Dairy farmers struggle to survive
Nobody ever said farming was easy. But for Missouri’s struggling dairy farmers, the last few years have been particularly tough.
The recession of 2008-2009 caused farm milk prices to plummet just as costs for livestock feed spiked. That wiped out our profit margin, creating a desperate struggle just to stay afloat.
Among those who survived, many piled up debts that will take years to repay.
Nationwide, dairy farmers lost $20 billion in equity between 2007 and 2009.
Here in Missouri, we lost nearly 8 percent of our cows between 2009 and 2010.
The last two years were better. But 2012 is shaping up to be another challenge, with falling milk prices and high feed costs combining to squeeze profit margins down to nothing.
In theory, the federal dairy program provides a safety net to help us through these rough patches.
In practice, it hasn’t worked for years — and for good reasons.
Much of the current safety net was designed in the 1930s, in a very different economy than the one we face today. For starters, dairy exports — which account for more than 10 percent of all the milk we produce — were virtually non-existent in those days.
Also, the current safety net focuses on propping up prices, when the problem we face most often today is tight margins.
We can have record high milk prices and still be losing money if feed prices soar.
To their credit, dairy farmers took it on themselves in the wake of the recession to modernize the system.
After a year of study, we took our ideas to Congress, where they were introduced last fall by Reps. Collin Peterson, a Minnesota Democrat, and Mike Simpson, an Idaho Republican, as the Dairy Security Act of 2011.
The Peterson-Simpson bill repeals most of the current federal dairy program and creates in its place an insurance plan focused on margins.
No longer will the government be buying up cheese and butter in an attempt to prop up farm milk prices.
Instead, federal support for dairy farmers will be triggered only when margins shrink to specified levels.
To prevent serious problems, a standby program could put temporary limits on how much milk each farmer can producer.
This is insurance for hard times, not a handout when times are good. For that reason, it saves money compared with the current program. And it won’t cause consumer dairy prices to spike, either.
The Senate Agriculture Committee endorsed the Peterson-Simpson approach late in April as part of its twice-a-decade rewrite of federal farm programs. But the bill is still a long way from becoming law.
The Missouri congressional delegation can help by endorsing the Peterson-Simpson bill now.
This is more than a fight over dairy policy.
Missouri has been losing dairy farmers for years. What’s at stake is whether we will continue to have a viable dairy industry and whether Missouri consumers can count on a plentiful supply of locally produced milk.
Dairy farming is still a $200 million business in Missouri. But Missouri milk producers need a federal dairy program that works.
Bill Siebenborn milks 100 cows on a 340-acre farm in Trenton, Mo. He is vice chairman of the board of Kansas City-based Dairy Farmers of America and chairman of both the United Dairy Industry Association and the Midwest Dairy Association.
Much of the current safety net was designed in the 1930s, in a very different economy than the one we face today. … dairy exports — which account for more than 10 percent of all the milk we produce — were virtually non-existent in those days.
Kent Mueller
11 months, 1 week agoSo, what you are saying is that you want a guaranteed profit. The government, as it shouldn’t, doesn’t guarantee margins for the grocery store.
But you are right, prices won’t spike, however, they will be permanently higher than the should be.
George Hunsucker
Northland
11 months, 1 week agoI concur with Kent’s thinking. There should be no friggin’ govt. program, with its hordes of bureaucrats involved in the dairy business. You, as an independent businessperson Mr. Siebenborn, should be able to produce in any quantity you desire, sell to anyone for a market-clearing price.
What do you think one of the major drivers to higher feed costs has been—ETHANOL—another govt. boondoggle!!!
David Foster
11 months, 1 week agoWe already have a government program… And it doesn’t work. I agree with Seibenborn. I am a dairyman from SE KS and we need a program for dairyman to produce a quality product in proportion with demand. We deserve more than what we are paid for our work and for the food we produce and for the communities we positively impact and live. There has been a continual washout of the dairy industry and too many families have gone out of business, which only should lead you to ask… Where will your dairy products come from?? We are uniquely positioned in the US to meet growing global population and food demands, but only if we stay in business. Is it fair that dairymen only get 10 cents on the dollar? Is it fair that dairymen can’t “pass on the buck” when our input prices skyrocket? Is it fair that best management practices and use of technology to be more efficient are being questioned?
This program simply offers a management tool to minimize risk. It is NOT going to make us all rich and increase grocery store prices. To top it off - the program is VOLUNTARY and some dairymen will choose not to take part.
I would appreciate your support and be glad to answer other questions.
Kent Mueller
11 months, 1 week agoDavid, you discuss dairy farmers going out of business as if that means dairy products will not longer be available. I think you understand how supply and demand works. The lesser efficient in any unprotected industry will always be at risk.
Someone has to pay you? Who do you want that to be? The consumers of your product? Or, the consumers of your product with more added in by the taxpayer. Many times insurance is a good thing in business. But, the business should pay for the entire premium.
It is usually sad, but perhaps economies of scale dictate larger dairy farms. That happens in every other business.
George Hunsucker
Northland
11 months, 1 week agoSorry Mr. Foster, you should be a businessperson wanting freedom to produce, not suck off a government teat!
David Foster
11 months agoI completely understand the “free market” mentality and would rather in a perfect world live by that. We have long been “nursing” off the government, I agree. I am a taxpayer as well and I want smaller government, more rights, not legislate away our freedoms. This program is in line with that because we are trying to “wean” ourselves from relying on direct payments due to a price floor. The fact is, if milk price gets below the current price floor, then that is way below the cost of production anyways and we are losing money. The current system doesnt work anyways. We are simply trying to replace with a better program that offers considerable budget (i.e. taxpayer) savings. Sorry Mr. Hunsucker, I do want the freedom to produce. How do you propose we get the processors and the retailers to quit taking advantage of the producer and at least give us a fair share? Are you not interested in listening to the public? They say they don’t want the complete industrialization of the ag industry, but without safeguards and risk management tools available to ALL producers, that is exactly what will continue to happen.
George Hunsucker
Northland
11 months agoI think you should be able to form a coop type structure that you sell your product to David. Then this cop sells to the processors vs. you doing it individually. The coop should have much greater bargainong expertise and more clouit with the processors vs. individuals such as yourself