Peer pressure supply management: U.S. dairy cooperatives ban together in an attempt to raise milk prices without government help

Farm & Countryside Commentary by Elbert van Donkersgoed

Editor's NOTE

This column was adapted from one of Elbert van Donkersgoed's weekly radio chats, called Corner Post, which are aired weekly on CFCO Radio in Chatham and CKNX Radio in Wingham, Ontario. Elbert is the Strategic Policy Advisor of the Christian Farmers Federation of Ontario, which is working hard to create a more satisfying and sustainable model for farming in the province. If you'd like to receive a transcript of Elbert's Corner Post address each week, send an email to evd@christianfarmers.org with SUBSCRIBE as the message.

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Posted May 28, 2003: Dairy marketing cooperatives in the United States have voted to implement a voluntary supply management program. The National Milk Producers Federation, representing most American dairy marketing cooperatives, is redefining how farmers work together, in an effort to balance supply and demand for raw milk.

The target economic impact is seven dollars more in farmers' pockets for every dollar that a dairy farmer is assessed to participate. To succeed, this Cooperatives Working Together program needs participation from at least 80 percent of the nation's milk supply, and must reduce raw milk supplies by 4.6 billion pounds over 12 months.

It is not the first attempt at supply management by American dairymen. In the past they have used refundable assessments, milk diversion and whole herd buyouts to control milk inventory and speed up price recovery. The Cooperatives Working Together program will use farmer assessments to fund three specific tools similar to previous projects: export assistance, reduced production marketing and total herd retirement. But this time there is a big difference - there is no government involvement. It is a self-help program. Success depends on peer pressure among U.S. dairy farmers and dairy coops.

Proponents of the program believe that government non-involvement has advantages. The National Milk Producers Federation is set for swift implementation by June 30. They hope to avoid: a) extra red tape, b) politicians worried about deficits and c) trade lawyers questioning legitimacy under international trade rules.

Lack of government backing is also the biggest drawback of this plan. How will American farmers feel about their neighbours and milk buyers that pass on the opportunity to participate in inventory control and forcing consumers to pay more for milk? How many will seize on the next 12 months as an opportunity to expand their enterprises?

This is worth watching. If this approach succeeds, the credit will not go directly to American dairy farmers. This project is driven by their cooperatives, with hope that independent processors will also participate. Cooperatives and milk buyers who decide to participate on behalf of their members and milk shippers will hold back the assessments.

Participants in the food chain, aside from farmers and consumers, are increasingly positioned to manage the supply of raw food ingredients. As the number of players between farmers and consumers shrinks to a few buyers, a few processors, a few wholesalers and a few retailers, that opportunity grows.

In the U.S. dairy sector, farmers will have an indirect say in managing the supply of milk because they own the cooperatives involved. Thankfully, in Canada, dairy farmers have the support of provincial government rules and federal policy to enable their direct involvement in controlling milk inventories.


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Corner Post can be heard weekly on CFCO Radio, Chatham and CKNX Radio, Wingham, Ontario. Corner Post is archived on the website of the Christian Farmers Federation of Ontario: www.christianfarmers.org. To be added to the electronic distribution list of Corner Post, send email to evd@christianfarmers.org with SUBSCRIBE as the message. To remove your name, send email with UNSUBSCRIBE as the message.