Economic Sustainability

One of the buzz words in agriculture today is sustainability.  Sustainability is simply the ability to do the same thing over and over again.  Our production practices must be sustainable.  Sustainability is an important thing to be aware of if we are to continue to farm and feed the world in the future.  When we talk about sustainability, we usually think of the environment and preserving the natural resources in order that we can continue farming the same area in the same manner year after year after year.   One factor that often gets left out of the sustainability debate is economic sustainability.  If our practices are not economically sustainable, we will not be able to use them year after year after year, because we will eventually be bankrupt.

With this in mind, I am concerned about some of the discussion and debate that is taking place in preparation to begin drafting the 2012 “Farm Bill”.  Much of what I hear seems to be focused on how can we get more federal money for the farmers?  And how can we more equitably distribute the farm payments?    

With a federal deficit of 1.3 trillion dollars and a national debt of 13.6 trillion dollars, the federal government is all but bankrupt (some would argue that they are already bankrupt and just don’t know it).  I have to ask myself:  Is it economically sustainable for American agriculture to be dependent on federal money?  Wouldn’t we be better served by a discussion about how to make American farmers profitable without government payments?  I am not suggesting that we can or should just discontinue all government payments to farmers; this would not be wise without addressing the reasons why farmers need these payments in the first place.  I do believe that by making some changes to our agriculture policies, we can wean American agriculture off government payments and into a more economically sustainable position. 

Some of the issues that I think we should address are commodity pricing systems (more accurate price discovery mechanism), trade barriers (the double standard between foreign and domestically produced products), over regulation, tax reform, immigration reform and labor laws.  This list could go on and on. 

There is a movement gaining momentum to reduce government spending, and the cry to end farm subsidies is getting louder and louder.  We can try to fight against this movement, and very likely lose, or we can join with this movement and ensure the economic sustainability of agriculture for future generations.

Fix The Formula by Mike Kohler and Utah Dairyman's Association

Consider a few questions?
 Why are farm gate prices still extremely low when processors are asking for more milk?
 Why have raw milk prices moved so much in the last couple of years in spite of consistent, steady growth in supply and demand?
 Why, in 2008-9, when our industry killed 350,000 cows (CWT), did the price not recover?
ANSWER: Traditional supply and demand rules are not being used to set farm gate milk prices.
Contrary to popular belief, supply vs. demand is no longer the driver of commodity price changes on boards of exchange and hasn’t been since 1995. Traders on these boards are now using billions of dollars of speculators capital to move the price instead of taking the price in the market. They make money based on the price moving. It is not the hedge market that it was set up to be. To illustrate the point, let’s look at farm-gate prices over the past 22 months:
 (June ’08 to June ’09) DOWN $10.28/cwt
 (June ’09 to Dec ’09) UP $ 5.01/cwt
 (Dec ’09 to Apr ’10) DOWN $ 2.20/cwt
(Cheese Reporter, 4/16/10)
During this same time total US production was unchanged.
2008 189.9 Billion lbs
2009 189.5 Billion lbs
We even killed 350,000 cows and it didn’t make a difference. It’s obvious that something besides supply and demand are at work here. SUPPLY and DEMAND are in balance. Consumer demand is on a strong and steady rise and has been for 25 years. Supply has followed the same steady rise as demand. Here are a few more facts:
 Domestic demand has increased to 610 lbs/person/year of fluid milk
equivalent.
 Total cheese in cold storage has steadily increased to maintain a 32-34 day supply for a population that has more than doubled its cheese consumption since 1985. (17 lbs per person to 34.5 lbs per person)
 Supply of milk has climbed on a steady slope to match demand.
 155 Billion lbs in 1995 to 189.5 Billion lbs in 2009.

Our check off marketing efforts have worked. Consumption is keeping up with our production.
Meanwhile, since 1995, prices to farmers have been recklessly volatile. Dairy farmers have lost over $11 billion equity in 2009 alone. This is ownership equity that they’ve handed over to banks so that they can continue to provide a delicious, nutritious, wholesome product. This is not capital of some big corporation. This is hard earned capital family farmers have scraped together over 20-30 years!

