Milk Producers Council
"Serving
the Dairy Industry for more than 60 Years"
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Welcome to the official website of Milk Producers Council! MPC is a nonprofit organization representing dairy families throughout California. For the past 60 years, our staff and board of directors have been working on behalf of our members on issues such as milk pricing formulas, environmental regulations and any other local, state or federal issues facing dairy families today. We hope you find this site useful and informative. If you have any questions about MPC and the work we do, please contact us at (909) 628-6018 or by email at office@milkproducers.org.
MPC News Click HERE to read the August 27th edition of the MPC Newsletter (Includes current commodity price information) Dairy Cares has published their July 2010 monthly column. Check it out HERE.
An Article Worth Another Read... Continuing to Delve
into the Details of the DPSP This newsletter continues to commit a lot of space looking at the details of H.R. 5288 and S. 3531. One of the criticisms of the bill is directed at the fact that it is a program that relies on government involvement. I can certainly relate to the anti-government sentiment behind these arguments. Our dairies already face strict government regulations – in how your milk is priced, how you treat your animals, and in how you manage your air and water resources. So the thought of any more government involvement is understandably enough to raise serious questions. On that note, this article will take a look at what additional powers the government (USDA) would actually have if we were to implement H.R. 5288/S. 3531. If you want to see for yourself what the bill would and would not do (rather than letting the critics define the bill for you), the actual bill text can be found at www.stabledairies.com. Click HERE to read the full article.
An Article Worth Another Read... The Fee is Temporary;
The Dividend Is Permanent As regular readers of this newsletter know, MPC continues to work hard to promote the “Dairy Price Stabilization Act of 2010,” which has been introduced in the U.S. House and Senate as H.R. 5288 and S. 3531, respectively. We’ve written numerous articles about the details of these two bills (all of which can be found on our website at www.milkproducers.org). Yet I am constantly reminded that there are many folks that still don’t fully understand the bill. Today, I want to focus on a basic premise in the bill: “THE FEE IS TEMPORARY; THE DIVIDEND IS PERMANENT.” Click HERE to read the full article.
An Article Worth Another Read... BREAKING NEWS! U.S. Senator
Bernie Sanders Joins Two of His Fellow Senators In Introducing S. 3531, the
“Dairy Price Stabilization Act of 2010” Yesterday, Senator Bernie Sanders (Vermont) introduced S. 3531, the “Dairy Price Stabilization Act of 2010.” Joining Senator Sanders in co-sponsoring the legislation were Senators Patty Murray (Washington) and Patrick Leahy (Vermont). S. 3531, which can be found on www.stabledairies.com, is virtually identical to the legislation introduced last month in the U.S. House of Representatives by Reps. Jim Costa (California), Peter Welch (Vermont), Rick Larsen (Washington), Joe Courtney (Connecticut), and John Larson (Connecticut). That bill, H.R. 5288, is also titled the “Dairy Price Stabilization Act of 2010.” “The introduction of this legislation in the U.S. Senate is a huge step forward for the dairymen and organizations who have been working on the ‘Dairy Price Stabilization Program’ for more than a year,” said Rob Vandenheuvel, General Manager of MPC. “After almost two years of devastating losses by our nation’s dairy farmers, the industry greatly appreciates the leadership of these three Senators in introducing S. 3531 and bringing this much-needed industry dialogue to the halls of the U.S. Senate." Click HERE to read the full article.
An Article Worth Another Read... Why The Dairy Product
Processors Are Opposed To H.R. 5288 Over the past month, this newsletter has taken a look at various aspects of H.R. 5288, the “Dairy Price Stabilization Act of 2010.” If you missed any of those articles, you can find them on www.milkproducers.org. Today that series continues with a closer look at the politics of H.R. 5288 – specifically, why are the processors so opposed to the bill? Click HERE to read the full article.
