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 year.

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 mobility.  

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 nation’s milk.

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 farm.

The only new addition is Calhoun Cooperative Creamery Co., which edged out Country Classic Dairies Inc., Bozeman, Mont., for No. 50.

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.