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Dairy Industry Seeks Improvement Through Self-Help

posted on April 23, 2004


Fluid milk production in the United States was revolutionized with the 1994 introduction of bovine growth hormone. Sold by Monsanto under the brand name Posilac, BGH increased production by up to 10 pounds of milk per cow per day.

But that prolific output is now in doubt. Beginning March 1st, dairy farmers who had been using Posilac were allocated just half of their normal shipment. The reason? The plant where Monsanto makes the drug is being reconstructed and that will cut supplies in half through 2004.

Dairy farmers are making plans to compensate, but many welcome the shortage. Plagued by overproduction, farmers are struggling to balance supply with demand and to get a fair price for what they produce. The latest approach is an industry-generated program that's easing the way. Wayne Bruns explains.

 

Dairy Industry Seeks Improvement Through Self-Help

Inside this vacant milking parlor, Kathy Baumeister had dreams.

Kathy Baumeister: Ex-Dairy Farmer: "I loved being a dairy farmer. That's all I ever really wanted to do was to be a dairy farmer.

"I wanted my children to grow up on a dairy, to learn the responsibilities of taking care of cattle and knowing that if you treat your cattle well, they'll treat you well. And it's been just a wonderful life for our family and something that we kind of had hoped that out children would maybe carry on.

"But the reality of it is that, economically, dairy farms are not real good and I guess we did not encourage our boys to take it over for that reason."

So after having invested 30 years of their lives in the dairy business, Kathy and her husband Darrell decided it was time to get out. And in that regard, they're not alone.

The dairy industry is shrinking rapidly. In 1950, there were 3.5 million dairy farmers in the United States. Today, there are 73,000. And a recent study by Cornell University predicts an 85 percent decline in that number by 2020. Such a reduction would impact not only the structure of the industry but the already volatile relationship between supply and demand.

Jerry Kozak, President, National Milk Producers Federation: "...farmers are starting to recognize that we have to try to take control of our own destiny.

"... perhaps it isn't just government programs that we should be relying on. Perhaps we ought to take a different route..."

That route was CWT, which stands for Cooperatives Working Together. Launched last summer by the National Milk Producers Federati0n, it's a three-pronged approach to getting at the industry's burdensome problem of overproduction. By offering programs in herd retirement, export assistance and fluid milk reduction, the federation hopes to provide options that most producers find acceptable.

Organizers say a diverse program was necessary because fractious regional differences within the industry meant no single approach would work.

Jerry Kozak, NMPF: "The challenge of getting producers all across the country to agree to a program was huge. And I was convinced that we needed to have what I called a multi-dimensional program."

As of January 5th, 32,724 cows had been enrolled in the herd retirement program ... and fluid milk marketings had been reduced by an average of 17 percent nationally. That's a little more than halfway to the program's goal of removing 1.2 billion pounds of milk supplies from the domestic market through 2004.

Darrell Baumeister: "it seemed like it was fairly obvious that was the best way to exit the dairy business and the most lucrative for us..."

The Baumeisters were among the nearly 300 dairy farmers nationwide to have bids accepted for the CWT herd retirement program. Last October, the couple said goodbye to their remaining 140 dairy cows and sought other means of employment. Kathy, who was the main force behind the family dairy operation, landed a job as a meter reader for the local utility and is studying to gain her teaching certificate. Darrell continues to farm row crops on 300 acres of ground.

The family worked hard at improving efficiencies in their dairy operation, including a progressive reproduction program that placed a high premium on genetic improvement of the herd.

Kathy Baumeister: "I also attended milk marketing seminars and came up with a milk marketing plan, which was very effective, but still not a high enough price."

The CWT program offered the Baumeisters a chance to get out of dairying, pay off most of their debts, and do so without taking part in a complicated and bureaucratic government buyout program.

Kathy Baumeister: "It is run by the dairy coops of the United States and for once we are united as a dairy industry and I think that is just the most important thing about this whole program."

Indeed, the program is funded voluntarily by independent producers and by dairy cooperatives. Those groups contribute five cents per hundredweight to a National Milk Producers Federation-administered budget of $58 million. Dairy farmers whose bids are accepted into the program are paid from that account.

Jerry Kozak, NMPF President: "... there's two results that I think we're hoping for. One is to try to strengthen the milk price and to provide some stability.

"The second thing ... is much more than the milk price. It's farmers coming together, whether they're in California or in Vermont, collectively saying, 'We are a dwindling number of dairy producers.'"

Whether the CWT program fully addresses price volatility and some of the other problems plaguing the dairy industry remains to be seen. But this much is clear: the program has gone a long way toward giving dairy farmers a better sense of their own destiny.

For Market To Market, I'm Wayne Bruns.

 


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