Press Release Milk Producers Council Responds to Outrageous Comments by IDFA's CEO CALIFORNIA – Milk Producers Council was outraged by comments made this past week by Connie Tipton, the CEO of the International Dairy Foods Association (IDFA), the main lobbying wing in Washington, DC for the nation’s dairy product processors. Ms. Tipton gave a speech on June 16th at a Washington, DC conference, which was printed on the IDFA website and was entitled, “Drawing a Line in the Sand against Supply Management.” The speech offered sharp criticism towards efforts within the dairy farmer community to develop a better tool for better balancing the production of milk with the consumption. Ms. Tipton’s full speech can be found at: http://www.idfa.org/news--views/details/4848. “Coming from a representative of our nation’s processors, these comments should anger every dairy farmer across the country,” said Rob Vandenheuvel, General Manager of Milk Producers Council. “As an industry, dairy farmers have gone to great lengths to provide our processors with opportunities to profitably operate. With virtually guaranteed profit margins in the form of ‘make allowances’ and a government price support program that guarantees a buyer for some of their products even when dairy markets collapse, processors have been largely insulated from market risk. “So why would IDFA, representing many of these processors whom dairy farmers have protected for so many decades and continue to protect, be so strongly opposing efforts to maintain better balance between the production of milk by our farmers and the demand for that milk? It’s simple: these processors want to control the supply of milk and ultimately control the dairy farmers.” Click HERE to read the full press release.
An Article Worth Another Read... Part Two of a Series
Delving Into H.R. 5288, the "Dairy Price Stabilization Act" Last week in this newsletter, you were all introduced to a new piece of legislation, H.R. 5288, the Dairy Price Stabilization Act of 2010. This bill was introduced by Rep. Jim Costa (Fresno) and four of his fellow Congressmen from around the country, and would implement a program we’ve been talking about for quite some time, the Dairy Price Stabilization Program. If you missed last week’s issue, you can find the article at: http://www.milkproducerscouncil.org/051410_dpsa.htm. While last week’s article summarized what the bill IS, this week’s article is aimed at explaining what this bill IS NOT. In this political era, where buzzwords like “amnesty” and “socialism” are used to shape the debate on various legislative proposals, H.R. 5288 is no exception. One of the most frequent claims by critics of the legislation is that it’s akin to the Canadian quota system – a program that aims to maintain a high value of milk by severely limiting any growth in their milk production. In that system, dairy farmers are assigned a quota, and the only method of increasing your share of the market is to purchase additional quota from a fellow dairymen, which has resulted in extremely high values being attached to that quota; the current cost of buying that quota is reportedly around $30,000 per cow. Not only does that type of program create a huge barrier to any kind of real growth in the industry, but it also locks up a tremendous amount of money in the value of their quota, preventing that money from being invested in improvements and developments in the industry. It essentially puts the Canadian dairy industry in a “straightjacket.” Clearly, a system structured like that would have tremendous opposition in the United States, including opposition from Milk Producers Council. For years, that type of system has been the de facto definition of “supply management” in the dairy industry, and regardless of the economics of the dairy industry, there has always been (and continues to be) broad objection for putting our industry in a straitjacket like that. Before explaining how H.R. 5288 IS NOT comparable to the Canadian quota system, let me first remind the readers what H.R. 5288 does: Click HERE to read the rest of the article.
An Article Worth Another Read...
H.R. 5288, the "Dairy Price Stabilization Act of 2010,"
Has Been Introduced in the House of Representatives! This past week, Representative Jim Costa (Fresno) and four of his colleagues in the House of Representatives introduced H.R. 5288, the Dairy Price Stabilization Act of 2010. In short, the legislation would create a tangible financial incentive for all U.S. dairy farmers to better manage their growth in milk production. Also co-sponsoring the bill are Reps. Peter Welch (Vermont), Rick Larsen (Washington), Joe Courtney (Connecticut) and John Larson (Connecticut). The text of the bill and summaries can be found at www.stabledairies.com. H.R. 5288 is the product of several years of work in developing a production management program that allows our nation’s producers to continue growing to meet our increasing demand for dairy products, while at the same time creating a financial incentive that will help ensure that not all 65,000 producers expand their production at the same time, collapsing the value of milk and dairy products every few years, as our producers have become painfully familiar with. Click HERE to read the full article.
An Article Worth Another Read...
