Friday, June 5, 2009

The Dairy Crisis

First and foremost, let me say Happy Dairy Month to all of you reading this! America's dairy farming families have expertly provided safe, healthy, delicious, and affordable milk and dairy products to our consumers for years and continue to do so. Even though many if not most of our nation's dairies have fallen on hard economic times, our commitment to providing quality products has not and will not change. It is our pleasure to serve you, and we have every intention of supplying you with products you can trust and enjoy for years to come.

If you're not familiar with the dairy industry, the way farmers are paid for their milk is pretty's not as simple as saying we get x% of retail price. Because there are so many variables involved, it makes our price very volatile and we experience periods of highs and periods of lows. We're currently in a period of very low lows, made worse by the fact that our on-farm expenses are much higher relative to other periods of low milk prices. Many dairy farm families are depleting their cash reserves and even their retirement accounts just to keep the business afloat, and many others have already started borrowing monthly operating capital from lending institutions with the hope that somewhere down the road the price will improve enough to repay their loans. But there's a limit to how much money, reserved or borrowed, a dairy has access to. There's a breaking point somewhere, and though we're not sure where that point is we do know that we're moving closer to it every day.

We have to do something, but what?

There are several ideas being discussed within the industry right now from pricing reform to supply management. Some focus on short-term relief while others promote industry models that would attempt to provide future price stability that would help us avoid these devastating downturns. Finding good solutions won't be easy, either. Differences in markets, geography, farm size, and pricing are just a few of the challenges that will have to be overcome in developing a plan that works for all of us. And we also have to realize that there most likely will not be a single "magic bullet" that will benefit all farms fairly or equally.

But whatever solutions are discussed and ultimately presented as actionable, we in the dairy business will have to do something that's proven difficult over the years: we ALL have to work together and realize that if we don't buck history we will be history.

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