Dairy farmer: Fix ‘broken’ milk pricing system

A Granville, Iowa, dairy farmer appealed to a Senate subcommittee Wednesday to help fix a “broken” milk-pricing system she said has worsened conditions in an era of financial uncertainty.

Christina Zuiderveen, managing partner of Black Soil Dairy LLC and an industry leader, said the federal milk marketing orders system “promised dairy producers that if their milk is as good as their neighbors, they will be paid the same price.”

“But after decades of decline in sales of fluid milk, that promise seems to be broken,” Zuiderveen told a panel that included Iowa’s two GOP senators, Chuck Grassley and Joni Ernst. 

Cheese prices boost farm

Zuiderveen said her family has prospered under the rules recently, focusing on selling milk for cheese production last year. They even paid part of their debt and expanded their operations during the coronavirus pandemic, as cheese prices soared.

But she wants to see the system changed to stem a long series of dairy closures over the years.

“Although these conditions have benefitted me personally in the last year, I’ve advocated for change because I want a fair system where everyone can compete on a level playing field,” Zuiderveen testified. “Our prices are definitely not uniform,” a fact that has been confirmed by her family members’ operations in California, Indiana and Michigan. It’s a national issue, Zuiderveen said. 

Zuiderveen, a member of the Iowa State Dairy Association board, said the federal system doesn’t provide market-based incentives to move milk to processing plants where it is more valuable. And there is tension between support for cheap powdered milk and for liquid milk. 

‘Good intentions, distorted system’

“Good intentions to create a system with uniform prices has resulted in a distorted system that is now coming unglued, to the detriment of dairy families whose income depends on the value of a blend of fluid milk, milk powder and butter,” Zuiderveen said.

The federal system makes dairy producers face a changing economic landscape in which they don’t know if their milk prices will be based on the market for cheese, butter or powdered milk, Zuiderveen said.

The federal government needs to change the system, either through rules or through the next farm bill to encourage competition among dairy farmers and to avoid promoting consolidation, she added. 

Sen. Patrick Leahy, D-Vermont, said his region lost 40% of his dairies since 2012. Leahy noted that he and U.S. Agriculture Secretary Tom Vilsack, former governor of Iowa, last week announced $350 million in assistance to dairy farmers due to market oddities during the pandemic. The stresses included the shutdown of school lunch programs at times.

“We look forward to solutions that improve the resilience, increase transparency and address long-standing market inequities,” Leahy said. 

Dairies disappear

The U.S. lost 7% of its dairies in 2020, with Wisconsin, Minnesota, Pennsylvania and New York taking the biggest hits, Lancaster Farming reported. Iowa ranks 12th in milk production.

Lowell Davenport Jr., owner of Tollgate Farm in New York, said in 1986, there were 250,000 dairies in the United States, and the average operation had 43 cows. In 2020, there were 32,000 dairies averaging nearly 300 cows apiece.

Any consolidation in the dairy industry, unlike the pork and poultry industries, has come from the bottom up, Davenport said.

“Dairy farmers are trying to capture a larger share of the consumer dollar,” Davenport said. “People in the dairy industry more knowledgeable than I are batting around ideas to reform milk pricing. The system the (U.S. Department of Agriculture) uses will work. It just takes some time. We just have to be vigilant in keeping watch on what transpires and be sure it benefits the ones with the hardest job — the dairy farmers.”

Robert Wills, president of Cedar Grove Cheese Inc. and Clock Shadow Creamery LLC in Plain, Wisconsin, runs two cheese factories supported by 28 dairy farms. “Today, I fear for  the future the dairy industry,” Wills testified.

Wills said the federal government’s well-intentioned milk pricing system had now turned sour, increasing prices paid by consumers while paying farmers less for milk.

There’s more, Wills said. “The outside pressures show how the system threatens the continued existence of dairy farming in the United States. Today, the dairy industry faces increased international competition, rising costs and uncertainty from climate change” and the threat of dairy products coming from genetically engineered microbes, he added.

“The survival of the dairy industry depends on your decision to end the rigidities of the market system as soon as possible,” Wills said.