a proactive fashion through CWT. Cooperatives Working Together is not just the best opportunity we have, but really the only opportunity to change things for the better.

Jerry Kozak, President and CEO, National Milk Producers Federation