NFO-186 (AV10686): Dairy in Reality

US farm report a public information program brought to you in the interest of agriculture real business and the well-being of our nature by members of the national farmers organization in this area and others interested in having American agriculture receive cost of production plus a reasonable profit the American farmers and ranchers are building a brighter future for agriculture through the national farmers organization the organization that awoke America and represents the leadership of Agriculture u.s. farm report presents dairy in reality with special guests Ed Graf national dairy commodity director for the national farmers organization and Don Birkin assistant to the nfo dairy commodity department here now is that graph I have a statement that I'd like to read it came from a leader in the dairy industry it states any increase in return to dairyman in general depends eventually upon the closer cooperation between all dairyman this statement means to me and to other dairy producers that this doesn't mean just cooperation between the dairyman in Wisconsin or Minnesota or New York or Idaho or California but it means cooperation among dairy farmers in all of the dairy producing states in the United States Don I thought this statement from a leader is something that is very important because this is certainly what NFO has advocated for quite some time the NFO allows has known that to be effective in dairy bargaining would require closer cooperation not only among dairy producers but among dairy groups as well and in the early days when NFO was being successful in organizing and primarily the meat and grain producing air they had to decide whether or not to extensively organize in the dairy areas in a 1961 after a thorough analysis of the dairy situation the NFO reasoned that the majority of the dairy producers were already organized because about 75% of them belonged to dairy cooperatives they reasoned then that the obvious solution to poor dairy prices was to the to form the existing dairy groups into a marketing agency in common so 1961 NFO suggested to the industry that they formed this marketing agency and a series of meetings were held to get the idea crossed and to get the dairy groups moving after these meetings however it became clear to NFO that the dairy groups were not going to move on this the appeared as though there was lack of leadership in the dairy industry at that time so NFO decided that they would have to organize the dairy producers and then get after the job of forming the marketing agency in common certainly Don this is the background and the history really of what actually happened back in the early days and I think as we're discussing this today we can realize that there was a misunderstanding of dairy leaders there was a misunderstanding of dairy producers out there how this had to come about I can remember back some of the times and maybe this is an impression now that some people have but I think we should get clearly understood that there's a necessity for a bargaining group out here something that has been lacking in the dairy industry and the feeling that NFO and the dairy program would be in a make an attempt to take over the control of the processing of dairy products really was a misunderstanding today I'm sure that's being clarified and there is a better understanding between the managers the board of directors processors in general in the dairy industry so today I think with a little background on the history of this and as I like to say the misunderstanding we should go into an explanation of what we've actually accomplished and how we had to take these steps down well of course NF Hall has been busily over the past number of years organizing dairy farmers and we've been bargaining and signing master contracts which would be used for future activation I think the results of these efforts of the NFO bargaining efforts can be seen we take a little look at a few of the figures I'll step up to the blackboard here ed for example 1962 and these prices by the way our actual prices from a large Midwestern grade a milk plant in 1962 the blend milk price at this plant averaged three dollars and 46 cents in 1963 the price was three dollars and forty eight cents in 1964 the price was three dollars and 51 cents and in 1965 the price was three dollars and 55 cents over a four-year period of time was a total of a nine cent increase in the price of milk now about this time NFO became well enough organized in a dairy industry to begin doing some real effective bargaining and in 1966 we saw the price go up in this same plant four dollars and fourteen cents which was an increase of 59 cents and in 1967 price rose another 20 cents to four dollars and 34 cents and of course this year we've seen another increase which has brought about a total increase of about a dollar 100 over the last two and a half years these are efforts that NFO has succeeded in getting to the dairy producers by the use of collective bargaining both at the producer and at the plant level this is really what's important when you look at figures like that that you actually can point at and say this is the dollars and cents that have been a contra that have been gained through the activities and farmers working together because I think now let's compare this to something that actually costs us money and I like to always point this out to every farmer every dairy farmer are if he produces another commodity we were all in this same position when NFO started and back in the early 50s when they said get bigger get more efficient we evidently did it we produced more and we created what they said was a surplus we got to the point where the surpluses were gone back in the middle 60s a 66 in there then the imports came in on us the imports were cut back we got supply and demand and balanced substitutions were used all of these things to hold down prices but look in two years when we got enough of this production together this is the real thing that's there I think all of us should look at the price increase that came about when enough farmers got working together and bargaining together to increase the prices really this is the purpose of our dairy program and it's being effective today with much more increases to come all it takes as the letter says cooperation among very much edie one thing we got to point out also is that when the bargaining did seem to slow up that NFO had the organization and the courage to use the biggest bargaining weapon of all and that was the no holding action in the spring of 1967 this holding action of course was largest organized effort dairy farm dairy farmers in the United States ever it brought about some real spectacular gains to the NFO dairy producer there's certainly right down the hole this brings us