Root cause of milk price crash studied

By Sharon Kiley Mack, BDN Staff
Posted March 30, 2009, at 10:07 p.m.

AUGUSTA, Maine — Maine dairy farmers are joining their colleagues across the country in rebutting claims that a glut of milk is causing the current milk price collapse. They are instead blaming a broken dairy pricing system and massive imports as the root causes.

Milk prices crashed this year to nearly Depression-era levels, with Maine farmers getting less than $12 per hundredweight for milk that costs them more than $22 per hundredweight to produce.

“Simple overproduction myths cannot be held accountable for the 50 percent reduction in milk prices to the farmer,” Julie Marie Bickford, executive director of the Maine Dairy Industry Association, said this weekend. The association represents Maine’s 330 dairy farmers.

Statistics from the U.S. Department of Agriculture show that more than 4.2 billion pounds of dairy products were imported in the U.S. last year, not including powdered milk protein concentrates and other milk proteins. That amount equals 230 tanker truckloads of milk imported every single day in 2008.

“Those ag economists and others who are falsely accusing dairy farmers of overproducing milk and stating we have too large a supply of dairy products as a way to justify these ruinous low prices couldn’t be more wrong,” Paul Rozwadowski of the National Family Farm Coalition said earlier this month. “Until we deal with the reality of a broken pricing system, massive imports and corruption in our dairy cooperatives, we will never be able to obtain fair prices for farmers that cover our cost of production.”

Bickford agrees with coalition’s assumptions.

“NFFC raises legitimate issues in identifying the root of the problem with dairy — that the federal system is failing Maine and U.S. farm families,” Bickford said. “If the system looked at regional cost of production and supply and demand, we would see a dynamic much different than today’s crisis.”

Bickford said that a positive step was taken last week when the USDA finally acknowledged that farmers are in a crisis.

“But, by failing to address the root of the problem they are condemning U.S. farmers to a system susceptible to manipulation at the expense of the dairy farms, and an almost certainty that farmers will be able to count on more economic downturns in the future,” Bickford said. “Until Washington takes formative action to realign the imbalance between sectors of the dairy industry, this cycle of farmer demise and short term Band-Aids — masquerading as final solutions — will concentrate more milk production in fewer places farther away from the consumers to the detriment of our rural communities.”

In Maine, a unique state subsidy program has helped dairy farmers weather the ups and downs of the federal pricing system. The program, called the Maine Dairy Stabilization Tier Program because it varies depending on farm size, was set up in 2003, but with enormous state budget deficits, the future of the program is unclear.

The payments vary, depending on the market price, and in its first year, the tier program paid out $1.1 million, according to MDIA. But when prices crashed in 2006, nearly $11 million was paid to Maine farmers.

Already in January and February of this year, $4.7 million was spent.

The Legislature’s Agriculture, Conservation and Forestry Committee has proposed suspending subsidy payments for the month of June to help balance the budget, but an estimated $1 million shortfall still needs to be addressed.

Although Bickford and other Maine dairy leaders say the program works to help Maine’s farmers, they also are working to change the federal pricing system that causes the massive ups and downs.

NFFC has long argued that the dairy pricing system was prone to manipulation due to thinly traded markets at the Chicago Mercantile Exchange, which determine farm milk price. Last December, the Commodity Futures Trading Commission fined Dairy Farmers of America, the nation’s largest dairy cooperative, $12 million for price manipulation. The Department of Justice has also launched a two-year antitrust investigation into Dairy Farmers of America and its partners Dean Foods and National Dairy Holdings.

According to a report issued recently by NFFC and created by John Bunting, a New York dairy farmer, imports of nonfat dry milk, milk protein concentrates, which never have been approved by the FDA, caseinates and casein, butter and cheese all increased in 2008 compared with 2007, and at the same time consumer demand for dairy products also increased.

The report said the U.S. continued to import massive amounts of dairy products even as milk prices began to slide for farmers late last year. Milk prices have nothing to do with market demand and are based on the price of cheese traded at the Chicago Mercantile Exchange.

Maine farmers agree with NFFC’s stance that the only way to ensure the survival of the country’s dairy industry is to reform the pricing system.

Meanwhile, farmers are closely watching a proposed change that would allow even more dairy imports to replace U.S. milk production.

FDA is considering an industry proposal to change the “standard of identity” of yogurt to allow for the use of milk protein concentrates, according to Food & Water Watch, a nonprofit consumer organization that works to ensure clean water and food.

“This change would mean that even while U.S. dairy farmers are facing historically low prices, more of their milk could get displaced by imports, and that consumers will be faced with this unregulated ingredient in yet another food,” Sarah Alexander at FWW said this week.

Milk protein concentrates, or MPCs, are created by putting milk through an ultra-filtration process to remove all of the liquid and all of the smaller molecules, including the minerals. What is left is a dry substance that is very high in protein and used as an additive in products such as processed cheeses, frozen dairy desserts, crackers and energy bars. Because the concentrates are a dry powder, they can be shipped long distances very cheaply, and almost all of the dry MPCs used in America are imported from countries that subsidize their production.

“MPCs have never been tested enough to make the list of food ingredients FDA considers to be safe,” Alexander said.

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http://bangordailynews.com/2009/03/30/news/root-cause-of-milk-price-crash-studied/ printed on July 26, 2014