Working Together

by Jerry Kozak
Producer Outlook
Economic events of the past year in the dairy sector clearly illustrate two points: first, that the mismanagement of government dairy programs really helped create one of the worst pricing environments ever for dairy farmers and their co-ops; and second, that producers can work together to provide innovative economic solutions in an effort to improve the situation.
Much of the dialogue within NMPF’s membership in the past 12 months has been focused on how we can rectify the killer low milk prices that afflicted farmers from 2001 through the first half of 2003. NMPF has worked in the legislative and regulatory policy environments in Washington on a variety of solutions. These include the following:
- Urging the USDA to strengthen the dairy price-support program so farm-level prices don’t continually fall well beneath the $9.90/cwt support level.
- Speeding up the ability of the USDA to make necessary changes in the Federal Order marketing environment to allow for more orderly, less volatile marketing condition.
- Pushing the U.S. Customs Service to do a better job of assessing whether dairy imports are truly milk protein concentrates and not just falsely labeled blends of skim milk designed to circumvent our tariffs, ultimately displacing U.S. milk in cheese manufacturing and watering down farmers’ prices.
- Most importantly, urging Congress to pass legislation that will provide a more level playing field in dairy trade through the imposition of tariffs on imports of MPC and casein.
On the policy front, NMPF also worked cooperatively with dairy processors in a successful effort to get the House of Representatives to update the school lunch program regulations to allow for a better variety of high-quality milk beverages to be distributed to America’s kids. Our challenge now is to get the Senate to approve similar legislation.
Concerning the second point I mentioned initially, the milk price plunge that lasted nearly two years was reversed in 2003 thanks in part to efforts undertaken by the nation’s dairy cooperatives. A year ago, we created a unique new program called Cooperatives Working Together (CWT) to better balance supply and demand.
The dramatic reversal of milk prices that began last summer, and will continue at least through this summer, is certainly the result of the milk-reduction activities funded by the nation’s leading dairy cooperatives, working with independent producers who are also pitching in to fund three milk supply reduction programs. The success of CWT — which will boost farm milk prices by an estimated 60 cents from October 2003 through September 2004 — illustrates that farmers can have a positive impact on the marketplace and can take control of their own destinies if they agree to work together.
Our challenge now is to manage the fallout from record-high milk prices. Although current conversations among dairy processors and producers are focused on the record highs, the futures markets are predicting a huge decline in prices in just a few months. CWT hopefully will help provide a soft landing for milk prices, rather than the typical hard crash that we have experienced repeatedly in the past decade once milk prices hit a peak and then deteriorate.
Jerry Kozak is president and chief executive officer of the National Milk Producers Federation.