NFO-53 (AV10460): US Farm Report: Dairy Market

NFO number two Staley and rust recorded October 5th welcome to another program of us farm report brought to you by members of the national farmers organization in this listening area in the interest of agriculture rural business and the well-being of our nation we have as our special guests Oren Lee Staley president of the national farmers organization and Albin Rust dairy commodity director of the N F old ladies and gentlemen we appreciate the opportunity to come into your home and visit with you particularly about during this afternoon but nevertheless we want to visit about the other commodities at the same time it is now being generally recognized that the NFO's collective bargaining program has been one of the big and most people or at least many of them consider the biggest factor and the unexpected price rise on hogs that have been maintained the price rise on cattle that has been maintained through the heavy slaughtering of cattle this year and so this means that certainly as we have built the collective bargaining program the NFO over a vast area we have added to the meat marketing arrangements the grain program which has in its principle at least theory and the principle practice of on for the imposition sales this makes it possible for members of the NFO that raise brain to decide what time of the year they want to sell that grain and then put it in position for sale either either in the local elevators that has been arranged for by county in fo Grain bargaining committees that these people of course have been elected from the NFO members within the county or is in position from farm storage now this is all important because the NFO recognizes that you cannot just work on one commodity and maintain any success that you make on that commodity without also working on all the other major commodities therefore we're working very hard in an overall bargaining program and dairy is of course one of the major commodities and one of the very important commodities and I have with me mr. Albin rust who is director of our dairy commodity department he's a dairy farmer from Hillsdale Wisconsin and of course it would be only appropriate to have a head of our dairy commodity department coming from the great milk producing state of Wisconsin which produces so much of the milk that comes into the nation's households now Albin I know that you've had a lot of experience in various fields and you as well as the other directors of our commodity departments are very green and meet our people that we're very proud of and these are coordinated with the assistance of other administrative people that have had various backgrounds all of them farmers and I know that Albin that the one thing that all of us recognize and that is that the dairy farmers put in longer hours of work throughout 12 months of the year than any other working group of farmers in America and of course it means that many of the families do the work many of the whys many of the children do the milking while the husbands are out either planting a crop tending it or harvesting it and then of course this means that it's a really truly a family operation but the dairy farmers are really the most underpaid group of any segment of our population I know that the consuming public Albin a lot of times thinks well 25 cents a quart for milk really how much does a dairy farmer in most areas get for that milk on the fine well basically mr. Staley the dairy farmer himself and his family for all the efforts they put in producing the individual quart a hundredweight of milk received very little in respect to what the consumer pays around 7 cents is the average per quart that the farmer himself receives for the milk he produces he has to out of that pay the trucking in to town these points seem to me to be quite ridiculous as you stated these people work for around 37 cents an hour they put in more hours year in and year out than any other farm group that is producing farm goods in America today they have a long history of producing a basic commodity that is needed on a day to day basis from farmer to handler to consumer of where it seems to me that if the dairy farmer through an organizational effort much as NMOS program is would put forth the necessary organization that he could change this almost overnight because dairy products being considerably different than other farm products they are produced on a day to day basis and they are consumed in this same manner in other words it's a small amount each day going into the market there is no one period of the year when you have months production coming in at one time or anything of the sort it's from day to day and in order for the farmer to price a commodity such as milk he needs organization and he needs sales groups that can work closer together than what they have in the past and I think but by and large we're getting ever closer to this as we keep moving along well but this is an interesting point when you say dairy farmers need organization we know that there are many many dairy groups organized out here in almost every milk producing area what what happens are these existing groups and do they compete against each other or just what happens that farmers are organized but what what really happens to do they have divided sales that compete against each other at this level or what what really happens this Albin well the farmer selling his dairy products naturally has to sell it to some local processor or handler in doing this we find in making the different studies throughout the 12 state area that there are approximately 800 individual selling groups representing the different groups of farmers today these 800 selling groups definitely compete with one another trying to make a sale someplace in the market now while you have 800 individual buying groups buying from the individual farmers you have about eight major dairy groups that buy dairy products butter cheese and powder nationwide so you can see the terrific competition existing between the individual selling groups and what a time they must have trying to maintain the pricing structures that they have today by and large if it were not for the government support programs federal order programs and the what should I call them the crutches that government has set up for the dairy industry to operate on I don't believe we would see prices even as high as we have them today well Albin I know that I've been in many dairy areas instead of the summer of nineteen hundred and sixty-five dairy sales have continued and through some of the heaviest dairy producing areas and it's simply because that the dairy farmers have become so discouraged because of the lack of return on their investment a lack of wages you might say for their work and so consequently this is a serious situation now you get into the situation what can be done and what is the NFO doing I know that I have been in several discussions with existing groups where we have tried to explain many years ago in fact that the organizational power in the dairy industry set up proper under a legal structure that would allow them to do just what we're saying has to be done this could have been done but it seems as though