National dairy policy needs an overhaul
Dave Forgey, Logansport, is good at what he does. When he was a conventional dairyman, he raised excellent alfalfa. Now he’s a leader in grazing and seasonal dairying.
Forgey’s big concern today is in dairy policy. He fears that recommendations by the National Milk Producers Federation, made up primarily of milk co-ops, will follow down the same old path the U.S. has followed for decades.
• Dairyman believes processors need incentive to produce for export.
• Dairy farmers want to bring the dairy industry into the 21st century.
• Congress will play a role in any changes to pricing strategies.
“The problem is that when the rules we still operate under were written in the ’30s and ’40s, there weren’t many exports going overseas,” he says. In his opinion, the legislation was set up to subsidize producers through government price supports, and it still does.
“We export some milk products, but only when other countries can’t, or when our prices are much lower,” he says. That’s because processors haven’t had an incentive to make superior products, he believes. And since the U.S. still subsidizes milk, other countries typically set their price margins just below the U.S. price.
“The net result is that countries that want to import dairy products, primarily China, can buy better-quality product on a more consistent basis for less than from the U.S.,” Forgey says.
In the summer of 2009, 500 Lancaster, Pennsylvania dairy producers met to discuss tough times for dairy farmers. They formed the Dairy Policy Action Coalition, or DPAC. Find it at www.dpac.net. DPAC now has membership in 18 states. Forgey is a director.
DPAC members agree that government price supports and storage programs need to go away. The problem lies in the fact that NMPF wants to instill supply management programs and has not developed policy to encourage processors to develop products and marketing strategies that would let the U.S. compete consistently in the world market, Forgey says.
Will it play in Washington?
The 2007 Farm Bill established Section 15 to bring more transparency to the milk pricing system, Forgey adds. That order required electronic reporting of dairy prices in a more frequent time period rather than weekly reporting. It also required more frequent auditing of prices and supplies.
That program was not implemented because USDA said the $3 million cost was prohibitive, Forgey observes. His own calculation pegged the cost at $0.0016 per hundredweight of milk produced in 2009. When producers invest 15 cents per hundredweight in promotion, Forgey believes that the cost to improve price transparency would be almost nothing.
Currently, the market price is established on a very small portion of the cheddar cheese and butter traded, he notes. Today’s markets sell yogurt, pizza cheese and sports drinks, not to mention all the bottled fluid milk products not reflected in dairy pricing. It’s time dairy had a daily market similar to other farm commodities, he adds.
Forgey’s hope is that Congress will listen to DPAC and act in the farmers’ best interests. He realizes that other organizations have more clout, but he also knows that congressmen like to listen to voters from home.
This article published in the April, 2011 edition of INDIANA PRAIRIE FARMER.