Management

Growth-management plan calls for change | Business

CASHTON, Wis. – Wisconsin had more than 32,000 dairy farms in 1991. In 30 years that number has plunged to about 6,500 farms. If something isn’t done soon the downward slope will continue to degrade, says Travis Klinkner of Klinkner Dairy near Genoa in Vernon County, Wisconsin.

Without a national program to prevent overproduction and price volatility, more than dairy farms will be lost, he said. Without dairy farms, small businesses in rural communities will continue to shrink – agriculture suppliers, parts dealers, welders and more.

“I need more neighbors who are farmers,” he said.

Klinkner was among about 50 farmers who recently gathered in Cashton for one of three Dairy Revitalization Plan meetings. The other meetings were held in Abbotsford and Chippewa Falls, Wisconsin.

The meetings were organized by county Wisconsin Farm Bureau Federation chapters and the Wisconsin Farmers Union. Together the organizations are calling on dairy farmers to establish a national, mandatory program for managed growth.

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The program wouldn’t be a quota system such as the one in Canada. Instead it’s a growth-management program that balances supply and demand, they said.

“No one wants a quota system (in the United States),” Joe Bragger said.

Bragger has a 400-cow dairy farm in Buffalo County, Wisconsin; he serves as District 4 director for the Wisconsin Farm Bureau Federation.

Mark Stephenson is the director of the University of Wisconsin-Center for Dairy Profitability, and an agricultural economist focused on dairy markets and policy. He explained to meeting attendees how the Dairy Revitalization program, based on economic modeling, would work.

• Base plus allowable growth means each dairy farm would start with a base level of milk production determined by historic production. A rate of allowable milk-production growth would be set based on market demand. All farmers would be free to expand to as much as the allowable growth rate without paying a fee.

• Market-access fees mean any farmer who wanted to expand beyond the allowed growth rate could do so by paying a market-access fee for the additional milk. Fees would be small when demand is strong and greater when the market is flooded. When a farmer wants to expand production, he or she would be required to pay for the additional share of the market in which all dairy producers participate. Beginning farmers would be exempt from paying the market-access fee during a grace period to allow for new farmers to enter the industry.

• Dividends mean the market-access fees paid by producers who expand production would be pooled and distributed annually to all producers who stayed within their allowable growth. The dividend would serve as an incentive to produce the correct amount of milk to meet demand.

The plan is based on an economic modeling study, “Analyses of Proposed Alternative Growth Management Programs for the U.S. Dairy Industry.” It was conducted by Stephenson and Charles Nicholson, an associate professor in the Department of Agricultural and Applied Economics at UW-Madison.

If dairy producers nationwide agree upon a growth-management program, it would need to be written into a farm bill – or verbiage of such intent would need to be included.

Robert Nigh, a dairy farmer from Viroqua, Wisconsin, attended the meeting.

“The devil will be in the details,” he said.

He’d like to see how such a plan would work if a next-generation family member wanted to join a family farm, he said, and the dairy herd would need to be expanded to produce more income.

“It also would take political will (for it to happen),” he said.

He recalled years-ago discussions about the Dairy Market Stabilization Program, which had been proposed before the debate regarding the 2014 farm bill. It was a supply-management program designed to enhance milk prices by levying a financial penalty on dairy farmers who didn’t reduce supply when Margin Protection Program margins were less than a specified threshold that triggered program payments.

The American Farm Bureau Federation reviewed historical Margin Protection Program margins. It found that the Dairy Market Stabilization program would have been triggered in 2003, 2009, 2012 and 2013. But had it been included in the 2014 farm bill, it would have been triggered just once in 2016. That’s when Margin Protection Program margins were less than $6 per hundredweight for two consecutive months.

Nigh said he recalled dairy farmers in California pushing for that program but other dairy farmers didn’t support it.

“You’d need a large number of farmers – representing at least two-thirds of the country’s milk production – to support growth management,” he said about the recent proposal.

Farmers at the meeting in Cashton noted that dairy cooperatives would need to be in support of a national mandatory program.

Jack Herricks, a dairy farmer near Cashton, said during a panel discussion that it was good to at least be discussing the issue of growth management.

The fact there’s more discussion by groups such as the Farm Bureau and the Farmers Union indicates interest, he said.

“(It) speaks to the fact people are interested and that it’s an ongoing process to see who can support a reasonable, effective program,” he said.

Darin Von Ruden is a third-generation dairy farmer from Westby, Wisconsin, and vice-president of the Wisconsin Farmers Union. He said dairy-industry consolidation will continue if there isn’t a mechanism to manage growth.

“There’s excitement and worry, but having conversations (among dairy groups) will help move us forward,” he said.

Klinkner said politicians as well as national dairy organizations recognize there’s a problem with oversupply.

“If we develop a good-enough plan, there will be an opportunity for us to change to be viable,” he said.

Visit dairymarkets.org/gmp to watch a video featuring an explanation of growth-management programs, and for more information.

This is an original article written for Agri-View, a Lee Enterprises agricultural publication based in Madison, Wisconsin. Visit AgriView.com for more information.

Lynn Grooms writes about the diversity of agriculture, including the industry’s newest ideas, research and technologies as a staff reporter for Agri-View based in Wisconsin.

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