there was reluctance on many of the existing groups to go together and unite the the selling power that could have been united in a legal manner so consequently although we started organizing in a corn-hog diversified area we knew that it was necessary for us to go into the milk area the areas where milk is produced and bring together the dairy farmers so that we could start establishing the organized power from the producer level this is where it has to be organized now if we're going to analyze the dairy industry I think the first thing we have to think about is just how much the nation's total production goes into manufactured milk and how much goes into the bottle the grade a class one milk well we have roughly today a 50/50 split hips that the figure is not just exact but it is about 48 percent bottled milk and 52 percent manufactured milk in this sense dairy products are split about half-and-half manufactured and half the other half being grade a milk now when it comes to pricing the two different commodities manufactured milk and a grade-a milk we do find that the manufactured milk by and large is priced through most generally a federal order in some area set up around such as Chicago Cleveland Indianapolis and so on well you find your manufactured milk prices being established namely on the support price that the government establishes from year to year it wouldn't take too much of a price increase on manufactured milk in most areas to make a terrific difference to the dairy farmers even in federal order areas we have a rough breakdown of how this takes place on legal fine and the pricing structure on butter powder ratio for example a one cent increase on the butter powder ratio would return to the American dairy farmer a five cent increase on raw milk you have on cheese a one cent increase on the pound of cheese to the consumer would levy a raise of prices on milk from the farm level going into cheese of ten cents if there were ten pounds of yield in a hundred pounds of milk so a very small increase in the price of dairy products could levy a very great return back on the farm level so far as individual producers are concerned I find it quite shocking that most consumers have no idea of what percent the farmer is receiving from dairy products any place along the line that's the reason I think the seven cents a quart and after all how long does it take a after the cows are milked on the farm under the sanitary conditions that are required and the farmer gets the seven cents a quart and he has to pay the trucking out of it how long does that take that milk to get to the household and how much processing is in it it certainly didn't take as long to get it from the farm to the consumer as it did for the old cow to get it from there into the processor this is about the point you get to on delivery of milk from farm level into processing groups and certainly it is a commodity as you stated it is a number one commodity it receives more inspection and red tape than any other farm product being delivered to consumers who you have in many many areas inspectors from any number of states inspecting these individual farms making sure that they are producing a grade a quality of milk that is befitting almost of any price you don't have these rigid inspections on your meat and grain that we find the dairy farmer competing with well this is right still the father because of no processing the fact that there's no processing or very little involved means that the cost of processing these other products meat for example should pretty well offset each other shouldn't they Albin and this means that what is taken for the processing and the others there's just something that's very wrong as far as the farmer receiving seven cents a quart for that milk and the next 24 hours it'll be a consumers table at twenty five cents a quart now what what first I think that we have to recognize that in order to be successful in bargaining in the dairy industry that you cannot just bargain in one area because if you tried to bargain in one area oh you can possibly bargain out of it is just a little improved efficiency and marketing and this is fine but this has generally been done but if you tried to do something about price in another area what happens in this case well what what happens there have been dairy areas maybe even as large as a state or more that have made an effort what happened to their efforts well the same old story happens with the dairy farmer that happens with any other farm commodity and they used to tell us by the way mr. Staley that well if you fellas take the milk out of the state of Wisconsin we'll ship it in from Minnesota yes and when we finally organized Wisconsin and Minnesota then they turned around and told us well if you hold milk back here in these areas we'll ship it in from New York and Pennsylvania yes when we started organizing in those then they said they would ship it in from Canada now I don't know where they'll get it from next but it's the same whole story of one group just setting just in back of the other one that always is subject to shipping these products into an area trying to price it if an individual area tries to price the commodity it's true with grain and meat in this same manner but dairy products being what they are certainly seem to me to be one of the easier commodities to price in this respect if the farmers in the different states such as Minnesota and Wisconsin Iowa in fact throughout the whole in NFO territory or area would sit down and work out this problem together an NFO has suggested a legal formula for this it's a matter of the individual marketing groups today enlarging their scope and vision so far as marketing problems are concerned and instead of working from just a county level or a district level or going from there up to an individual state level for them to start looking at their problem as a national problem and working together on those basis certainly we know most any group can solve their problems yes FL program well Albin I think what you brought out is so important because the people that they're selling to those 8 major companies you're talking about by all over the dairy producing area and so you cannot be successful in bargaining unless you do the bargaining over this entire and I think another important point is that marketing orders the federal support programs are only minimums there's nothing to keep the bargaining efforts bringing price above these if the if there's sufficient bargaining power to get the price and I think there's one thing important and you pointed it out I live in Northwest Missouri and we're in a diversified farming area and I remember when we first started organizing in NFO they used to say well if you just try to do anything for the dairyman we'll ship Wisconsin and Minnesota milk and and then of course we said well we'll go out and organize the dairy farmers in Wisconsin and Minnesota which we have and then what do you think you're going to get it as you said they said well New York New Jersey of course then they get to Canada Canadian milk production isn't very big you know as far as our population is concerned and of course the thing about it is our program is set up so that