presentspresents

Law and Order must be established to Law and Order must be established to the Dairy Industry’s the Dairy Industry’s

““Wild, Wild West Market Chaos” Wild, Wild West Market Chaos”

by Bryan by Bryan GothamGotham

Hermon, N.Y., Hermon, N.Y., Dairy FarmerDairy Farmer

http://128.122.253.144/T-Shirts/nanmv/wildwest.JPG

Today's Wild, Wild West Chaos Today's Wild, Wild West Chaos in the Dairy Industryin the Dairy Industry

No law and order. Farmers squirting Milk in each other’s eyes.

My Search for Law and Order My Search for Law and Order

• Unchecked markets have created high levels of Unchecked markets have created high levels of unfair lawless market Chaos. unfair lawless market Chaos.

• To survive globally we must adapt and reduce To survive globally we must adapt and reduce chaos by becoming better organized supply chaos by becoming better organized supply managers.managers.

• Milk Market Improvement Act of 2009 (S.889) Milk Market Improvement Act of 2009 (S.889) provides solutions for Law and Order. It is not provides solutions for Law and Order. It is not another band aid and it eliminates excuses.another band aid and it eliminates excuses.

ImportImportChaos Chaos

• Globalization - American dairy farms have a Globalization - American dairy farms have a resource disadvantage compared to New resource disadvantage compared to New Zealand and Australia. We cannot compete. Zealand and Australia. We cannot compete.

• The effects of Globalization must be managed The effects of Globalization must be managed because it is not going away. Today because it is not going away. Today Globalization is dominating our market and Globalization is dominating our market and history has proven it adds to volatility and history has proven it adds to volatility and mostly negative Market direction. mostly negative Market direction.

• Imports of food should be driven by need not Imports of food should be driven by need not by greed. by greed.

Imports Imports Need Law and Order Need Law and Order

• In jeopardy for consumers: food Sovereignty, food In jeopardy for consumers: food Sovereignty, food safety and food quality. safety and food quality.

• American Dairy farmers can not be responsible for American Dairy farmers can not be responsible for the worlds oversupply Burdon caused by imports. the worlds oversupply Burdon caused by imports. With order, we will be responsible for our own With order, we will be responsible for our own domestic oversupply.domestic oversupply.

• Dairy imports have grown at a rate faster than Dairy imports have grown at a rate faster than domestic production past two decades. $3 billion domestic production past two decades. $3 billion today. today.

(source: Jerry Kozak of National Milk Producers Federation)(source: Jerry Kozak of National Milk Producers Federation)

• Concentrated Imports have a higher milk equivalent Concentrated Imports have a higher milk equivalent than exports dollar for dollar.than exports dollar for dollar.

Why do we continue to Import Why do we continue to Import when we have a surplus?when we have a surplus?

Milk Protein Concentrate Imports are Higher in first quarterMilk Protein Concentrate Imports are Higher in first quarter

MPC Import Spikes have uncanny MPC Import Spikes have uncanny relationship to Class III Price Trends and relationship to Class III Price Trends and

VolatilityVolatility

Today we don’t have a Supply & Today we don’t have a Supply & Demand Challenge Demand Challenge

We have an Import Export Challenge

““Asymmetric pricing" Asymmetric pricing" Needs Law and OrderNeeds Law and Order

Wanted Symmetrical Pricing from Farm to RetailWanted Symmetrical Pricing from Farm to Retail

Our milk/retail market should Our milk/retail market should correlate like the oil/gas marketcorrelate like the oil/gas market

The Sheriff is in TownThe Sheriff is in TownS.889 – Shoots DownS.889 – Shoots Down

Asymmetric/Apex Pricing Asymmetric/Apex Pricing

• S.889 provides a stable price Based on National S.889 provides a stable price Based on National Average Cost of Production.Average Cost of Production.

• S.889 provides simple price discovery calculated by S.889 provides simple price discovery calculated by the Economic Research Service on 23 statesthe Economic Research Service on 23 states• Note: research is already conducted, no expanded Note: research is already conducted, no expanded

governmentgovernment• The price is not set by the Secretary of Agriculture it is The price is not set by the Secretary of Agriculture it is

adjusted according to changing market data compiled by ERSadjusted according to changing market data compiled by ERS• S.889 would raise on farm receipts annually from est. S.889 would raise on farm receipts annually from est.

