Audio Milk producers organize (story audio) Photos A dairy cow on the Greg Jans farm Greg Jans Mark Furth View full slideshow (4 images) Your Voice Soapbox: "There are more reliable ways to lower milk production and in the bargain improve Minnesota's soil and water quality, animal welfare, and food safety while lowering production costs and keeping more Minnesota farmers in the business of dairying."

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Milk producers organize
by Mark Steil, Minnesota Public Radio
October 26, 2003

The nation's dairy cooperatives are paying farmers to cut milk production. Greg Jans has about 400 cows on his farm near Grove City. (MPR Photo/Mark Steil)

Over the past few years, most dairy farmers have experienced a life time's worth of bad news. Low milk prices have forced thousands out of business in Minnesota alone. But now dairy producers are fighting back. Led by the nation's largest milk cooperatives, farmers are trying to boost prices by themselves, without government help. It's a historic change, but some question if it will accomplish anything.

Grove City, Minn. — The dairy slump hit Minnesota hard. Some farmers wonder if the state's milk industry can survive one of its worst downturns ever. Central Minnesota farmer Greg Jans has watched the economic mess from his dairy operation near Grove City. At least three neighbors have gone out of business. Jans spoke with one of them last month.

"He was still struggling with it. He still would break down in tears. He says, 'I never dreamed in my whole life that I'd be back working for somebody after this long.' It makes you feel bad when you hear those stories," Jans says.

Jans says milk prices have risen recently, but not enough to offset the money losing times of the past several years. A few months ago Jans heard about a plan to boost prices.

	Greg Jans

Organized by the nation's dairy cooperatives, the program pays farmers to cut milk production. It's known as "CWT", short for "Cooperatives Working Together".

About 300 U.S. farmers agreed to leave the dairy business by selling their milk cows to the CWT program. A smaller group, including Jans, agreed to reduce milk production. Jans says he'll cut back 20 percent.

"If we can get all them coops working together, we should be able to control that price a little bit, what we get for our product," he says.

The goal is to trim the nation's milk production by a half of one percent. Under one of the most dependable laws of economics, even that tiny cut in supply should cause milk demand, and price, to rise.

It's too early to say if this has happened, but it's attracting attention all over the country. One west coast farmer says forget about slightly higher prices. Sybrand Vander Dussen says the most important thing is that farmers agreed on something.

"To me that's miraculous," says Vander Dussen.

He operates a dairy farm near Riverside, California. Vander Dussen says thousands of normally very independent farmers agreed to pay a small fee to fund the milk reduction program.

They'll contribute a nickel for every hundred pounds of milk they sell. Vander Dussen says the economic problems in dairy are the worst he's seen during his 34 years in the business. He says the crisis may be one reason farmers agreed to join the effort.

	Mark Furth

"We certainly have the power of the cooperative structure, under which we could create a supply and demand that is more sensible," he says.

What he's talking about is something that's unique to farmers in the U.S. economic system. Imagine if the heads of the nation's major oil companies agreed at a public meeting to limit production to boost prices. That sort of price fixing is illegal. Farmers, though, can agree among themselves to limit production. Mark Furth is General Manager of Associated Milk Producers of New Ulm. He says the 80 year old Capper Volstead Act gives farmers the right to organize.

"Capper Volstead allows farmers to join together in marketing their products. And obviously they haven't been very successful at it because farm prices are at all time lows, but the concept is there," says Furth.

Milk producers are trying to add muscle to the concept. Cooperatives control 85 percent of the nation's milk supply. That gives them a lot of influence in the milk market. Cooperatives and their farmer members feel if they can stick together, they can bump milk prices higher by cutting supplies. So far, about about two-thirds of the nation's dairy farmers are contributing money towards the milk program. AMPI's Mark Furth says it's a good idea. He says even a small reduction in milk supplies will lead to higher prices . But he wonders how long it will last.

"It's a very short-term, very temporary program that is only a good start in our mind towards real supply management," Furth says.

Furth says the biggest problem is that higher prices are a magnet for increased production. Farmers routinely add cows and boost milk production when prices rise. That could quickly cancel the impact of cutting the nation's milk supply by a half a percent. Imports are an even bigger concern. Furth says dairy imports threaten to overwhelm the fragile balance between supply and demand.

"There are products coming in, flooding the United States dairy market. It's getting worse by the day. And we're trying to get those holes plugged. But until we do, frankly for us to try to manage our own production a half a per cent at a time is a little futile," he says.

HIstory is another major obstacle. The federal government tried for decades to boost milk prices. About twenty years ago the government launched a program very similar to what dairy producers are doing now. The U.S. Agriculture Department bought thousands of cows and sent them to slaughter. Some farmers were paid to cut production. Furth says milk prices jumped in response to the cut in dairy supplies. But he says it didn't last long.

"It had no follow-up to it. And as soon as prices got better, expansions started again. Within a couple of years as I recall we were back to the same kind of surpluses that we'd had before we started the program. And prices were just as lousy as they were before the program," says Furth.

Some people wonder if a similar lesson awaits the cooperatives and farmers involved in the current effort to control milk supplies. But even if that happens, many believe it's still worthwhile. Don Berg of Minnesota-based Land O'Lakes says it's become a rallying point for farmers.

"It really became a groundswell at the producer level saying maybe it's time we do something on our own. Versus always leaning against or expecting the government to provide some type of discipline or incentive to manage supply," Berg says.

Count Minnesota dairy farmer Greg Jans among the hopeful. He likes to say he's been in the dairy business ever since he could walk. And for nearly that long, he's watched milk prices go up and down, breaking farms and hearts. He says even if he doesn't see a big jump in profits, the effort to boost milk prices is a good one. He says a little farmer independence is good, but too much hurts.

"That's probably the biggest downfall as dairy producers that we have. The inability to work together to get a decent price for our milk. And I think this is one step where we can get coops working together. And maybe going down the road we can do other things like this, that would benefit dairy farmers," he says.

For decades farmers have nurtured a dream of economic power. That one day they would control their production and with it, the market place. Farmers are nowhere near doing that in the milk business. But producers like Greg Jans think for the first time, they've taken a small step in that direction.

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