The Dairy Price Stabilization Program: Bringing it Back to Basics Since the Spring of 2007, Milk Producers Council has been publicly advocating for a program that would give dairies an incentive to manage their growth in milk production. The program has been called several things – Refundable Assessment, Growth Management Plan, and Dairy Price Stabilization Program – but the concept remained the same. The basic idea is that given the system of pooling we have in the U.S. where producers are paid the same for the last gallon of milk produced as the first, dairies have an inherent incentive to produce as much as possible, regardless of the market demand for dairy products. This reality means that anytime we have balance in supply and demand (which results in a profitable price), every dairy across the U.S. has the incentive to produce as much milk as possible to “chase” that profit. And given how quickly our industry can ramp up milk production, the response to profitable prices is an immediate and rapid increase in production. Since we have no effective tool to get supply back in line with demand, we go through month after month of devastating losses, which eventually result in the necessary production decreases that get our milk supply back in line with demand. This drives the milk price back up and starts the whole process over again. That’s the “boom” and “bust” you’ve been feeling over the last ten years, getting progressively worse with each “bust.” Click HERE to read the rest of this article.
An Article Worth Another Read...
The Dairy Safety Net: Mend It, Don’t End It Dairy producers are in terrible shape right now. Clearly, the government’s current dairy safety net is not working as it should. On September 21, National Milk Producers Federation put out a press release informing the rest of us that they are working on “sweeping changes” to the structure of the dairy industry as we know it. They are proposing eliminating the support price program and the MILC program and replacing it with a still undefined “revenue insurance” program, as well as essentially deregulating class II, III and IV in the federal order program and replacing that with a “competitive pay price” as the class I mover. In fairness to National Milk, we will let them flesh out their proposal before we make any substantive comments on it but the question for today is can the current program be fixed. Click HERE to read the rest of this article.
An Article Worth Another Read... Transferability of "Bases" -
A Hot Topic for the Dairy Price Stabilization Program As the readers of this newsletter are well-aware, there is a growing debate throughout the country about what we can do to address the massive milk price volatility that has become commonplace in the dairy business. An idea gaining national support amongst producer groups is the Dairy Price Stabilization Program, or the DPSP. MPC has been promoting the DPSP for quite some time, and one recurring question that comes up is, “why doesn’t the program allow for full transferability of a dairy’s ‘base’?” Click HERE to read the rest of this article.
An Article Worth Another Read... Are Dr. Sexton's
Arguments Credible? It’s been a more than a month since I’ve written in this newsletter with any detail about the Dairy Price Stabilization Plan. However, behind the scenes there has been much activity. The U.S. dairy industry is in the midst of a national debate. Everyone – from producers to processors – recognizes that the growing milk price volatility that has become commonplace in our industry is extremely harmful. However, when it comes to potential solutions, there is a battle of ideas and ideologies circulating. While the Dairy Price Stabilization Program (or DPSP) has been garnering more and more support amongst dairy producers, there has been an effort by some to discredit the idea. I’ve published several “Frequently Asked Questions” and responses in this newsletter in an effort to foster real debate over the issues that have been raise (these and more information can be found at www.milkproducerscouncil.org/gmp.htm). But recently, those opposing the DPSP have enlisted a new spokesman – Dr. Richard Sexton. Click HERE to read the rest of this article.
An Article Worth Another Read...
Cornell University Report Highlights the Continuing Threat of
Milk Price Volatility This week, Cornell University’s Program on Dairy Markets and Policy released the full report on their analysis of the Growth Management Plan. Drs. Mark Stephenson and Chuck Nicholson included an expansive discussion of milk price volatility and how it has gotten dramatically worse with each boom/bust cycle. The readers of this newsletter have heard it before, but it bears repeating: volatility is undoubtedly the single largest threat to this industry. This year is shaping up to be the worst year ever experienced by those currently in the dairy business. There’s no way to sugarcoat it – this year , dairy farmers will collective take billions of dollars in equity built up over the decades they’ve been in business, and convert it into bank loans. There will be some producers that decide to get out of the industry – either by choice or by force. And while that is extremely unfortunate, the real question I’m asking today is aimed at those who are staying in: With the massive boom/bust cycles that have become common in this industry, how do you plan to build your equity back up? And with the banks feeling the pain in this wreck, are they going to be there for you the next time to get you through that wreck? Sure, there will be profitable times once we come out of this wreck, and Cornell’s model predicts that as well. But are the good times going to be long enough to make up for the massive hemorrhaging of equity that is currently taking place? Are your pockets really deep enough to not only survive this wreck, but survive the next one as well? Click HERE to read the rest of this article.
