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Guest Editorial by Arden Tewksbury/Manager, Progressive Agriculture Organization

S-1645 (Specter-Casey Bill) Does Return Profitability to the Dairy Farmer!

Without any reservations the Federal Milk Marketing Improvement Act of 2009 (S-1645) was geared to return a reasonable profit to dairy farmers across the United States.

Despite some continued charges by a few people, but not many, including a host of a National telephone conference line; S-1645 clearly reveals a profit to dairy farmers.

An examination of S-1645 will clearly indicate that all milk used to manufacture dairy products will be classified as Class II. The authors of S-1645 appear to be the first ones to realign the classification of manufactured dairy products into one class.

The Bill clearly indicates that the Class II price will be determined by using the National Average Cost of producing milk as determined by the Economic Research Service (ERS), a division of the United States Department of Agriculture (USDA). This clearly means that the average dairy farmer will have all of his costs covered by the Class II price.

S-1645 also clearly states that the value of Class I milk (milk used for drinking, etc.) will be determined by adding existing Class I differentials to the Class II price. The Bill also mandates the USDA Secretary of Agriculture shall assign appropriate Class I differentials in unregulated areas (including California).

The price paid to dairy farmers would then be determined by adding the two prices together. For instance, in Federal Order #1 the price would be the Class II price of $22.00 per cwt. ($22.00 is an example) added to the existing Class I differential of $3.25 per cwt. would mean the Class I price would be $25.25. Based on a 46.5% Class I utilization in Order I would indicate a pay price of $23.51 per cwt.

Some say this price is too high. Why so? In August of 2007, the pay price in Boston was $23.14 per cwt. Certainly everyone should realize the accelerated cost of producing milk in 2010 and 2011 as compared to 2007.

The highest Class I price in Order I was $25.16 per cwt. in September of 2007.

S-1645 also contains a milk supply management program that would be paid for by dairy farmers, which is geared to maintain a balance between supply and demand. The supply management program cannot be implemented unless the Secretary of the USDA determines the imports of dairy products does not exceed exports of dairy products. In other words, we don't want USA dairy farmers to pay for the balancing of world dairy products.

Also remember S-1645 calls for all prices adjusted four (4) times a year. This would be done on January 1st, April 1st, July 1st and October 1st.

On November 1st of each year the Secretary shall announce the new cost of production figures to be used starting the next calendar year.

Where is the profit? The average dairy farmers' cost will be covered by the Class II price. In this example $22.00 per cwt. is used. The profit will come when a dairy farmer multiplies the Class I differential to his production. For instance if his monthly production was 100,000 lbs. of milk than his profit would be $3,250.00. ($3.25 per cwt X 100,000 lbs. of milk.)

This would play a major roll in starting to revitalize rural America.

Do dairy farmers deserve this type of a formula? Of course they do! Dairy farmers have been on the bottom of the totem pole all together too long.

I urge dairy farmers to unite behind this proposal along with the National Family Farm Coalition, Progressive Agriculture Organization, Family Farm Defenders, the American Raw Milk Pricing Association, and many others, plus the hundreds of thousands of consumers who stand should to shoulder with dairy farmers in obtaining a fair price for all dairy farmers.

Let's set aside all of the rhetoric and support the Federal Milk Marketing Improvement Act.