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Political season brings out perennial debate over dairy supply issues

posted: September 04. 2018 08:05a CST
by / John Hosemann

During my 30-year career in farm policy work, there was always a “supply problem” in dairy. Today, it is more of the same. Understanding the federal marketing order/‚Äčadministrative pricing system has been left to a few academic economists, industry economists, some dairy farmers and very few, if any, politicians.

As the political season approaches, the perennial “supply problem” in dairy is once again center stage in various dairy state forums. The typical response from incumbents and political challengers is that “we’ve got to do something to help dairy farmers.”

It has never been, in my recollection, politically correct in farm circles to raise the sample question: “Which size dairies are causing the supply problem?” Most politicians and editorial writers cling to the popular position that “we can have all size dairies.” With most dairy product markets flat to declining, this response is economic naivete.

Based on the 2007 Census of Ag, 48 percent of dairies produced only 4 percent of the total milk supply, compared with the less than 2 percent of larger dairies, which produced 40 percent of the total supply. The 2017 ag census is most likely to reflect similar to, if not more of, this contrast. So the simple question remains: “Which size farms are producing the surplus supply of milk?”

It is politically incorrect to suggest in farm policy discussions that large-scale, mega-size, industrial dairy operations are in direct opposition with traditional 70- to 150-cow dairies. It is simply economic folly to argue that all farms are adding to the milk surplus when this is clearly not the case.

Large-scale megadairies can do a number of things to increase milk production in the short run that traditional farms cannot do — “higher-octane” feed rations, heavier culling of lower-producing cows, three-times-a-day milking, added milk producing hormones, etc. Time and other resources keep most traditional farms from adopting the “advanced” technologies.

Today, there is chaos in the marketing/‚Äčprocessing side of the dairy production and marketing equation. More and more traditional farms are being squeezed out by the higher-volume megafarms that are literally now “too big to fail.” These farms are essentially calling the shots on who gets to go first at the processing plants. Processors will make a hodgepodge of public excuses for why they will no longer take milk from traditional farms. The reality, however, is that they prefer the milk supply from one 1,000-cow dairy rather than from 10 hundred-cow farms. All the while, dairy politicians wave the banner of “saving family farms.”

The trend of large-scale megadairies displacing traditional farms has been underway for a long time and will likely continue. About all that policymakers can do is stop subsidizing the large-scale units with their access to a host of federal low-interest loans for expansion, require effective limits on high-capacity wells and the same effective controls on manure applications and groundwater and runoff contamination.

Federal and state subsidies that enhance the construction of ever larger-capacity dairies should be curtailed or substantially restricted to give traditional dairies time to adjust their operations. As the old Norwegian saying goes: “If you are in a hole, first stop digging!” Politicians need to get rid of the policies that are driving farm families out of dairying while candidates keep waving the banner of saving family farms.

John Hosemann is from Ferryville.

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