An Article Worth Another Read... A Big Week for the Growth Management Plan This week brought some very big developments in our continuing efforts to build national support for a program like the Growth Management Plan (GMP). As I’ve reported in our newsletter in recent weeks, the Holstein Association USA has taken the concept of the Growth Management Plan, added some additional detail and unveiled it as the “Dairy Price Stabilization Program” (DPSP). A summary of the DPSP can be found on their website at: http://www.holsteinusa.com/association/dairyprice.html. Like the GMP, this program would create a tangible, financial incentive for dairies to manage their milk production. This simple incentive would give dairymen a reason to manage how much milk is going into their tanks – something that most dairymen across the country have no incentive to do. The involvement of the Holstein Association in this discussion is a tremendously positive development, as they represent 30,000 members from every dairy area throughout the U.S. At the MPC board meeting this week, our board voted unanimously to support the efforts of the Holstein Association and work together to build national support for the DPSP. Another huge development this week was the announcement by National Milk Producers Federation that they are setting up a task force that will, among other things, examine proposals like the Dairy Price Stabilization Program. NMPF is a national leader in the dairy industry, and having them engaged in this debate is a huge step forward. If you haven’t already seen their press release, you can find it on their website: http://www.nmpf.org/latest_news/press_releases/task_force051109. According to a letter this week from DFA President and CEO Rick Smith to his members, the DFA corporate board is also setting up a task force to look at “supply management/price stabilization programs and policies.” As the largest cooperative in the U.S., DFA carries tremendous power in our industry. With that power comes tremendous responsibility. It is extremely encouraging to see them actively involved in exploring these proposals that would address the fundamental problem of milk price volatility. And finally, today a group of producers from the northeast U.S. – Dairy Farmers Working Together – formally announced their support for the Dairy Price Stabilization Program. You can read the press release on their website: http://www.dfwt.org. Across the country, the long-term future of the dairy industry is being mapped out as we speak, and California’s industry leaders need to be engaged in this process. Every producer in California ought to be calling their co-op and trade association leadership and asking them what they are doing to address the single largest threat to this industry – massive boom/bust volatility in our milk price. Our leadership needs to hear from you, the producers.
May 1, 2009
Major Development for the Growth Management Plan This week, the Holstein Association USA, which boasts 30,000 members nationwide, unveiled the “Dairy Price Stabilization Program.” This program is virtually identical to the Growth Management Plan (GMP), which readers of this newsletter have been hearing about for quite some time (and for those that haven’t, I would encourage you to check out http://www.milkproducerscouncil.org/q&a_gmp.htm). Like the GMP, the “Dairy Price Stabilization Program” would create a tangible financial incentive for dairies to manage the amount of milk they produce, thereby keeping a better balance of supply and demand (more information on the “Dairy Price Stabilization Program” will be provided in upcoming articles). MPC is extremely excited about this development, and supports the work of the Holstein Association. The opportunity to make positive changes to our national dairy industry is upon us, and folks throughout the country are recognizing that. As I wrote in our newsletter last month, MPC has been meeting with producer groups from all over the U.S. and there is increasing momentum for implementing a program like what MPC and the Holstein Association are promoting. Our leadership in California needs to be engaged in this debate. An industry task force that MPC President Syp Vander Dussen serves on is meeting next Monday (May 4th), and I would urge the task force members to move quickly and come up with industry recommendations. We have a window of opportunity for rallying the dairy industry around positive change and we just don’t know how long it will last. We have all seen the short memories this industry tends to have. So whether our industry leaders support the Growth Management Plan or not, it is time to take a position. Because one thing is abundantly clear: if we do nothing, we are guaranteeing ourselves that at some point in the near future, we’ll be right back on the losing end of this extremely volatile milk price.
