US dairy sector suffers from low milk price

The above is particularly a problem for small family businesses. That's why 50 groups, including the Wisconsin Farmers Union, asked Congress for emergency aid last month. Among other things, they want the government to set a minimum price for milk; for example, during the months of the recession, dairy farmers received only $13 per 100 pounds.

They also want a management system for this the milk supply, in order to stabilize the volatile market. As a final point, they hope that the government will buy the surplus milk; This can then be used, for example, by emergency aid providers.

'Price does not cover the bills'
Gina Stokes, a dairy farmer in Wisconsin, understands that the solutions seem extreme, but she says that also applies to the crisis threatening the American dairy sector. "Current milk prices do not cover our bills," Stokes reports USA Today. "However, I have no intention of stopping. If I have to make even more cuts to ensure the bills are paid, then I will."

(Text continues below the chart)Milk supply in the United States has been increasing again recently.

'Proposals make it worse'
However, critics say the proposals could make matters worse. “I've always felt that the market is the best way to clear the milk,” said Mike North, president of the Commodity Risk Management Group. "Creating a minimum price, especially without stock management, could encourage farmers to... milk production to perform. That is not desirable in this market."

Others call the system in Canada as an example. “However, that system also has flaws,” Gordon Speirs, a former Canadian dairy farmer, told USA Today. "I can say that things are not going as smoothly as they would like there either. They try to change the rules every year in order to deal with over- and underproduction. This is partly because they want to meet a quota. Everything What I experienced in the US, they also experience in Canada. It just doesn't happen so quickly there."

Oversupply is increasing
When milk prices are (too) low, dairy farmers are confronted with difficult choices. This is because all options increase the oversupply. Even now that the number of dairy farms has fallen sharply, milk production has increased; partly due to improvements in genetics and animal feed.

Smaller dairy farmers believe this oversupply has crushed their market. For example, several cheese producers now source milk from other states because the price is lower there. “We don't have the business income right now to keep our own business afloat. It feels like all it takes is one bad decision to go under,” said Randy Wokatsch, a Wisconsin dairy farmer. 

(Text continues below the chart)The price of cheddar in the United States is declining.

Search for balance between supply and demand
However, according to a number of groups, the supply-demand balance in the US is not going to fix itself. “It's absurd to call it a free market,” countered Kara O'Connor, a consultant with the Wisconsin Farmers Union USA Today. "The supply of milk in the US significantly exceeds demand."

However, the Wisconsin Farm Bureau Federation, the largest group in Wisconsin (by dairy farming), does not support a minimum milk price or a supply management system. They believe that supply is well supporting export growth and increased consumption. According to the group, no government program is a quick solution to the fact that many family businesses are on the brink of collapse.