Dairy Farm Crisis Is A Self-Inflicted Wound

That the nation’s dairy farm families face a deepening financial crisis is well established. A Dairy Farmers of America, (DFA) Cooperative, National Director, David White of Clymer, New York, recently quoted in Jamestown New York’s, The Post-Journal, speaking of the growing crisis and dismal milk prices paid to U.S. farmers said; “It’s really creating some difficult times for farms. From now until midsummer it looks, to put it nicely, terrible.” Just what relief Mr. White sees coming by midsummer remains unexplained and unclear. Difficult times? Indeed! The most difficult since the Great Depression! Sadly, it is a self-inflicted wound.

What brought the nation’s dairymen to this juncture? In a word; overproduction. Quite simply, the gross overproduction of milk that has been ongoing for the last four years, unabated. Triggered by the last good year of milk prices, 2014, when the national all milk price topped out in the $24 per hundredweight range, U.S. milk production has been rolling along like a runaway train. Rolling down that same grade since 2014 have also been the prices paid to U.S. dairymen as the available milk supply overwhelmed and swamped the practical domestic demand for it. U.S. milk prices have now been driven several dollars below the cost of production, which has been pegged at an average of $18 to $19 per hundredweight. Recent pay prices were in the $14 per hundredweight range, but on a downward trajectory, with no end yet in sight.

Could anything have been done to prevent this? Many industry observers fault the management of the nation’s largest milk producer cooperatives for not responding to the impending calamity and pushing back on this overproduction long before it created this obvious eventuality. There is even a rising suspicion of the possibility of darker motives on the part of some of these large co-ops’ management, in that they might have deliberately encouraged this overproduction knowing it would discourage the nation’s small, family dairy farms, all the better to facilitate the vertical integration of the remaining dairy production industry just as the chicken, beef feeding and pork industries have been vertically integrated. If that was the plan, it would seem to working to a “T,” as many of the small and medium sized dairy producers of the Northeast are rapidly nearing the point of financial exhaustion and ultimately farm dispersal. Meanwhile, recent published reports are telling of a gala reception hosted by DFA officials, led by CEO, Rick Smith, for “200 representatives of large dairy farms” at the Turning Stone Casino, a posh Upstate New York gambling den and luxury resort owned by the Oneida Indian Nation in late February. (Those DFA members curious about the cost and who picked up the tab on that lively little hog killin’, might give their DFA Director a call….)

At the crux of this crisis is what might be termed “a tale of two co-ops,” the first being the one that’s supposed to market member farmers’ milk profitably — this one is failing its mission and the member farmers miserably. The second is the processing arm that has a huge employee base, running up ruinous debt and is paying six and seven figure salaries to an inflated executive staff on the member farmers’ dime. It abuses the member farmers’ cheap, captive milk, which makes its manufacturing operations cash flow. Recently, the Land O’ Lakes Cooperative Dairy Division announced record profits for 2017, while its farmer members continue to suffer through the worst economic downturn in memory. Little doubt DFA management will soon be releasing another rosy annual report, even though they increased the member farmers co-op’s indebtedness by over $300 million in 2017. (Current DFA indebtedness is pegged at $1.873 billion by Moody’s Investors Service; but not to worry, that debt is secured by first dibs on DFA member milk checks.)

How are these large dairy cooperatives addressing their farms’ difficulties and surplus production? According to Gordon Hoover of Land O’ Lakes Dairy Cooperative, speaking at the 39th annual Fulton Bank Ag. Seminar in Lebanon, Pa. on February 13th, the job of dairy cooperatives is not to, “… pay you, (member farms) the most money…” and that exports are the key to solving the U.S. dairy crisis. Dairy exports figure big in the proposed solutions of the other large co-ops as well. While exporting excess U.S. milk production may clear milk overproduction out of the system, it can only be done at prices that are several dollars per hundredweight below the U.S. cost of production. Therefore, it must be concluded that while exports may provide revenue for U.S. dairy co-ops, for U.S. dairy farmers they are a money loosing proposition and financial disaster.

So, is there a solution for this mess? Yes, but only if overproducing U.S. dairymen look in the mirror and confront the party responsible for it. As stated in the opening paragraph, this is a self-inflicted wound and only the dairymen themselves can resolve it. The first place to start is by removing all the cooperative “leadership” that stood by and did nothing to stem this catastrophe. That includes all the executive management staff, national and local directors. They have proven their incompetence and gross lack of concern. Fire them!

After new, competent, responsive management is in place, then devise an in-house, fair, comprehensive, flexible system of supply management to pare the oversupply of milk back down to the profitable level of domestic demand and maintain it there. Bringing the oversupply down is the only way to bring the farm milk price up. Do not, under any circumstance, ask, expect or accept any help from any form of government, Federal, state or local: U.S. dairymen should pull themselves up by their own collective effort. They should make every effort to produce enough milk for our nation’s needs, without ruinous overproduction. That is the only way the nation’s dairymen will achieve the profitability and prosperity they and their long suffering families so richly deserve.

Nate Wilson is a retired dairy farmer from Sinclairville.