Byron dairy farmer tells Sen. Gillibrand like it is

Here's the verbatim testimony of Byron dairy farmer Robin Denniston-Keller given at the Senate hearing on the dairy industry held at GCC on Thursday.

It's titled "Legislative Responses to the Dairy Crisis: Reforming the Pricing Structure."

"...I am a proud American dairy farmer. My husband and I milk 100 Jersey cows and take care of another 100 young stock on our farm 10 minutes northeast of here in Byron, New York. It’s a privilege and honor to be asked to speak today.

"I’m not an economist or an expert on milk pricing, but I do feel I have common sense and a strong work ethic, which have served me well so far in life. I milk my own cows every day, and being up to my elbows in the results of lactation and excretion (generally not at the same time!) gives me a certain sense of reality!

"On our farm, our “pay price” for our milk produced in July 2009 was $13.26 per hundredweight. Put in consumer terms, $1.14 a gallon. This includes all protein and quality premiums received from Sorrento, the cheese plant we supply with pure, fresh Jersey milk. 

"Last year our July pay price was $24.23 per hundredweight, or $2.08 a gallon. I could spend my next three minutes ranting about the volatility and injustice of this, but that’s not constructive, and you can figure out on your own how I do the math to pay for our own health insurance, groceries, feed for the cows and calves, fuel for the tractors, hauling and fuel surcharge costs to send the milk to the processor, and the numerous other bills staring me in the face each month!

"Our 100-cow dairy benefits from the MILC program. We are at the perfect size to maximize our usage of the program. Our MILC government payments are currently a little more than 10% of our monthly income.

"Solutions to milk pricing issues -- please remember, as I said before, I’m not an economist or a milk pricing expert! Time heals all wounds, however, how do we stop the bleeding now?

Increase solid-non-fat fluid milk standards.

I like to call this the “No more blue skim milk” suggestion. Since 1962, California has had higher minimum standards for nonfat solids in fluid milk than the rest of the United States. Raising the United States standards to match the California standards will accomplish the following:

• Improve the nutrition benefits of milk. For example, California 2% milk has 21% more calcium than does 2% milk in other states. In addition, higher solids result in better tasting milk.
• Utilize more milk solids in consumer products and reduce the amount of nonfat dry milk produced for CCC purchase. This June, Dairy Farmers of America estimated that if the California Standards had been in effect for the rest of the U.S. during 2008, an additional 300 million pounds of milk solids would have been included in fluid milk sales. This represents more milk solids than were in all the CCC nonfat dry milk purchases through July 2009. California retail milk prices have remained competitive with, not higher than, the rest of the U.S.

Urge Agriculture Secretary Vilsack to have USDA purchase cheese for nutrition programs.

• This single action would accomplish several goals: Help to bolster milk prices and ease the current crisis faced by many dairy producers across the country; reduce outlays in dairy safety net programs (MILC payments and CCC purchases); and by donating the purchased cheese to food banks and other charitable organizations; USDA would be providing humanitarian nutrition services.

Cheese inventories are poised to be much higher than normal heading into this fall. This supply is weighing on the market and suppressing prices. A purchase of 100 million pounds of cheese would bring inventories more in line with past levels, and would bolster farm milk prices. Even a modest rise in milk prices would provide relief for dairy producers, reduce MILC expenditures, and lower CCC purchases of cheese.

Overhaul the dairy price discovery program.

I believe that our current milk-pricing structure is based on the trading of 2% of the cheese in this country on the Chicago Mercantile Exchange. This small amount of cheese determines my mailbox price. Or, in other words -- what the check I get in the mail says I will be paid for the product I’ve spent the last month getting covered in manure and other fine things to harvest!

This whole process goes against my good old common sense. Large milk processors were convicted for price manipulation as recently as 2006; clearly a more fair and broad based pricing mechanism is needed. We need a new set of tools in our milk-pricing toolbox. 

Sometimes I wonder why I am in a business where, I buy everything retail and sell my product wholesale, and the pricing mechanism is based on what I would call a “house of cards”? Way of life, being my own boss, pride of ownership, producing good food for an expanding world; they’re all good reasons. But if I’m not treated fairly, it’s time for me to wake up and find another life. I digress. Back to my suggestions.

Imports -- Charge promotion fees on imports.

United States dairymen contribute 15 cents for every hundredweight of milk we produce towards dairy promotion. I believe the new Farm Bill instructs USDA to charge importers
seven and a half cents for every hundredweight of dairy products imported. Dairy promotion basically helps create a larger market for dairy products. Importers benefit from that increased demand for dairy that our domestic producers have paid for, so it only seems fair to have importers contribute into the promotion program. 

At issue here is the fact that USDA has not implemented this fee, and it discourages me to see the lack of timeliness on legislation implemented into law. Seven and a half cents is not much, but I think charging importers this fee would decrease the amount of imported dairy products flooding our domestic market. 

I believe in fair trade, and I feel this fee charged to importers would somewhat level the playing field, and I’m encouraged that this promotion fee works for WTO reasons as well. 

Proceed with Extreme Caution before implementing Growth Management or Supply Management Programs.

While some producers and organizations are promoting growth management or supply management plans as a long-term solution to the dairy economy problems, I have some issues with these plans. Again, not an expert, and applying my common sense, I’m concerned that without solid knowledge of the impact of any such plans, I am not in favor of “jumping out of the frying pan and into the fire.”

Mandatory supply management goes against all my gut instincts, and my belief in the efficiency and productivity of the American Dairy Farmer. Last year’s high milk prices at the farm level resulted from a booming export market for American dairy products. We live in a global economy, and putting handcuffs on the American dairy industry with mandatory supply management seems to me to set us up for failure. We only have to look “across the pond” to see Europe struggling to get away from its quota system.

Finally, a sincere thank you to Senator Gillibrand and your staff for your efforts on increasing the MILC rates and indexing these payments for inflation. I am a proud American Dairy Farmer, and taking handouts does not please me, but this truly is a time of need for my fellow dairymen and me. Thank you for your efforts and your interest in the intricacies of dairy pricing. Thank you for listening to my suggestions, and I’m looking
forward to working together to resolve the dairy pricing issues we currently are facing and those in the future."