Baby Needs a Bottle and Mama needs a Satchel…

The Associated Press is reporting today (February 3, 2010) that "Only months ago, dairy producers were slaughtering an average of 50,000 dairy cows a week because a milk glut made it impossible to sell their milk for what it cost to produce." (See Full Story here) And one article on line has headlined it as "Milk price for US dairy farmers nudges upward, boding well after devastating losses of 2009".

The group that masterminded this “retirement program for cows” was The National Milk Producers Federation (read US Dairy lobbyist) that runs Cooperatives Working Together (CWT), a program that pays dairy farmers to have their cows slaughtered. It appears the plan was to have the farmers pay into a fund that would in turn begin reducing the herds when the market was over saturated. As usual with lobbyists, it doesn’t appear that the small business owner (the front line milk producer) will reap the same appreciable benefits as the lobby group themselves.

In late 2008 through a letter exchange discussion between the Milk Producer Council (MPC) and NMPF, it was noted that the CWT was receiving over 10 MILLION dollars a month in support of the “retirement” project – most from the dairy farmers themselves who assumed they were doing a good thing to help combat the volatile commodities market. NMPF was asked to authorize another herd retirement program and to produce an accounting of the funds that they had received.

The letter was addressed to the president and the general manager of the Milk Producer Council and states:

“Thank you for your letter of September 18, 2008 to Charles Beckendorf. Charles has asked that I respond on his behalf. While we appreciate your efforts to make the CWT program as efficient and effective as possible, I find it necessary to clarify certain assumptions contained in your letter. First, it is important to understand that for specific legal and anti-trust reasons, the CWT Committee cannot be directly involved in the decision as to when a herd retirement program should be executed. As authorized by the CWT Committee, such decisions are made exclusively by the CWT management staff following careful analysis of economic benchmarks vetted by the CWT Committee. Secondly, with respect to information concerning CWT’s financial accounting, a posting on the CWT website contains the information you requested. It should be noted that only those costs directly associated with removing herds submitted by accepted bidders are included in the cost of each Herd Retirement program. Similarly, the Export Assistance expense category only includes payments of export assistance made directly to member cooperative bidders. As has been our practice since the onset of the program, the CWT committee and the NMPF Board of Directors will again review the breakdown of all program and administrative costs at the CWT meeting next month in Nashville. Should individual producers want more specific financial information, CWT staff believes they should obtain it through their cooperative or from the independent producer representatives on the CWT Committee. Lastly, keeping in mind our common goal of making CWT as beneficial to producers as possible, I am curious as to whether all members of the Milk Producers Council are participating as members of CWT? One of the most important elements concerning the future of CWT is the elimination of free riders through full participation by all producers. While I know that you, Syp, are a strong supporter of CWT, I hope that both of you believe that all members of organizations such as yours should be full contributing members of CWT. To this end, please let us know how we can increase the overall participation rate in your region.

Sincerely,

Jerry Kozak

President and CEO, NMPF” (Milk Producers Council Newsletter dated 10/2/08)

Ummmm. This letter produces some interesting fodder for discussion. Upon researching the CWT site, we find that NMPF has defined the CWT program as “Cooperatives Working Together… a program designed exclusively by dairy farmers for the benefit of dairy farmers”. Yet, the letter doesn’t really seem to be fostering a “work-together” plan but more of a corporate hierarchy. Upon further review of the CWT website, we also find that the CWT committee (which Mr. Kozak refers to as the only ones who can make decisions regarding the program) are defined as consisting “of the NMPF Board of Directors, representatives from each participating cooperative that is not a member of NMPF, and representatives for independent producer members of CWT. Representation on the CWT Committee for these various groups of producers is based on milk production volume.” It follows that this positions the small dairy farmer from being able to contribute to making decisions for the CWT program – even if that farmer’s business is contributing monetarily and is a member.

Lobbyist have been controlling the marketplace for as far back as any of us can remember and as in so many cases, the original intent was good and worked. Now because it has become laden with its own top heavy structure and ability to hide its true accountability, the original goal is missing, it appears to have become a self-serving steam roller. Today the CEO of NMPF, Jerry Kozak talks big business logics and plans that sound good but that don’t necessarily filter down to the smaller farmer in their entirety. In reviewing the extremely basic financial report shown on the CWT site and using the numbers from the press releases along with some basic math, the numbers don’t add up effectively which the author assumes is the reason MPC asked for an accounting of the administrative costs.  However, per Mr. Kozak’s letter, for anti-trust and legal reasons, these numbers are not public domain and cannot even be released to the members. Neither can the author find any public financial accounting of NMPF supposedly for the same reasons.  However, since CWT was reportedly reaping 10 MILLION dollars a month in 2008 (which would total up to around 1.2 billion) and only had a budgetary carry over of $65 Million (or less than 1 month’s income) one has to ask about the rest of dollars.

The Small Business Farmer

If the small farmer is reaping the benefits of this legalized price fixing, why isn’t he benefiting overall?  Obviously, that same farmer still has to run his household and care for his family.

The members of NMPF, like Dean Foods, Kraft Foods, Pfizer Animal Health and Land O Lakes along with the various state councils, etc. do not have this issue. Corporations have to look at the cost of the product as well as the cost of transportation, etc – but whatever the cost, it is passed on to the consumer. That same corporation IS the customer of the dairy farmer. So the question becomes, who’s helping whom? If the corporations control the lobbying group and the corporations are the ones paying the dairy farmers, then who is really winning out in this deal?

Your locale may be different but in 2009 the southeastern US saw milk prices jump $1.00 a gallon along with all the other significant increases that are musts to run a household. The milk producers are saying the prices bottomed out to the lowest in seven years in 2009 and NMPF is predicting the prices paid to the dairy farmer will shoot up 24% during the 2010 year because of the “herd retirement” program.  If this occurs then consumers can likely expect the shelf prices to shoot up another $1.00 in 2010 as well. In the southeast, this means milk prices will be running around $5.00 a gallon and much higher on the western coast unless the grocery stores continue helping by using their "loss leader" program and take part of the hit themselves.

Bottom Line?  Take your satchel to the store and jump in for another bumpy ride in 2010. The consumer, the small farmers and the babies are going to take another hit.

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