Dairy Farmers vs. Commodities Traders

Skyrocketing input costs and skewed pricing policies are jeopardizing America's independent dairy farmers.

By Arden Tewksbury

Despite treating her cows humanely, strictly adhering to milk production regulations, and carefully stewarding her land, a Pennsylvania dairy farmer I know is $70,000 in debt. She has no idea how she'll repay her creditors or how much longer they will allow her to buy feed and supplies before demanding payment. Without a fair price for her milk, she can't accrue enough funds to pay off her debt. Most likely, she will have to sell her dairy cows and the family farm--the home and livelihood for her, her husband, and their children.

Since November 2008, I have received daily crisis calls from dairy farmers. One, whose feed costs increased by $500 between November and December, also received $500 less for her milk during this period, equaling a $1,000 loss when her cows were actually producing more milk. Another reported his feed costs had risen by almost $8,000 in one month. Still another declared that the U.S. Department of Agriculture's Farm Services Agency loan was approved at the county level, but was denied by a higher authority.

The continued spike in grain prices, coupled with increased electricity, oil, and other fuel costs, is threatening the survival of many independent dairy and livestock farmers. They were suffering before prices escalated, due to an antiquated system allowing milk prices to be manipulated by Chicago Mercantile Exchange traders and investor-biased milk cooperatives. These dairy farmers have no control over the price they're paid for their milk. When they aren't paid enough to cover their production costs, they operate at a loss.

Dairy farmers don't begrudge fair compensation to grain producers, but corn at about $7 a bushel costs twice what it did six months ago. Dairy farmers can't force the cooperatives buying their milk to pay more, and local banks (often not locally owned) are increasingly hesitant to lend more for farmers' operational costs. Dairy farmers are also consumers, trying to manage the financial crisis like the rest of us. These family farmers, who had viable operations for years if not decades, have little idea how their operations will continue. For the sake of these farmers and a healthy national milk supply, these adverse policies must change.

In 2009, Democratic Sens. Bob Casey and Arlen Specter of Pennsylvania introduced the Federal Milk Marketing Improvement Act (S. 1645). It would have allowed dairy farmers to cover their production costs, helped maintain an adequate supply of domestic milk, and addressed the unnecessary import of dairy products. This bill would have also bolstered America's rural economy, which is losing pace rapidly as farmers sell their livestock and farms. It has enjoyed broad support among dairy farmers and consumers. Despite this support, many dairy organizations and economists oppose its passage.

American consumers love their milk, cheese, and ice cream. We must counter the mistaken belief that dairy farmers benefit from higher grain prices through higher milk prices. There's absolutely no direct relationship between the two.

I urge all consumers to support us in our efforts to adopt a pricing formula that provides our dairy farmers a fighting chance to stay in business, while assuring the public continued access to fresh, affordable, wholesome, locally produced milk.

President Barack Obama mentioned job creation and innovation in his latest State of the Union address. I suggest he revisit the idea of supporting well-paying jobs in rural communities and fair compensation for our farmers. Exports and trade may sound sexy, but family farmers who receive fair prices for their products can employ more local residents, buy more local goods, support local infrastructure, and help their communities thrive. That's the kind of change we can believe in.