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There Could Be A Lot Of Spilled Milk

Federal Milk Marketing Order# 1, (FMMO 1) which encompasses the Northeastern U.S. will be facing a huge surplus of milk production this spring, as it has in the previous two years.

The result will overwhelm the milk trucking and milk processing infrastructure and will result in, at least, several hundred dumped, (wasted) tractor trailer loads of milk per month from April through July. 89 percent of the milk marketed in FMMO 1 comes from farms in Vermont, New York and Pennsylvania.

On January 12, 2017, a letter was sent from Dairy Farmers of America, (DFA) the largest U.S. farmer owned milk marketing cooperative, to Erik Rasmussen, Market Administrator of FMMO 1. The letter asked Rasmussen to relinquish farm milk marketing rules to the Order’s milk handlers from April 1 to September 30 of this year.

This would largely involve DFA and its wholly owned subsidiary, Dairy Marketing Services, (DMS), as they are the largest milk handlers in FMMO 1. As such, this proposal has to be viewed as a threat to some 900 FMMO 1 DMS independent dairy farmers, the business infrastructure that supplies them and the rural communities of the Northeast underpinned by the financial support of these dairy farms.

What was being asked was relaxation of the rules governing the ability of a milk handler to pool or depool milk processed in plants pooled on FMMO 1. DFA/DMS wanted the authority to do this at will, without restriction or penalty.

If depooled, DMS independent producers would lose important protections: payment based on the monthly Statistical Uniform Price, payment due for milk within mandatory time limits and the right to have farm milk quality and component content testing verified by third-party check testing.

If achieved, depooling would leave DFA free to set the price of the DMS independent producers’ milk, assess hauling, marketing charges and surcharges with no oversight or producer recourse.

Depooling would place these independent producers in the same plight as current DFA and DMS member co-op producers who, upon joining their co-ops, surrendered their right to those protections from arbitrary and predatory deductions from their milk checks. This blatant attempt at greater consolidation of marketing power in FMMO 1 has been the goal of more than two decades of diligent and devious effort by DFA management.

DFA claimed it needed suspension of pooling rules to overcome a, ” …significant and unprecedented imbalance between the supply and demand in the FMMO 1 marketing area.” That such an imbalance has existed in the spring season for the past two years in FMMO 1 is obvious.

The Market Administrator’s Monthly Statistical Report, shows staggering milk dumpage from April through July of both years, resulting in vast amounts of redundant milk being dumped each month.

However, DFA’s concern for this burgeoning production imbalance rings hollow. While other large handlers in the region, in an attempt to rein-in overproduction, have put their producers on notice that they will not guarantee the Statistical Uniform Price for milk production exceeding traditional base norms, DFA has not subscribed to this sensible policy.

On the contrary; DFA has a subsidiary, DFA Finance, working closely with First Financial Bank, to advance loans to DFA member farms to expand milk production in FMMO 1, fueling further overproduction.

Curiously, overproduction is not a significant problem in the other FMMOs. Opinion is building that DFA management has deliberately orchestrated overproduction in FMMO 1 as a device to rid itself of independent producers perceived as an impediment to DFA monopolistic ambitions.

Anticipating the Trump White House’s freeze on all Federal regulations, DFA realized it was unlikely to gain its agenda through the FMMO 1 Market Administrator. Therefore, the premise of the January 12 letter was abandoned and DFA cut to the chase: on January 19, DMS began sending letters to DMS independent farms in FMMO 1, warning of possible milk market termination. Beyond calling an auctioneer, DFA gave DMS independent producers three unsavory choices: stay a DMS independent but agree to depooling, leave the DMS system and seek other buyers in an over supplied market, or join DFA or a DMS affiliated co-op.

Currently, 900 hundred DMS independent milk producers face potential loss of their livelihood unless they bow to this craftily designed squeeze-play. Doing so, they will be in the unenviable predicament of other DFA and DMS co-op members; subject to the same, or worse, plundering of their milk checks. Refusing that, a few may find alternative markets, but for the majority of those unwilling to knuckle-under to this coercion, it will be the end of an era, with their cows sold and barns going dark forever.

That would be a horrific, if not destabilizing, body blow to the Northeast’s historically fragile, continually challenged rural economy.

Should DFA/DMS prevail in this depooling scheme, or follow through with terminating a significant number of these DMS independent farms, the financial calamity visited on rural communities in the Northeast might qualify the resulting impoverished region to a Federal Disaster Declaration.

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