From top to bottom and back
It’s been said that
you can’t appreciate being at the top of the mountain till
you’ve been to the bottom of the valley. That’s certainly true
where milk prices are concerned, especially over the past two years. Just
as they spent most of 2002 and 2003 dealing with the wrenching economic
consequences of record-low milk prices, dairy farmers and their
cooperatives enjoyed a very different perspective in 2004, when prices
reached record highs, and stayed at above-average levels throughout the
As processors are aware, both extremely low and high
prices tend to correct themselves over time, but until prices revert to a
more typical level, the marketplace often is disrupted in ways that hurt
everyone in the food chain. When prices are too low for too long, farmers
exit the business, milk output drops and processors can have a hard time
securing a steady supply of raw milk. When prices climb high (too high, of
course, is a relative term), demand can suffer, along with profit margins.
Apart from the lesson that low prices produce high
prices and vice versa, another lesson from last year is that, while fluid
milk may be slightly more elastic (i.e. price sensitive) than was once
assumed, it’s still quite resilient to price spikes. Consumption
didn’t drop anywhere close to the level that prices rose, which is
the measure of elasticity. The real surprise last year was cheese, which
also saw much higher than average prices, but didn’t appear to suffer
much of a drop-off in demand. If we needed any reminder, last year proved
that extreme volatility, as I mentioned earlier, is a detriment to everyone
in the dairy business.
That’s one of the reasons why we are about to
begin our third year of operations of Cooperatives Working Together (CWT).
CWT was one of the factors behind the resurrection of farm-level milk
prices in the second half of 2003, and it’s been one of the factors
behind the strong prices since. More importantly, it’s the only tool
farmers have at their disposal to help control the supply side of the
supply/demand balance. Other production-limiting factors in 2003, including
high feed costs, a lack of Canadian dairy replacement animals, and reduced
supplies of Posilac — all of these have either corrected themselves
or will in the future.
We need a self-funded self-help program to give
cooperatives and farmers some control over the marketplace. CWT is not just
about improved prices; it’s about stabilizing the market so that
supplies are neither too short nor too long.
NMPF’s Washington efforts will remain focused on
a series of policy initiatives designed to improve farmers’ bottom
lines, including passing legislation imposing limits on the volume of cheap
dairy protein imports than come into our country; creating our own domestic
protein production capability; and targeting mislabeled dairy protein
imports. We are backing the Bush administration’s pursuit of a
Central American Free Trade Agreement, and we are supporting repeal of the
estate tax (which penalizes family-owned businesses like smaller
processors) and changing our immigration laws that hinder workforce
At the end of the day, however, what producers and
processors both should agree on is that everyone benefits from
“Goldilocks” milk prices that are neither too hot nor too cold.
Some of that can be achieved through specific policy initiatives, but we
believe that CWT holds the key to achieving “just right” prices
through our own initiative.
Jerry Kozak is president and chief executive officer
of the National Milk Producers Federation.
Top three co-ops produce more than a third of the
total U.S. milk supply.
The nation’s top 50
cooperatives marketed 137.3 billion pounds of milk last year, which was
up 1 percent from 2002. This accounted for nearly 81 percent of the 170.3
billion pounds produced in 2003.
For the first time in five years, a new name appeared
in the top five. Family Dairies USA edged out Dairylea for fifth place. In
2003, Family Dairies produced 178 million pounds more than in 2002 for
a total of 5.658 billion pounds. Dairylea held steady at 5.5 billion
pounds. Making the biggest leap is Lone Star Milk, which jumped five places
to 20th with 1.420 billion pounds.
Farmer’s Cooperative Creamery, which recently
acquired Portland Independent Milk Producers, moved from 34 to 30.
Dairy Farmers of America (DFA)handled over twice
as much milk as California Dairies, No. 2. With 13,445 farms shipping 35.8
billion pounds, DFA produced 21 percent of the nation’s milk. While
DFA continues to increase pounds of milk handled — in part because
each of their members produced an average of 212,564 pounds more milk
last year — the total number of member farms decreased by 882.
The co-op handled another 20.7 billion pounds of non-member milk.
Members of the top three co-ops — DFA,
California Dairies and Land O’Lakes — collectively produced in
excess of 62.5 billion pounds, or more than 36 percent of the
A New Mexico cooperative, Continental Milk, handled
the most milk per member farm — 55.9 million pounds. Second was
Select Milk Producers, also from New Mexico, with 43.2 million pounds per
The only new addition is Calhoun Cooperative Creamery
Co., which edged out Country Classic Dairies Inc., Bozeman, Mont., for No.
Information for this co-op ranking is provided to Dairy Field by Hoard’s Dairyman. Each
cooperative is contacted annually in the summer and asked to provide the
previous year’s information. Some co-ops end their fiscal year on a
date other than December 31, so milk volume and member farms may not
necessarily represent the 2003 calendar year.
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