28 billion to 42 billion if it was in place today.28 billion to 42 billion if it was in place today.• ALL Manufactured Milk Price ALL Manufactured Milk Price →→ Class II Class II • State & Federal orders and Class I Differentials State & Federal orders and Class I Differentials

remain intactremain intact

16.9316.9617.0817.7018.45 Total operating costs

0.340.340.350.350.35 Interest on operating capital

0.000.000.000.000.00 Other operating costs

0.820.830.840.850.86 Repairs

0.670.660.640.670.70 Fuel, lube, and electricity

0.670.670.680.690.70 Custom services

0.330.330.330.330.33 Marketing

0.620.630.640.650.67 Bedding and litter

1.071.081.111.121.13 Veterinary and medicine

12.4112.4212.4913.0413.71 Total, feed costs

0.150.150.150.150.16 Grazed feed

6.096.116.126.316.61 Homegrown harvested feed

6.176.166.226.586.94 Purchased feed

Feed--

MayAprilMarchFebJanOperating costs:

Pennsylvania, monthly dairy costs of production per cwt of milk sold, 2009 ERS

27.15

27.27

27.61

28.21

29.02Total costs listed

10.22

10.31

10.53

10.51

10.57

Total, allocated overhead

0.710.730.740.730.75 General farm overhead

0.350.350.360.360.37 Taxes and insurance

0.060.060.060.060.06 Opportunity cost of land

(rental rate)

3.843.883.943.863.83 Capital recovery of

machinery and equipment

4.224.264.374.424.47 Opportunity cost of unpaid

labor

1.031.041.071.081.09 Hired labor

MayAprMarFebJanAllocated overhead:

ERS Source: Based on USDA's 2005 Agricultural Resource Management Survey of milk producers and updated using current USDA milk production per cow and production input indexes.

S.889 Rebalances Profit S.889 Rebalances Profit

• S.889 provides new growth and economic policy for S.889 provides new growth and economic policy for Rural America. Rural America.

• S.889 is the Young Dairyman’s bill. S.889 is the Young Dairyman’s bill. • S.889 supports the trend towards promoting local S.889 supports the trend towards promoting local

food.food.• It secures the Homegrown food supply for National It secures the Homegrown food supply for National

Security, food sovereignty and sustainability . Security, food sovereignty and sustainability . • Farmers will have a chance to pay income taxes Farmers will have a chance to pay income taxes

and contribute to this economy.and contribute to this economy.• S.889 rebalances the profit back to small business S.889 rebalances the profit back to small business

from “Big Food”. from “Big Food”.

To Reduce Import Chaos To Reduce Import Chaos S.889 uses a S.889 uses a

Carrot Carrot • S.889 balances the responsibility for the S.889 balances the responsibility for the

over supply from Globalization between the over supply from Globalization between the farmer and manufacturer. farmer and manufacturer. To take To take advantage of the guaranteed advantage of the guaranteed market funded by farmers market funded by farmers imports must be less than imports must be less than exportsexports.. This puts responsibility on This puts responsibility on manufactures for over production caused by manufactures for over production caused by excessive imports. excessive imports.

S.889 provides Farmer S.889 provides Farmer Funded Supply ControlFunded Supply Control

• When needed, the Supply Management is two tiered. The first When needed, the Supply Management is two tiered. The first tier is funded by all farms on up to 5% of milk on up to 50% tier is funded by all farms on up to 5% of milk on up to 50% of the class II price. The overproduction base on the second of the class II price. The overproduction base on the second tier and it is a tier and it is a Temporarily Active Base.Temporarily Active Base. I I personally am not in favor of a permanently active base.personally am not in favor of a permanently active base.

• The S.889 oversupply production base is only used as a last The S.889 oversupply production base is only used as a last resort to control supply. You can produce all the milk you resort to control supply. You can produce all the milk you want but only get paid for what the market needs when there want but only get paid for what the market needs when there is an extreme oversupply. is an extreme oversupply.

• Each tier has the potential of generating a Billion dollars to Each tier has the potential of generating a Billion dollars to rebalance supply. rebalance supply.

• S.889 treats all farms sizes equally on both tiers.S.889 treats all farms sizes equally on both tiers.• Food pantries, School lunch and other food programs benefit Food pantries, School lunch and other food programs benefit

from the Dairy Farmers Abundance.from the Dairy Farmers Abundance.

