As Crisis Rocks Dairy Industry, Farmers Focus On How To Manage Milk Supply

Aug 9, 2018

Dairy farmers in the Northeast say they're ready to talk about something that's been almost off limits for decades: how to manage the milk supply to stop overproduction.

Farmers are struggling, and a fourth year of low milk prices has driven many out of business. In response to the crisis, several hundred farmers will gather Monday for a day-long meeting in Albany, New York.

Vermont Agriculture Secretary Anson Tebbetts grew up on a dairy farm, and has seen the boom and bust cycle of milk prices for years. But these last few months have been the worst he’s witnessed.

"Something has to change. We can't continue to keep the current system in place if we're going to retain farmers." - Vermont Agriculture Secretary Anson Tebbetts

“In Vermont alone we’ve lost 66 this year. So we’re talking 8-10 percent of Vermont farmers have gone out of business this year,” he said. “Something has to change. We can’t continue to keep the current system in place if we’re going to retain farmers.”

If crisis creates opportunity, then the meeting Monday might be the best chance in years to gain support for some sort of a system to manage the milk supply, Tebbetts said.

The market now is awash in too much milk. And for economic reasons, farmers often add more cows so they can sell more milk just to keep afloat as prices fall. But it’s a vicious circle because it leads to even more over-supply. Tebbetts said there’s got to be a better way.

“Instead of when the price goes south, that you have to increase your production, this approach may be like we’re going to have incentives to not have you put on more cows [and] increase production which drops the price to the farmers,” he said.

And the region's largest dairy co-op, Agri-Mark, wants to explore supply management. Bob Wellington is its senior vice president and a dairy economist.

He said several different supply management proposals will be up for discussion next week. One is called a “base-excess” plan. It would simply pay farmers a set amount for milk produced at their historical production level – call that the base – and then anything over the base – the excess – would earn the farmer less.

“So the goal here is to try to get producers to cut production, even just 2 or 3 percent, when market prices are low,” he said.

In the past, supply management proposals have foundered on the internecine politics of the dairy industry. Farmers in states where production was expanding did not want to give up the opportunity for growth. Congress was reluctant to endorse any legislative change that might be needed. In 2013, then House Speaker John Boehner famously declared supply management as “Soviet style agriculture.”

But Wellington said all sectors of the industry are hurting, and the time might be right for a supply management system.

"The last four years have really brought producers together ... They have this common misery. And so the suffering is occurring across farm sizes, across regions of the country, across production types." Bob Wellington, Agri-Mark dairy co-op

“The last four years have really brought producers together. I mean they have this common misery,” he said. “And so the suffering is occurring across farm sizes, across regions of the country, across production types. Even organic is suffering. So we’re looking at saying `is it about time to address a problem that is hurting every dairy farm family in the nation?’”

But how the supply would be controlled, legally and structurally, has yet to be determined.

Dan Smith is a Montpelier lawyer with lengthy experience in dairy policy and law. As a lawyer for the Vermont legislature he helped craft legislation that created the Northeast Interstate Dairy Compact. Before it expired in 2001, the compact allowed the six New England states to set minimum pay prices for farmers. Smith will be on a panel to discuss legal issues at the Albany meeting.

He said co-ops and milk buyers in California and the Midwest have established base/excess system on their own, without needing a change in law.

“I’m interested to see whether the discussion that develops goes down that line, so it’s industry-business based, or whether there’s some revisiting of a government organized approach,” he said.

The Albany meeting is likely to be the first of several as the dairy industry tries to find solutions to its worst crisis in decades.