up to the holding action certainly that's something that did not go unnoticed I wonder if everyone realizes the benefits from the NFO dairy holding action certainly I hear farmers who are unfamiliar with the bargaining efforts unfamiliar with the NFO program that say well what can you point to well I can point directly to at least 7 things accomplished in that dairy holding action one of the things I think of course was that it through the sacrifice and the real determined fight that the NFO dairy producers fought in the spring of 1967 but this sold collective bargaining to American agriculture and this is one thing that the dairy producers that participated in this gallant fight it got to take credit for that they sold collective bargaining to American agriculture yes that's right done I think this is probably one of the most important selling collective bargaining to agriculture and to the nation in general this didn't only sell a dairy program it sold collective bargaining because every other group is now saying collective bargaining where a few years ago it was almost a word that no one would like to hear and some people were even afraid to use of course you spoke before about the better understanding between NFO and the dairy industry and I think this has come about a great deal since the NFO milk holding action of 1967 Don I mentioned there are seven different things that were accomplished by the NFO dairy holding action I'd like to point them out and also show that people in the dairy industry recognized this at the exact time immediately following this holding action many people today in the dairy industry say while the imports are going to hurt you or they say well what will you do about the imports well first of all of course if you don't organize you can't do anything about the import know you very well right you've got to be an NFO-- member and in a dairy program here to do anything about the imports but following that holding action we saw the President of the United States use his emergency powers to cut back on dairy imports now the amazing thing on this is what effect would it would we had had not the president used these powers we had coming into this country in the past year about 5.5 billion pounds equivalent milk equivalent this was reduced to about 1 billion pounds it only takes a small portion of imported products to depress your prices this was absolutely cut back immediately following the holding action number two the emergency federal order hearings that were held here's something I hope that everyone can understand that federal order hearings were asked for by many people in the dairy industry including an F oh well you could get federal order hearings but there was very little said about price immediately following the NFO holding action emergency federal orders were held the hearings were held to do something the seasonal price decline number three was eliminated here's the dairy record the Washington newsletter the dairy industry newsletter the United States Department of Agriculture boosts order prices 20 cents and ends seasonal pricing it actually cut out the seasonal pricing where we you normally have your decrease plus a 20 cent increase given point number four number five the dairy industry moving together certainly today we're reading of mergers consolidations picking up the papers the fire magazine more than we've ever seen them before the industry coming together prior to the NFO holding action actually the dairy industry was operating like individual farmers competing against one another number six the support price of course today has been raised to 90 percent of parity on dairy as high as they legally can go why did this happen why is it happened just recently certainly the statement that was made by NFO in the past four months depending upon the gains made by the commodity holding action and if these gains were being tied down on contracts NFO would not hesitate to go into another holding action in milk the support price was raised to the legal limit and of course the one point number seven the one we discussed before selling collective bargaining to the nation not only to the nation by means of Telstar people in foreign countries realize that the farmers of America were doing something all because of the NFO milk holding action few people I think really realized the problem that the dairy farmer was in until actually he demonstrated what was happening to him during the holding action at one thing we do have to point out here though is that with these emergency federal order hearings and the price increase that we're talking about as we can see here the the bottom line of course represents the price that was spelled out very clearly in the federal orders this is not a price that we say might have happened this is a price that indeed was spelled out in the federal orders and this line of course represents the price of milk that the producers would have actually gotten had it not been for the milk holding action of course the top line shows the actual price of class one milk as a result showing the effects of the milk holding action on class one prices that's correct and at this time following this holding action when NFO went into the phase two the second step you might say in the holding action probably the misunderstanding of phase two at that point has caused some problems in some areas that just again a misunderstanding and to clarify that point Don I think we ought to go into the Phase two portion of this a little bit right now I think this is a very good idea Edie one thing I think we should point out here right at the start the phase two program would not mean a class one or a grade a producer would be required to have his milk processed and as the old term goes stored and held this I think is where a great deal of the misunderstanding came about because of the phase two program in other words there's so much more to the phase 2 program then store and hold there always was more to face to the store and hold it was just that our producers or many of our members never became aware of the real power or the real purpose of phase two perhaps said what you should do is is draw this out for us on the blackboard and I think we might be able to get a real good clear idea of exactly the power and the purpose if they do all right Don certainly there's a way in agriculture that the consumer gets the product whether it is dairy grain or meat and it's primarily the same we must think of selling dairy products grain or meat almost through the same channels it is through the same channels the retailers the chain stores and I believe through this diagram we can see a little bit more clearly how our production moves through the channels and where it ends up and what we must do to price it let's start from the top on this