PRODUCER OUTLOOK
2007 Cooperative Activities
Jerry Kozak

It’s fair to say that the past 12 months have been marked by severe volatility in many of the areas where NMPF is active, especially in both the Capitol Hill policy arena, and in domestic (and even global) dairy economics.
Let me start this column with an appraisal of prospects for the 2007 Farm Bill, because it has significant bearing on our industry. Things have been volatile in Washington because of the turnover last November in congressional leadership in the House and Senate. The newly emboldened Democrats want to put their own stamp on farm policy by writing and, in some cases, rewriting the Farm Bill.  
Now, for dairy policy, congressional leaders haven’t unveiled sweeping new proposals. But NMPF has, and we hope that both leaders in Congress and in the Bush administration will see the wisdom of what we want to do.  
In terms of an economic safety net, we are reconfiguring the venerable dairy price support program so that it no longer supports the price of milk at $9.90 per hundredweight. Instead, the program would support key commodity products — cheese, butter and powder — at levels that are designed to return a solid, predictable price to farmers. Too often in the past decade, the price support program has been a safety net with holes in it. Our approach would firm up that net.
We are also calling for a new form of direct payments, to replace the current Milk Income Loss Contract program. NMPF’s proposal is decoupled both from a market-based trigger price, and from future milk production. We believe these changes make our program more market-oriented and less trade-distorting.  
Our Farm Bill package — and it is a comprehensive package, with a portfolio of ideas — also supports making additional resources available for on-farm sources of renewable energy, principally through tax credits for the installation of manure digesters. We are also supporting the final creation of a concept that was included in the last Farm Bill — but never implemented: the checkoff assessment on dairy imports. Most commodities that have checkoff programs in this country assess imports, but dairy is the primary exception. Foreign-produced dairy imports to the U.S. have increased in value from $830.3 million to $2.335 billion from 1989 to 2006. Clearly, imports benefit from our growing consumer market, and they should help foot the bill to expand it, just as America’s dairy farmers and milk processors do.
Significantly, NMPF for the first time is supporting the inclusion of forward contracting for manufactured classes of milk in the Farm Bill — providing there are certain producer protections included in the contracting statute, and providing that NMPF’s other economic policy goals are also included in the Farm Bill.  
The need for predictable dairy policies will be even more urgent in the coming year because of the unpredictable dairy prices we will continue to experience. The combination of high energy and feed costs, coupled with last year’s low prices, and complicated by the reduced use of rBST, is diminishing the growth of milk production at the same time that both domestic and international demand for dairy are growing.  With supply constrained and growth booming (especially the global market for proteins), prices have rebounded sharply this year in comparison with 2006.  
In fact, it’s likely that we are going to see a “new normal” pricing level for milk and other livestock products for the foreseeable future. Without a return to $30 oil and $2 corn, and with continued pressure to forgo production-enhancing tools like Posilac, we are likely to see a new dairy supply dynamic in the U.S. that limits output and keeps prices above historic norms.  
In that respect, at least, while what goes into the Farm Bill is vitally important to both producers and processors, the invisible hand of the larger market at work will ultimately decide where prices are after 2007.
Jerry Kozak is president and chief executive officer of the National Milk Producers Federation.
Top 50 co-ops marketed 140 billion pounds of milk
The nation’s top 50 cooperatives handled 142 billion pounds of milk in 2005 and collectively marketed 80 percent of the nation’s milk supply. The top 50 co-ops’ production was up about 1.69 percent from 2004, while the nation’s total production rose 3.8 percent. The top 10 cooperatives based on member milk volume are the same as last year, with one minor change. Dairylea Cooperative, Syracuse, N.Y.,  jumped into the top five, while Family Dairies USA, Madison, Wis., was bumped to sixth.  
Dairy Farmers of America, Kansas City, Mo., held strong at the top, marketing 36.7 billion pounds, 20.6 billion more pounds than California Dairies, Los Banos, Calif., finishing second on the list with 16.1 billion pounds. Land O’Lakes Inc., St. Paul, Minn., rounded out the top three cooperatives with 12.3 billion pounds. The top three co-ops combined marketed 65 billion pounds, about 37 percent of the nation’s milk.
The biggest climber on this year’s list was Zia Milk Producers Inc., Roswell, N.M., jumping five spots to No. 32, and marketing 0.219 billion more pounds than in 2004.
After dropping from the list last year, Calhoun Cooperative Creamery, Lansing, Iowa, and Hastings Cooperative Creamery Assn., Hastings, Minn., moved back onto the list at No. 49 and 50, respectively. There will be a few openings next year as Allied Federated Cooperative, No. 29, merged with Agri-Mark, No. 15,  and Upstate, No. 26, and Niagara, No. 36, also merged.
Farm numbers dropped by 2,802, about 5.5 percent, in 2005. This was offset by a 2.1-million- pound boost in milk volume per member.
Three New Mexico-based co-ops produced the most milk per member farm. Continental Dairy producers, Inc., topped the list with 66.2 million pounds per member, while Select Milk Producers was second with 50.25 million pounds. Zia Milk Producers Inc., finished out the top three with 45.786 million pounds per member farm.
Information for the 50 co-op list is provided to Hoard’s Dairyman during the summer. Each cooperative is contacted and asked to provide the previous year’s information. — Co-op information provided to Dairy Field by Hoard's Dairyman, originally published in October 2006.