A survey revealed Dec. 5 by the Wisconsin Farmers Union, which has its state headquarters in Chippewa Falls, displayed the answers of 1,050 farmers regarding profits, overproduction and policies and laws in place that are affecting their farms. Of those who answered, 63 percent reported having a negative profit margin from their milk costs.
Farmers who are producing conventional milk without any special milk certifications are receiving 97 cents less per hundredweight (100 pounds) of milk than what it costs to produce it. Farms that are non-organic but have some other form of milk certification were seeing an average profit margin 91 cents under the cost of production.
Organic farms were the only type of farms making a profit, which was a considerable amount of money above production costs. They had an average profit margin of $13.16.
Historically, organic milk typically goes for a higher price than conventional milk. Darin Von Ruden, president of Wisconsin Farmers Union, said it is not too often organic goes for twice as much as conventional milk.
Von Ruden said this season’s issue was overproduction and it came down to the problem of processor capacity. This level of overproduction is seen about every four or five years, he said. When the cycle comes around where prices are dramatically dropping again, hundreds of Wisconsin’s 8,400 dairy farmers could be seen leaving the business.
“By this time next year, we could be below 8,000 dairy farmers in the state of Wisconsin,” Von Ruden said.
The last farm bill in 2014 passed by Congress originally had measurements in place to protect against overproduction issues. Von Ruden said due to budget constraints, those protections were cut at the last moment. One of idea that was going to be implemented was a feed cost adjuster.
This would allow for feed costs to be based on the region. However, Congress decided to have one national feed cost. Von Ruden said a regional feed cost would have helped in places such as the New England region where there were droughts last summer and where feed costs were $3 to $4 higher than the national average.
To calculate the margin difference they had to use the national average so they received small payments. If it were based on a regional price, and was adjusted for weather conditions, Von Ruden said farmers in that region would have received some good money back from the program, provided they used the original calculations discussed for the farm bill.
Another idea originally in the bill was a program using premium dollars left over to buy product off the market and put it into food banks or to help other countries that are in need of extra food products. However, it was removed and there was no mechanism for the USDA this last summer to go out and purchase product and use it for food banks.
Von Ruden said Congress has been under the pressure of budget deficits and national debts for the last three or four years. The next farm bill is going to be an even bigger struggle than the last one, he said, as they look to conserve in their budget.
“There’s going to be more and more pressure to keep spending low and therefore there’s going to be fewer dollars available to implement programs to keep farmers on board,” he said.
The farm bill also introduced the Dairy Margin Protection Program (MPP), which is designed to protect farmers during bad farming years. It allows farmers to pay an annual $100 fee to receive margin protection coverage as well as paying a premium that covers $4 to $8 below the national margin average.
According to the survey, 73 percent signed up for MPP, but 85 percent reported receiving no payments. Of those who have received payments, only 1 percent consider it to be supporting their farm.
Von Ruden said those who bought coverage at an $8 margin level received payments but farmers did not feel like it covered enough to make the program worth it at face value.
Source: Madison
Link: http://host.madison.com/business/overproduction-of-milk-leaves-dairy-farmers-struggling/article_6fd46643-c85b-5d10-8b4e-b4ebb029f7f9.html