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Need: Emergency Crop Program, Dairy Producers


June 23, 2009

Hon Tom Vilsack, Secretary
U.S. Department of Agriculture
1400 Independence Ave., S.W.
Washington, DC 20250

Re: Need: Emergency Crop Program, Dairy Producers

Mr. Secretary:

1. May this letter constitute a formal request for an emergency program to assist America’s dairy producers. We write on behalf of America’s dairymen, and consumers, as all have a stake in this urgent matter.

The Need

2. Whole milk prices currently defray approximately 60% of production costs. This means that a dairyman’s milk check is not sufficient, at the present time, to pay the basics costs of production necessary to maintain a dairy herd’s life and continuity. Sixty percent of production costs will not cover employed labor, feed, medicine, breeding, utilities, and transportation costs. 3. America’s most perishable crop product, milk, has never been at greater peril than today. My recent contacts with representative producers in California and New Mexico disclosed, without communication between the groups, similar estimates: In each location, industry leaders estimate that one-third of diary producers, with their herds, will be lost in the next 90 days. They will not survive beyond Labor Day.

The Short-Term Solution

4. The need for assistance is so urgent that there is no time to experiment with an untried, or untested, solution. Milk must be treated as a crop. Emergency crop programs like those used for annual crops in stricken areas, must be adapted, with all dispatch, to the dairy industry. You are respectfully urged to consider the dairy industry’s dire circumstances, nationwide, like a regional crop failure of astronomical dimensions of the kind that would call up, and implement, a disaster loan, or emergency price support program, for producers of seasonal row crops.

The Cost

5. It will not be sufficient for your program to protect producers from lenders. The program cannot simply help dairymen meet loan demand. Your emergency program should require that all funds applied for and disbursed be used strictly to maintain herds at 85% of current levels, and should require a 15% reduction in herd size as a condition of receipt of funds. Lending should be limited to no more than the first 1000 cows in any operation. Larger operations suffer from the same tragedy as others, but sizes and economies must be scaled, and we recognize this is so.

The Burden

6. We respectfully suggest that the program’s benefits be limited to a maximum of 75% of the difference between each milk market region’s current certified production costs, and the NASS cash milk price. Producers with milk contracted at higher prices would be required to make this disclosure and milk above the support level would not qualify, or be qualified for reduced amounts of support.

7. The support should be offered as an interest free loan – a disaster loan – like other crop programs. Payback terms can be modeled after row crop circumstances.

The Long Term Solution

8. Three components to a long term solution should undergo immediate study and become aggressively pursued priorities of USDA. First, a quota system like systems that stabilize prices in Canada and Europe should be actively evaluated. Second, the current system of milk cooperatives, which forces produces to join in order to have milk outlets but no longer emphasizes the needs of producers, should be re-evaluated. Perhaps, the antitrust exemption granted coops should be scaled to prevent coops from growing beyond defined economic bounds. Third, the producer protections of 7 USC § 192 against improper conduct by packers and stockyards should be extended to fluid milk, and other dairy product, purchasers.

Critical Timing

9. As each week passes, more decisions are made by commercial banks to close down efficient, well managed, highly productive, locally beneficial dairies. Our goal is not to preserve all dairies intact, or to engender a continuing oversupply of milk. Instead, this proposal’s objective is to stabilize efficient dairy producers as they currently exist, initiate a far reaching study, and find a permanent solution for the dairy industry. It is, of course, a fundamental underpinning of America’s greater economy.

David A. Domina