EXPORTS
Consider the period from August 2008 - February 2009. During this time dairy exports declined 1.805 billion lbs (average of 258 million lbs per month). This made every dairy newsletter and hundreds of other publications. Everybody was talking about it.
The reason exports declined is because the economic decline in countries like China and Indonesia diminished their ability to pay for US dairy proteins which were priced at an alltime high. ($21.00 milk) And, the only export enhancement/support program in place at the time, CWT, was suspended.

PRODUCTION: TOO MUCH OR NOT?
With historically low prices, plans were devised to kill cows to control the supply. The mindset of many in the industry was that if the price is so low, we must be producing too much milk. But, during this same period (Aug ’08 – Feb ’09) milk production actually DECLINED an average of 332 million lbs per month, totaling 2.324 billion lbs. Net change in supply: a DECREASE of 519 million lbs. In addition, 2009 was the 4th best year for dairy exports ever. Since the decline during fall of ‘08, world economies are stabilizing and/or in recovery. Our foreign consumers are able to buy our product again.
So what should we do?
Supply management plans being pushed all rely on the premise that changes in supply dictate changes in price. Clearly NOT true since 1995. Since there is momentum to do something to correct the problem, we must make sure we are curing the right aliment. The problem is not production, it’s the pricing formula. A solution will require more than just one “fix.”
Here are some suggestions that ought to be contained in any plan to stabilize farm-gate prices:
1. Use an Input Index - Stability for the industry is critical. The FMMO should incorporate an index which assures that returns to the farmer stay above the costs of inputs.
2. Volatility Modifier - Apply a weighting ratio to the FMMO calculation to reduce the volatility that comes with the boards of exchange impact to the FMMO. The calculation could be the same as it has been for years, with the simple application of the weighting ratio. For example:
Current Price = current price calculated as before X 33.3% (weighting current month) + price of each of the past 4 months times 16.7% = Modified Current Price
3. Market Clearing Mechanism - Periodically there will be excess product. Provided that processors are required to package dairy products in a form that meets the preferences of our consumers, both foreign and domestic, excess product can be “cleared off the market” through existing Nutrition Programs. Historically, over 70% of the cost of each Farm Bill actually funds Nutrition Programs like food stamps, WIC, school lunch, etc. These programs should be used to feed our fellow Americans with safe, nutritious foods produced by Americans.
We may only have one chance to solve this. We need to get it right.
For more information, Mike can be reached at mikekohler2009@gmail.com or call any Utah
Dairyman’s Association board member.
Special thanks to Utah Dairy Commission and Ray Buttars for providing data for this article.

Why I Support Mike Lee

Many of you have asked us about Mike Lee, and why we have been volunteering to help with his campaign.

We first heard Mike Lee speak back in January. He gave a two hour speech on the constitution, and then answered questions for at least another hour. We were so impressed with his knowledge and his love of the constitution. Even more than his speech, what impressed us was the way he answered questions. He was so respectful of the people asking the questions, and he always had very good and honest answer. It was after that speech that we first volunteered to help with Mike’s campaign here in Cache Valley.

We have had the opportunity to meet with Mike several times since, and have become even more convinced that he is the right man for the job. He WILL be an effective leader in the Senate.

Much has been said about the choice between a businessman and an attorney. While it is important to know what these two men have chosen as their profession, we believe it is more important to know what they have used their chosen profession to accomplish, as this may give us insight into the positions they will take as our Senator.

Tim Bridgewater co-founded Interlink Capital Strategies which is a consulting firm that helps businesses secure US federal grants and loans. Recently Interlink helped secure $10 Million in IPOC loans to help build affordable housing in Mexico (i-caps.com/ICS/Services.html). While this is a perfectly legitimate business venture, do we really want to be sending more tax money out of the country?