April 17, 2009 A Closer Look at the
Growth Management Plan While the GMP is nothing new for the regular readers of our newsletter, the current economic condition of the dairy industry warrants a fresh look at this simple and achievable policy proposal. As a reminder, the presentation made by Dr. Chuck Nicholson from Cornell University on their analysis of the GMP can be found at http://www.milkproducerscouncil.org/021909gmp.pdf. First and foremost, what is the Growth Management Plan (GMP)? The GMP is a proposal that would create a national program that fundamentally changes the inherent incentives in the U.S. dairy industry that promote constant production growth regardless of the market’s ability to absorb that growth. Why should we be considering a Growth Management Plan? Dairymen are no different from any other businessmen – they respond to incentives. What incentives currently exist in the highly-regulated dairy industry? The incentive to grow, grow, grow. Every morning, dairymen across the country wake up with one question in mind – how do I get the most amount of milk into my tank? There is little or no thought about the market demand for the milk you are producing. While this type of produce, produce, produce mentality makes a lot of sense to individual dairymen, it makes absolutely no sense to the dairy industry as a whole. Producers need to realign the incentives in our industry and the GMP would do this. The proposal would create a real, tangible, financial incentive for dairy producers to watch and manage the amount of milk that goes into their tanks. Click HERE to read the rest of the Q&A. And if you have a question comment of your own, please email it to gmp@milkproducers.org. We want to hear from you!
February 20, 2009 Cornell University Releases Updated Analysis
of the Growth Management Plan This week, the Cornell University Program on Dairy Markets and Policy (CPDMP) released an updated economic analysis of the Growth Management Plan (GMP). The analysis was done by Drs. Mark Stephenson and Chuck Nicholson. If you recall, the Growth Management Plan is a concept conceived by Milk Producers Council in the Spring of 2007 (at a time when the dairy industry was nearing the end of the devastating economic wreck of 2006) as a tool to minimize the massive volatility in the national milk price. The program creates a financial incentive for dairy producers throughout the U.S. to manage their milk production. CPDMP originally analyzed the program in April 2007, and their analysis showed that if implemented, the GMP would be effective in minimizing the volatility that seems to be getting worse with each cycle. With U.S. dairies again facing massive losses in equity, MPC recently asked CPDMP to once again analyze the program. Drs. Stephenson and Nicholson were able to model how the program would react to certain price "shocks," such as the rapid escalation of feed costs and the sudden loss of demand due to the world economic slowdown. Their updated analysis showed that in fact, the program would be very effective - not only in minimizing the volatility during "normal" times, but also in recovering from "shocks" like the economic slowdown much more quickly. On February 19, 2009, Dr. Nicholson presented the results of CPDMP's analysis at an industry forum hosted by Western United Dairymen in Modesto. Producer response at the forum was very positive, and MPC will continue to work with our fellow industry groups to promote this simple, yet effective program. You can see Dr. Nicholson's powerpoint presentation by clicking HERE.
An Article Worth Another Read... Was This Wreck Predictable? You Be The
Judge Almost two years ago, on April 27, 2007, Geoffrey Vanden Heuvel published an article in this newsletter entitled, “Staying Profitable – An Idea.” The article opened with the following introduction: “The dairy industry has gotten into a Boom and Bust cycle, which is getting increasingly violent with every passing turn. We had a downturn in the year 2000 and recovered in 2001. We had a downturn in 2003, that was, at least for me, twice as severe as the year 2000 downturn. We recovered in 2004/05 and went into another downturn in 2006, which we are just starting to recover from in 2007. The approximately 16 months of downturn in ‘06 and early ‘07 has been twice again as severe in terms of equity lost as was the 2003 downturn. Realistically we are probably looking at about 12 - 24 months of prosperity before we go back into the soup again. If nothing changes it is likely that the 2009 downturn will be horrific.” (Geoffrey Vanden Heuvel, 04/27/2007) Fast forward to now. As you can see above, Fred Douma is projecting the January overbase price to be $10.40 – a level not seen since the summer of 2006. And while the milk price may be at the same level as it was in 2006, the cost of production has jumped from the $12-$13 per cwt range to the $17-18 per cwt range since then. It’s fair to say that Geoffrey’s prediction two years ago that 2009 would likely be even worse than 2006 has now painfully become a reality. Click HERE to read the rest of this article.
