The Farm Bureau Takes a Step to Shore Up the Struggling Dairy Market

Unprecedented talk of adopting a supply management system may turn the tide for dairy farmers.



By and large, 2019 was another dreadful year for American dairy farmers. Yes, the price of milk rose—to a high in November of $20.21 per hundredweight—for the first time since 2014’s glut caused a lingering downward spiral. But by then, the industry was well on its way to losing another 100,000 dairy cows—with 773 farms throwing in the towel in Wisconsin, the second-largest producer state, alone.

Adding insult to injury, organic processor Trickling Springs shuttered amid a financial scandal in September, leaving farmers with one less outlet for their milk. And the biggest milk company in the U.S., Dean Foods, filed for bankruptcy in November; its attempted merger with the country’s biggest co-op, Dairy Farmers of America, is currently facing an antitrust probe.

But in a move that surprised some industry analysts, the American Farm Bureau Federation (AFBF)—an insurance company and lobbying group that has often been closely aligned with Big Ag—voted to “support the creation of a farmer- and industry-led milk management system” at its annual convention late last month.

Dairy supply management—matching milk supply and demand in order to stabilize prices for farmers—is an approach some U.S. ag interests considered too radical as recently as last year, when AFBF voted against it at its 2019 convention.

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“AFBF has [actually] supported supply management since the 2014 Farm Bill,” says Travis Klinkner, a sixth generation dairy farmer who sits on the dairy committee of the Wisconsin Farm Bureau (WFB). Although, that portion of the bill “was ditched at the last minute before voting.”

But wording in AFBF’s policy lumped supply management with mandatory per-state quotas, a prong of the more than 50-year-old Canadian system that AFBF opposes. Decoupling these two concepts this past January allowed AFBF to vote in favor of the former while continuing to dismiss the latter, according to AFBF chief economist John Newton. “It was really just a matter of semantics,” he says.

Still, Austin Frerick, deputy director of the Thurman Arnold Project at Yale University, describes the shift as “a very big moment for the Farm Bureau. They’re at a fork in the road where they have to decide: Are they on the side of farmers, or are they on the side of industry?”

Without quotas to stanch the tide of cheap milk flooding the market from large-scale dairy operations exploding in Arizona and elsewhere, Frerick—a lifelong Iowan and ag-industry observer who has been critical of the Iowa Farm Bureau—says he isn’t sure how a supply management program would prevent further farm losses. A concentrated animal feeding operation (CAFO) that supplies a $1.30 gallon of milk to Walmart, he says, “has an unfair advantage in cutting corners to get to a lower price that drives family farms out of business.”

AFBF is in favor of “free and fair trade,” in Newton’s words. But constantly changing export markets for American milk have also helped drive oversupply, which is directly linked to low milk prices. When those markets have proven “fickle,” says Lynne McBride, executive director of pro-supply-management California Dairy Campaign (CDC), “it’s caused unprecedented stress in the industry.”

A Way Forward

Nevertheless, McBride says there is a way forward. She sees the first step as instituting an incentive program whereby “if [farmers] increase production beyond profitable demand, they’re not going to get paid the same for that milk.” McBride says that without such incentives, some dairy farms will continue to overproduce. “[That’s] why you see surges in production now, to take advantage of that,” she says. A farmer might overproduce when prices are low, to boost revenue, or when prices are high, to make as much money as possible while they’re able.

Milk co-ops such as Massachusetts-based Agri-Mark and Prairie Farms in Illinois already function like this, with base excess plans that do not reward overproduction. Some would like to take this a step further, with a “market access fee plan” that would also charge farmers who overproduce a fee to be distributed to other co-op members who’ve stayed within agreed-upon production limits, says Klinkner. He and the rest of WFB’s dairy committee has been working with the Vermont Farm Bureau to develop a supply management model—they call it “growth management”—that could garner broad support.

“You can have growth management and not have a monetary quota like Canada … which in some cases created unnecessary headaches by creating artificial values” for cattle and other dairy farm investments, Klinkner explained by email.

The industry also needs other strategies to cut back on production. “Milk productivity of cows has gone up over the years, but you can change [their] nutrition to limit that,” CDC’s McBride says. (The diet cows are fed can either increase or decrease the amount of milk they produce.)

Additionally, McBride says, “excess milk doesn’t make sense with the environmental challenges we’re facing”—why spend money on water and fertilizer for milk that could get dumped?—“and it hurts milk prices.” It doesn’t take much curtailing to see an improvement, though. McBride explains that a tiny decrease in production of .1 percent last March is what led to 2019’s price rise—which had a significantly positive affect on struggling farmers. But the fact that this drop “just happened” due to a variety of triggers, rather than being purposefully implemented by the dairy industry, “just points to the problem we’re facing,” says McBride.

CDC and the Wisconsin and Vermont Farm Bureaus support “manag[ing] supply at a level nationally [to] generate a stable and profitable pay price,” which benefits consumers, too, says Klinkner. He says that a $5 increase per hundredweight of milk would increase the price of a gallon by only 43 cents, while providing meaningful stability for farmers.

Yet another strategy: building a market for local whole milk within the National School Lunch Program. “Imagine if in Wisconsin schools all the milk they served was coming from Wisconsin family farms. That procurement [change] would be so powerful for the climate, and for rural development,” says Frerick.

And the support such a policy could engender for local farmers, says McBride, “is really important to those economies, because they have a ripple effect. Dairies generate a lot of jobs that lead to a thriving rural economy.”

The Route to the Farm Bill

The overarching benefit of these strategies is that they can be implemented now, by farmers and processors, “to help ease the stress in the short term,” says Klinkner. Larger, systemic change has to wait for the next renegotiation of the farm bill, which isn’t scheduled for an update until at least 2023.

Nevertheless, “We’re on track to get [supply management] into the next farm bill if we can come up with a unified plan among industry organizations,” says Klinkner. “More farmers and processors are tired of the system we are in and fighting to survive.”

Which leads to the question on many people’s minds: What would an AFBF-supported milk management program look like? CDC and the Wisconsin and Vermont Farm Bureaus endorse a three-tiered plan that includes managing supply on a national level, negotiating fair prices, and establishing a more effective trade policy. Getting this into the next farm bill means that all the various industry-related organizations will have to agree on it. “We need a nationwide, coordinated approach to change the direction and fix the system,” says McBride.

“We haven’t endorsed a specific proposal at this point,” says AFBF’s Newton. “If the industry comes forward with a concept, our members can look at it and evaluate it to see if it’s something we want to consider.”

Frerick calls AFBF’s January vote in support of supply management largely “symbolic.” But what it does, says Klinkner, is “open doors. It puts AFBF and all the state Farm Bureaus in a position to work with other organizations … toward a common plan.”

Says McBride, “We think for the Farm Bureau to even have supply management in its policy [now] is a big deal, and I’m hopeful this will improve our outlook. It couldn’t happen too soon.”

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  1. John Van Dyk
    Thursday, February 6th, 2020
    2 ways your overlooking
    1. set a higher ratio for butterfat across the U.S. , there is too much SMP in the world and its the lowest price class.
    2. stop allowing new farms to set up or put a cap on new construction say 1,000 cows per farm.consumers don't want milk from mega farms .mega farms are driving milk consumption down.
    why does america want to export so much when export is proven to only lower farm gate price and use up resources America will need in the future.