Less Government, Less Government, Taxpayer $avingsTaxpayer $avings

• The cost of S889 would be minimal since it would use existing The cost of S889 would be minimal since it would use existing entities such as ERS, Market Administrators, FSA and FAS. entities such as ERS, Market Administrators, FSA and FAS. Much of the required data collection is already being done or Much of the required data collection is already being done or could be done with little additional expense. could be done with little additional expense.

• Support Program will be obsolete. Products are purchased at Support Program will be obsolete. Products are purchased at the market not support. the market not support.

• MILC Program eliminated.MILC Program eliminated.• All current Government food program obligations remain in All current Government food program obligations remain in

effect like WIC.effect like WIC.• S.889 was written by farmers and not Government. S.889 was written by farmers and not Government. • Our Government’s role changes and finally brings Law and Our Government’s role changes and finally brings Law and

Order to the greed and corruption that has wiggled into our Order to the greed and corruption that has wiggled into our market.market.

Adapting to Globalization to Adapting to Globalization to SurviveSurvive

• We need a new Business Attitude. We need a new Business Attitude. • Common sense, law and order is needed to prevent Common sense, law and order is needed to prevent

the damage for everyone involved. We must think the damage for everyone involved. We must think like other small business (retail stores) managing like other small business (retail stores) managing their inventory surpluses.their inventory surpluses.

• I Argue we can still be American Dairymen that I Argue we can still be American Dairymen that strives to be above average.strives to be above average.

• To compete globally, we must become organized To compete globally, we must become organized supply managers rather than chaotic supply supply managers rather than chaotic supply managers. We must swim together or we all will managers. We must swim together or we all will sink together. sink together.

Trade Issues?Trade Issues?

• Is S889 consistent with the U.S.’ WTO Is S889 consistent with the U.S.’ WTO obligations?obligations?Since the supply management is farmer funded, the Since the supply management is farmer funded, the main target is domestic supply and demand. main target is domestic supply and demand. Therefore, the legislation does not rely on Therefore, the legislation does not rely on government subsidies allowing us to believe it is government subsidies allowing us to believe it is consistent with the US’ WTO obligationsconsistent with the US’ WTO obligations..

• Will S889 require changes to the current Will S889 require changes to the current tariffs and quotas pertaining to imports of tariffs and quotas pertaining to imports of dairy products into the U.S.?dairy products into the U.S.?No changes in current tariffs and quotas would be No changes in current tariffs and quotas would be required under this legislation.required under this legislation.

Dairy Da’J’a Vu

1982 Changed Farm policy started the Wealth Transfer

From Rural America

The Big HurdleThe Big HurdleHow do we Get this Done?How do we Get this Done?

• ““United States Dairy Farmers & Friends” a new Grassroots political United States Dairy Farmers & Friends” a new Grassroots political force. usdairyfarmers@yahoo.comforce. usdairyfarmers@yahoo.com

• Represents the silent majorityRepresents the silent majority• Low cost lobbying using farmers and interested volunteersLow cost lobbying using farmers and interested volunteers• Goals are oriented toward building unity between farmer and dairy Goals are oriented toward building unity between farmer and dairy

consumer interests. We have built relationships with “Food consumer interests. We have built relationships with “Food Democracy Now” a Consumer Group on the cutting edge of lobbying.Democracy Now” a Consumer Group on the cutting edge of lobbying.

• Lobbying specifically for Dairy farmers and Dairy Consumers onlyLobbying specifically for Dairy farmers and Dairy Consumers only• Uniting Dairy Farmers across country by using internet technology, Uniting Dairy Farmers across country by using internet technology,

communication and a name that we can all belong to.communication and a name that we can all belong to.• Today we endorse S.889 for its Solutions. We are open to other Today we endorse S.889 for its Solutions. We are open to other

solutions that correct the challenges before us. However, today solutions that correct the challenges before us. However, today farmers are running out of time.farmers are running out of time.

S.889 In Summary S.889 In Summary

• New Non corrupt Price DiscoveryNew Non corrupt Price Discovery• Processors have incentive to Curb Processors have incentive to Curb

Imports when there is oversupplyImports when there is oversupply• Farmers have new signals to reduce Farmers have new signals to reduce

supply instead of having milk price supply instead of having milk price disastersdisasters