Volatile Dairy Market Leaves Farmers in Lurch

Farmers look to government and consumers to solve a perfect storm of problems. Some groups are also looking for additional markets in the Northeast to fill the void left when Dean Foods canceled 100 dairy farmer contracts

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American dairy farmers are being squeezed by a triple-headed monster of overproduction, decreased milk consumption and increased consolidation among processors.  

“Farmers are caught in a Catch-22 game of margins and a worldwide glut of overproduction and over-saturated inventories of dairy products,” said Julie Walker, who works with Ag Central Farmers Cooperative in Eastern Tennessee.  

 “Each individual farm is trying to generate enough money to keep bills paid from milk sales at a wholesale price level,” Walker said. “To have enough total money to pay bills, they must sell as many pounds as possible.  When they produce those pounds of milk, they keep contributing to the world overproduction.” 

The dairy crisis hit a low note earlier in March, when Dean Foods announced its decision to cancel 100 contracts with dairy farmers in their supply chain. The contract cancellations hit home particularly in the Eastern states where the milk processor purchases a large volume of milk. The cancellation, to take place in May, includes farmers in Indiana, Kentucky, North Carolina, Ohio, Pennsylvania, South Carolina and Tennessee. 

Several farmers that supply Dean’s Mayfield Plant in Athens, Tennessee, are affected by the contract closures. Athens is the county seat of rural McMinn County, located between Knoxville and Chattanooga. Mayfield Dairy is one of the largest employers in the rural region, employing 250-300 workers in dairy processing and distribution.  

Dean Foods, for its part, has explained that this overproduction among dairy farmers combined with a decrease in consumption of fluid milk is the reason for the canceled contracts. They also note that one of their largest former customers, WalMart, has built a large milk processing facility of their own in Indiana.  

Changes in the dairy industry, with a smaller number of farmers producing an increasing volume of agricultural products, is similar to trends in other sectors of agriculture. USDA data indicates a similar pattern in crop, poultry, hog, cattle feeding, fruit and vegetable production. 

 Many farmers are now discussing whether federal policy could address overproduction and low prices paid to dairy farmers. 

“The government should have stepped in long ago and come up with a quota system like Canada has,” Josh Watson, one of the Tennessee dairy farmers affected by the Dean contract cancellations, told the Advocate and Democrat. 

With the current farm bill expiring in September, some dairy farmers in the Midwest and East are organizing to explore a different approach to government intervention and regulation in the dairy market. In Wisconsin, the National Farmers Union, National Farmers Organization and Organic Valley recently brought Canadian dairy producers to a series of meetings to explain how Canadian-style dairy policy helps protect family farmers from overproduction.  

“Increasing dairy production, on larger operations but on fewer farms, is something that benefits agribusiness corporations but not the farmers themselves,” said Jim Goodman, a Wisconsin dairy farmer and National Family Farm Coalition (NFFC) President, who was profiled earlier by the Daily Yonder. “Supply management, which would promote fair prices for farmers, a stable supply for consumers and possibly some protection for the environment by limiting the growth of industrial dairy operations is a better solution.” 

NFFC, along with more than 50 additional family farm groups, submitted a letter to Senate and House leaders earlier in April urging Congressional action to address the crisis. The groups are calling for implementation of a $20 floor price for milk to provide immediate relief for farmers in debt and unable to pay bills. The groups think that legislation recently introduced by New York Senator Kirsten Gillibrand would provide much-needed emergency relief of a guaranteed milk price, but with costs covered by taxpayers rather than by milk processors. 

“Dairy farmers today are facing no money, no hope, no way to plant spring crops or pay last year’s debts,” says Pennsylvania dairy farmer Brenda Cochran, a member of Progressive Agriculture Organization (ProAg). “Nothing will stop the financial hemorrhage we are facing except a better farm milk price. To keep farmers on the land, fresh food in our grocery carts, and save rural America, we need a $20/cwt floor price and a supply management program as outlined in the proposed 2011 Federal Milk Marketing Improvement Act.” ProAg helped draft the 2011 legislation. 

The groups are also calling for government purchases of excess milk for emergency food providers and a moratorium on federal funds going to factory farms. The policies would curb the current oversupply of milk, the major contributor to low prices and dairy farm closures. 

In seeking a long-term solution, the letter urges Congress to schedule hearings in the next nine months to develop new approaches to dairy policy in partnership with family dairy farmers rather than under the sole influence of processors, manufacturers and corporate-controlled dairy cooperatives. The groups say that a supply management program would ensure dairy farmers are permanently protected from price drops due to oversupply.  

Others in the dairy industry are looking for help directly from consumers. 

“The thing concerned people can do to help out dairy farmers is to go out and buy a few gallons of milk, even donate it to a food bank if they can accept refrigerated foods,” Walker said. “There needs to be a long-term, sustained effort for consumers to vote with their dollars. That’s how to have the quickest, biggest and deepest impact. It’s going to take one-on-one conversations happening in churches, between neighbors, people-to-people connections that can turn things around.”  

Farmers and advocates have also worked hard to find additional markets in the Northeast for farmers being dropped by Dean Foods. Schneiders Dairy, a Pennsylvania-based dairy processor, recently decided it would pick up additional dairy farmers.   

 

Topics: Ag and Trade
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