An Article Worth Another Read... Discussion Continues on a Possible California
Federal Order This week, MPC Vice-President Geoffrey Vanden Heuvel was interviewed on DairyLine Radio on the growing discussion regarding a possible California Federal Order. Below are some excerpts from the radio interview:
DairyLine also published a written article following the interview which noted that "Western United Dairymen has notified DairyLine that they will hold industry wide meetings for California dairy producers and processors in February to present an in depth analysis of the federal order issue." The interview can be heard by clicking HERE.
An Article Worth Another Read... More Thoughts on a Possible California Federal
Order In the past few issues of this newsletter, we have laid out some of the arguments for why California should seriously consider developing a California Federal Milk Marketing Order (FMMO). As we’ve explained, it is truly the ONLY way we can recapture the class 1 revenue we are currently losing to out-of-state milk. CDFA recently reduced our class 1 price by $0.35 per cwt in an apparent attempt to slow down that milk coming from out-of-state. But will that price reduction slow down that milk and bring any additional class 1 processing capacity back to the pool? Absolutely not. The only thing that hearing decision accomplished was taking almost $2 million a month from producers, gift wrapping it, and giving it to the class 1 processors in the state. It bought us absolutely no additional processing capacity. How much further are producers willing to slash our milk price in an effort to cling to what’s left of our class 1 market? Despite the undeniable arguments in favor of developing a California FMMO for the industry to consider, there are some in the industry that have doubts. A number of questions have been raised regarding a possible California FMMO, and I’d like to respond to a few of those today. Click HERE to read the Q&A printed in the December 26th issue of MPC's newsletter.
An Article Worth Another Read... More Comment on "The Magic of Pooling" Syp Vander Dussen, in his outstanding articles the last couple of weeks, explained the “magic of pooling” concept. He wrote, “If I produce one extra load of milk, which of course will go to powder (and possibly to the CCC), it will have a value of less than $10 to the pool, but I will receive a blend value of approximately $16.00 cwt for that load. But remember, the income to the pool bucket is about $10.00! That $6.00 loss is shared by all! Stated in again another way, it is in the best interest of every producer to produce as much milk as he can, always, because the lower value for that excess product is borne by everyone.” What Syp is pointing out is the fatal flaw in our milk pricing regulation: the price risk associated with increased production is not borne directly by the person making the production increase; it is transferred to the group at large. Basic economics tells us that supply and demand for any product is kept in balance by each individual participant’s calculation of risk verses reward. The “magic of pooling” transfers the risk to the entire group and the individual is left with the “reward.” Because of this reality, it is perfectly rational for each individual producer to grow production indiscriminately, while at the same time it is obviously irrational for dairy farmers collectively to produce more milk than can be profitably marketed. Click HERE to read this full article.
An Article Worth Another Read...
My View on Milk Production Increases The dairy industry in California continues in its addiction of over-production of milk. Dairy producers seem to have only one clear focus; produce more milk. As costs go up, as milk prices decline, we produce more milk. As coops battle to place milk and milk products, we produce more milk. With 3x milking, rBST, advancing genetics, gender-specific semen, we produce more milk. In a perfect world, where the milk we supply and the demand for those products remained somewhat in balance, this would be a strong sign of a vibrant and healthy industry. But the reality is, dairymen produce in an unrestrained fashion with no consideration of demand, leaving the industry in a perpetual state of overproduction which causes a myriad of problems, all of which should be unnecessary. Click HERE for the rest of the article.
An Article Worth Another Read...
Some Background About the CME and How It Works Not a week passes without reference to what has happened to Cheddar cheese and butter prices (and occasionally, nonfat dry milk prices) on the CME. It’s important to follow those prices because they are the most current indication of changes in cheese and butter prices – two of the major three products that are used in milk price formulas in California and federal orders, and (we are told) by plants in unregulated areas that compete with plants that are regulated. Click HERE to read more about the CME and how it works.
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