By Mark Spurgeon
Is giving thousands of dollars to your co-op to pay for dumping milk a good supply management plan? No. Will Farm Bureau’s insurance plan help for years to come? No. Should we depend on the federal government to pay us forever? No. Have our milk promotion efforts solved the problem? No. Will we ever agree to reduce our production? No. Did Cooperatives Working Together work? No. Are we still paying into it? Yes.
Only when we agree to a plan to help each other and do so in a way that helps us all, only then can supply management work. A National Dairy Disaster Assistance Program will do what we all need. Everyday somewhere in the U.S. some farm is having a disaster: fire, wind, flooding, heavy snow loads, Katrina-type weather, drought, diseases, cancer, heart attack, divorce, bankruptcy, death, an ICE raid, or a letter from Dean’s Direct that says your contract is terminated.
Any one or a combination of two or more of the above can force a farm into disaster. For some in the dairy business, milking the cows for many years can be painful due to arthritis, bad legs or shoulder discomfort. What I would like to suggest is a way to help all of the above and help every dairy farm.
Put 40 cents into a fund that is managed by a national board from all milk marketing areas. Let this board — after one year of saving 40 cents per cwt of milk, which equals $1 billion — put a price per pound on every female cow, heifer and female calf on every dairy farm. If a farm has a problem, we buy all females and send them to market. If a heifer, calf or cow is hurt or dead and has no value, then only our value would be paid. In return, all farms have to give us their board of health permit and legally agree that their name and location or names and locations not receive a milk check or own dairy cattle for 10 years.
If we will put a buyout program in place with all cards face up on the table 365 days a year that treats everyone equal in their orders or milk price areas, and helps remove any farm that is willing to take our money and stay out of all aspects of dairy for 10 years, I believe we can slowly bring the base price of milk up to a level that can be profitable no matter what feed costs are.
To do so, make a program that can have high value and at times will get the attention of bankers. During low-price periods the value of the farms’ females with our buyout price plus market price would represent debt repayment and retirement from dairying. If a buy-out program was like the up-and-down cycle of the board of trade, I think all producers would see the value in funding it.
The board of trade has a constant changing value and based on supply compared to demand, a buyout program would do the same. If you dairy where the need for milk is more constant, buyout value would be less. But this lesser value would increase as your milk price drops. The same would apply to an area that constantly has too much milk. The buyout value would be greater.
If properly administered by a national board, the producer would be more inclined to exit the business if they could choose their trigger price. This plan has no gimmicks. It is simple. Take our money and for 10 years you’re out.
Everyday there is an exiting price, and this would be more than the value if you had a sale on most dairies. If we would be willing to help use our own money to help those in need quit, the payback would be fewer cows and higher values for our milk. This plan would allow a farm to plan its exit from the industry. Every day the value of its asset “females” would have a base value, but everyday a bonus value would also be given. The bonus value would increase as the product value “milk price” decreases.
This is the real secret to making a buyout work. Remove cows when the market says reduce supply. Each area would have the same base value, but each area bonus value would be different. This is very important to understand. No two farms that are in different areas would receive the same bonus value, but they would receive the very same base value. Base values are the same for every farm in the nation.
The need for supply management is greater today that ever. We can meet market demand and should do so in a manner that would not require tax dollars to subsidize our milk checks. If we would only be willing to help each other and spend a small amount — 40 cents — the return would be a reduction in cow numbers and higher profit.
Every day we should be willing to help every farm gain control of its disaster, whatever form it is. Every day we should balance supply so we are never charged to dump good milk down the drain again. The current practice of selling out-of-order excess milk at discounted prices comes out of our milk checks, and this needs to stop. Every day no matter how big or small the problem, we should use our own money to help the largest and smallest farms quit with grace.
Now let’s look at the legal side of the program. PETA will say that a National Dairy Disaster Assistance Program is inhumane. Show the judge the pictures of barns full of dead cows that the farmer received full insurance payments on plus received full payment from NDDAP. The suit will be thrown out, and all costs paid for by those who sued. This is not a short, quick fix. It is a free-market, long-term solution.
Spurgeon is a dairyman located near Seymour, Ind. He developed this proposal several years ago and brings it up again due to the current dairy crisis. Opinions expressed in Reader’s Report editorials are those of the reader and do not necessarily reflect the views of Indiana Prairie Farmer.