Mike Lee is an Attorney who has a proven track record of standing up to the government and defending the rights of the people. He fought the Obama administration in reopening 77 oil and gas leases in the Uintah Basin. He fought the ACLU in its efforts to have access to the Main Street Plaza in Salt Lake City. He fought for Kane County’s rights to maintain access trails on federal ground. Right now we need someone to represent us who has a proven track record of standing up to the government and defending the rights of the people, Mike Is that man.

With regards to Mike's involvement with Energy Solutions here's the truth:

While serving as Governor Huntsman's general counsel, Mike Lee lead the fight to keep nuclear waste (that is, spent nuclear fuel) out of Utah. That fight proved successful in 2006. Several years later, Mike's law firm was retained by EnergySolutions to represent that company in one case -- and one case only -- because of Mike's expertise in constitutional law. That case had nothing to do with spent nuclear fuel. Nor did it have anything to do with whether it is a good idea to dispose of Class A material, whether foreign or domestic, in Utah. Rather, that case dealt with whether the authority to restrict the importation of Class A material resides with (a) the States, or (b) the federal government. The federal district court agreed with Mike's argument that the Constitution leaves such import decisions in the hands of the federal government. Mike does not believe that Utah should be he world's dumping ground, and would support federal legislation establishing a categorical ban on the importation of Class A material. Mike also continues to oppose any plan to dispose of nuclear waste in Utah. Mike knows first hand the consequences of exposure to this harmful material. In 1996, Mike's father Rex Lee died from a form of downwinders syndrome. This tragic loss for the Lee family has made Mike an advocate against any harmful waste material. Mike's willingness to be a champion of the Constitution -- even where it might not be popular -- is demonstrated by his expert handling of these complex issues.

We hope you will join us, tomorrow, June 22 in voting for Mike Lee to be Utah's next Senator.

Thank You,

Garrick and Holly Hall

P.S. please feel free to call if you have any questions about Mike that we might answer for you. 435-232-1117

Visit to Schreiber Foods

I had the opportunity to visit Schreiber Foods in Smithfield, Utah this past week and take a tour of the plant. Following the tour, a group of about 25-30 dairymen met with the plant manager to discuss their company and the potential to sell milk to them. I have driven by this plant many times, but I have not had the chance to go inside since I was just a young boy, and the plant was owned by Cache Valley Dairy. The plant has been expanded and remodeled several time since then. Schreiber has been leasing the plant for about three years now and is currently in the process of buying it.

I have had the chance to tour several cheese plants, but I was particularly impressed with this one. I noticed right away that the people who work there are referred to as partners, not employees. This is because Schreiber is employee owned, so they are all literally partners in the business. Everyone in the plant was very friendly and helpful, even though we were in their way. I was told there are about 450 people that work in the plant. They make several different kinds of cheese, mostly Swiss and American (cheddar, mozzarella). However, the largest part of the plant is the cutting and wrapping department. Much of the cheese they package is purchased in 40 lb blocks or barrels from other cheese plants in the region. They package cheese for many major retail stores, including Sam's Club, Costco, and Western Family to name just a few. They also provide cheese to such places as McDonalds, Taco Bell, and The Olive Garden. Cheese packaged in this plant is shipped all over the western US.

I was very impressed with the efficiency and professionalism that I saw on my tour. Schreiber is very important to our county, not only do they have the cheese plant in Smithfield, but they also have a plant in Logan. Schreiber provides many good jobs as well as very tasty, high quality cheese for all of us to enjoy. I was struck by the thought that as important as Schreiber is to our community, they could not exist without the dairies that produce the milk they need to make cheese. Businesses like Schreiber are the reason a recent Utah State study found that 15% of the economy of Utah is based on agriculture, while less than 2% of the public live on farms.

After my visit I made the decision to begin selling the milk from my dairy to Schreiber Foods.