and we will talk of the retailer or the chains in particularly or let's say exporters they take some of our products exported into foreign countries but we've got to get it there and this is where it is being priced today well let's follow this through and work on this phase 2 program and see actually what we have where do these people get this product how does it get to them let's say here that we'll take the broker that takes our product who handles a lot of dairy products that we normally think about Borden certainly Kraft certainly major handlers where does it come from to these people well let's say that we've got processors out here some of them may be independent some of them may be coops this production has to be processed moving through these channels the coops must get this production and the independence from where producers farmers all over the nation so now let's start at the bottom what could this farmer or this small group of farmers what could they do to bargain with the coop for the independent processes or the broker or the chains and the exporters really nothing as individuals a step has to be taken and I'm drawing out just a few farmers here to show what a few could do in pricing their product and I want to go to this step where I'm going to draw in a solution to the pricing problem of dairy products and how it can work under the phase 2 program certainly this group of farmers goes to the cooperative with the product or the independent to have it processed we go through it let's go to an unknown group or group we haven't had until now n fo all of these farmers marketing through the independence and the coops still coming in to this n fo block of production let's for a minute I mentioned before how could this farmer or if you say this represents ten farmers how could they bargain with the independent processor the cooperative or the broker or the chain when the Marketing System does this the broker comes to the co-op and said I'll give you so much for your product the Borden's and the crafts the large handlers do this come to the independence and the coops as individuals when there are thousands and thousands of cooperatives and independents out there because they are working together understanding more that they have to do today by these mergers we see we're moving in a step in the right direction but now let's take this production this production all of it bring it to this block and what does NFO really means it means anytime that the market can not fulfill its needs from outside of NFO then we become a bargaining factor in the market at this point by retaining control through our phase two program NFO becomes the major bargaining group now you might say but there are not as many showing here selling into NFO blocks as you have outside of it I think Don better to show that I'm going to ask you in just a minute to show that taught what the total production means and how this group is the major bargaining group but to go through it once more all of us realizing that the chains and the exporters are two of the primary outlets eventual outlets for all products and agriculture dairy the same as in in grain or meat the brokers the Borden's and the crafts are the major handlers handle a tremendous amount of it but eventually it still goes most of it through this group are thousands of coops and independents where we as producers sell the product or have it processed all of us are too weak as independence down here alone whether we be a at the co-op level or at the producer level but bringing this together all over the nation and forming this new organization the marketing agency in common being controlled by NFO this is where the bargaining power is and what eventually happens the broker or the Maillard handlers can't come to you as an individual they can only come to this group right here it's so simple to see that that's what you work for the commodity must be blocked together any foe couldn't bargain for anything if it didn't have the production to use we have it through the phase - Don I'm gonna call on you to show again in another graph how effective this group can be actually Edward we must point out here also is that to be effective in bargaining you first must have control of a large enough portion of the total supply that's right and of course what you've pointed out here really shows that we've got a structure that'll make it economically possible to price milk from the farmer level up rather than from the chain store down now with this circle here perhaps I could show you what we mean by getting enough of the total production together so that we can bargain effectively assuming that this represents the total production in the United States and we spoke of the small groups today that large groups various amounts of them that today are bargaining and handling production we must keep in mind that today one of the largest groups controls only 6% of the total supply yet by NFO being able to block together production nationwide we could come up with a far larger portion of production than any of these existing groups and at the same time we must remember that these groups cannot legally bargain together with one another the answer of course lies in the formation of a marketing agency this of course faced who can bring about all the while NFO keeping control of a large enough block of production so that we can can continue to have bargaining control market control in the market this is right down that block represents a major factor in the bargaining or the marketing system today we're seeing and hearing a lot of the mergers about the mergers it looks to me as though the industry today is moving very similar or in the way NFO suggested back in 1961 this is good we must also point out that Dean a lot of production coming into phase 2 is increasing rapidly each week and this of course is what's going to determine just how effective NFO is in its bargaining efforts after all we must have the production of our members signed on the milk processing and sales agreement before we can legally bargain for this for their product this is our goal now to complete the signup yes the dairy program will work get the production in to the phase 2 portion of the program today's program has featured dairy in reality with Ed Graf national dairy commodity director for the national farmers organization and Don Birkin assistant to the nfo dairy commodity department members of the national farmers organization invite you to tune in again next week at the same time for more facts on Agriculture and Rural America which is a gear wheel in our economy that produces the majority of our nation's new wealth the farm income pattern sets the nation's prosperity and the national farmers organization represents new thinking in a new generation of agricultural producers