Nightline Response

I recently watched a report by Brian Ross on ABC’s Nightline. The report was about where milk really comes from, and featured video footage from an “Undercover Investigator” at a large “Factory Farm” in New York. As a dairyman watching this report I quickly realized that this was not an investigative report as had been advertized but was simply a propaganda piece by radical Animal rights groups(Mercy for Animals and HSUS). The video of the cows that was shown was not taken by ABC, rather it was shot by the “Undercover Investigator” who certainly had his agenda to prove. I began wondering if some of the clips were staged to enhance the shock value. For instance, I know of no one who docks tails in the manner shown in the report, all the dairies that I know use rubber bands that cut off circulation and then the tail just falls off after a few days. There seems to be very little pain and no blood involved with this method. (Not very shocking).

While I immediately saw this report for what it truly is, I realized that people unfamiliar with modern dairies would likely believe the fallacy of the report and believe that cows are abused and mistreated by dairy farmers, this could not be farther from the truth. In an attempt to counter the claims in the Nightline report I will attempt to compare cows to people, only because the term “Humane” is used so frequently to describe the way farm animals should be treated, although they are not human and should not be confused as such.

The cows in the report were shown standing in a crowded holding pen with no room to move, the assumption was made that cows are kept in this condition all day, every day, when in reality those cows were there only for a few minutes while waiting for their turn to go into the barn to be milked. This is much like stepping into a crowded elevator or crowded subway car, we would not want to be there all day, but we tolerate it long enough to get where we are going. After being milked all the cows returned to their pen where they have access to fresh feed, water and a dry comfortable stall to lay down in(not shown in the report).

During stormy weather people like to be inside where it is warm and dry, these cows have a warm dry barn to protect them from stormy weather. Likewise, when it is hot outside people like to stay inside an air-conditioned building, these cows have a shaded barn with fans and misters to keep them cool and comfortable.

These cows have their home cleaned at least once, probably twice a day. I know the report shows cows in several inches a manure, however since no reasonable explanation was given, I will assume that the corrals were in the process of being cleaned, the manure had been pushed to one end of the coral but had not yet been pushed all the way out of the coral (video footage being taken out of context for shock value). Some cows seek out dirty spots to lie in and seem to be able to find one regardless of the care taken to prevent it. We all know people whose personal hygiene is less than perfect; these people are the exception not the rule.

These cows have their beds made for them at least daily (raked out with clean fresh bedding applied as needed).

Every day these cows are fed a diet that is specially formulated to meet their nutritional requirements. This diet is formulated by a trained professional dairy nutritionist in order to provide the best health and comfort to the cow. These cows are also provided with all the fresh clean water they can drink (water being the beverage of choice for cows).
I hope you are beginning to see that these cows may be treated more “Humanely” than a lot of people. They are also provided with a pedicurist (Hoof trimmer) and a doctor (Veterinarian) when ever needed without having to worry about paying the bill.

There seems to be much concern about the pain involved with certain management practices such as dehorning. While there is some pain involved with dehorning the animals are better off without their horns. People undergo medical procedures that are painful knowing that it is for their own good. Who enjoys having their wisdom teeth pulled, it is painful and can cause discomfort for several days, yet we still pull wisdom teeth. Similarly we must dehorn calves for their own good. Dehorning methods have improved greatly over the years, we used to take a saw and cut the horns off (talk about a bloody mess). Today we simply burn them for a few seconds while the horns are still very small.

I know of no one who docks tails in the manner shown in the report, all the dairies that I know use rubber bands that cut of circulation and then the tail just falls off after a few days. There seems to be very little pain and no blood involved with this method.

The report concludes with an attack on the ethics of America’s dairy farmers. I would say the ethics are with the people who get up early every morning 365 days of the years (weekends and holidays included) to place the care and well being of their cows above their own comfort and often that of their family. America’s dairy farmers take pride in caring for our animals and producing a safe wholesome product for you and your family. In the future if people have questions about farming don’t ask ABC –ask a farmer. For more information on animal care go to www.conversationsonanimalcare.org.