we can have a surplus disposal program developed through our master contracts with processors and many of the people have always said well processors won't even talk to NFO they won't even sit down to talk to you well processors and all the commodities are even the largest many of the largest processors are sitting down investing with NFO now the important point is that they have problems that we can help meet that haven't been met by getting the production there to them in the area that needs to come from in order to be most practical as far as their plant operations but I think that it might be interesting I'm sure it would because you've told me were these master contracts have been signed with processors lately tell me a few of the places you have been to show the scope of this Albin and the fact that processors are not only investing their signing master contracts and then we'll discuss briefly the master contracts which are of course the heart of our program well in the last 10 days two weeks we have had cooperation in signing contracts all the way from Idaho over to the southwestern corner of southeastern corners of Wisconsin I took in some discussions last week with processing groups out in the Colorado area these groups by and large seem to be taking a different view of the dairy situation and what they have in the past I do find many of them telling me quite frankly at this stage of the game that in years gone by individual groups such as our marketing milk in the southwestern areas that these groups did at one time try to sit down and formulate a program much as we have suggested at this time however these efforts failed namely because of lack of participation by farmers to urge the different processing groups to carry out this type of a marketing procedure and I think it's very important for the processing groups as well as the individual farmers at this point to understand that through the NFO program specifically we have an opportunity not just to talk to the individual farmer about becoming a member of NFO and it's dairy marketing program but we also have a chance to bring his knowledge to the processing level and talk the problem over there also by having both groups out selling a program of this type certainly it can be accomplished well but I think you brought out some points that are so important and when you were talking about the contracts being signed from Idaho on over into Wisconsin in the 10-day period I remember you coming in with a group of contracts from northern Minnesota and I believe over in South Dakota shortly before that and then I remember a short time before that you are some of the people in the dairy commodity Department told me about being east to the Pennsylvania line and and I believe on down into Tennessee Kentucky into that area and this shows the great effort that is being made over the entire area now in these master contracts when a processor signs a master contracts basically what what does a master contract incorporate in it or what is incorporated in the master contract basically and the dairy contracts for dairy production these to me are a very practical contract for any dairy farmer to work under the dairy farmer in the past and we have never touched on this too much and has signed many many contracts with many many processing groups however the contracts he's had signed with the different marketing oops have all of them been a simple contract for a supply one of the big factors in the NFO program and its contracts is that these contracts establish a delivery to local processors they also establish a grade and quality to be delivered on a stipulated pricing structure they established still further a year to year supply feature for processing groups to work with this certainly gives them the benefit of the doubt by saying the production will be there from year to year on such-and-such a standard and with such and such a volume so that they can do an efficient marketing job throughout the industry these are basic then the whole important core of the NFO program is first for the producers to organize so they can bargain together right right and this is what the NFO has been building a structure whereby the producers can make their desires felt and an information structure where the producers can and analyze the entire marketing structure and decide on their own how they're going to market and whereas they're developing their bargaining power and this is their this is their individual initiative that they must take in this face and then of course after these have been organized then you're talking about the master contracts at the processor level which stipulates the price that the producer is going to be paid which is 605 base price for class 1 grade-a mail the manufactured milk the prices 5 hours from $4 to find safety yes so varying on the area and then all these points are incorporated in the contract and the one thing that really amazed me was when I heard existing dairy groups one time say well Mary farmers can't get a price for their milk or they'll price themselves out of the market and I've heard so many people say well if hogs ever go to 20 to 75 and what people don't realize is that these are average prices over the year we're talking about those allowance for seasonal variations and all but they said if hogs ever go to 2275 way you'll lose your market well this always amazed me and then it amazes me more because I haven't heard anybody talking about that and the people are still eating pork and I'm sure that they're going to continue to drink milk just like I bought this suit of clothes although the price was up it means simply that the American public has to realize that the American farmer is a very important segment of our economy he purchased so much steel so much gas so much rubber so many of the things that are manufactured and that this great purchasing power could not use and less farmers have a fair price for their products and so Albin Rust we'll just simply means that the rest of the nation cannot continue to have the profits that they've been enjoying or the working people cannot continue to have the wages that they have at the present time unless the farmer also gets a price for his product to help buy some of these things now then back to the dairy program and back to the effect of it we're organized over this large area we've organized and of course signed many many contracts with processors and this means that the bargaining power of very farmers have continued to be increased now as we build this bargaining power do you think farmers really realize how much strength NFO has and that they really understand that this organization is built on the principle of bargaining effectively on all major commodities and that all of them have to be brought up in relative balance that the minor commodities also will fit into the pattern as this bargaining powers increase do you think the people really understand when they talk about bargaining for farmers do they understand what they're talking about I'd I sometimes wonder whether the individual farmer there seems to be no doubt in his mind that he understands that selling together can get him a better price because he understands the business formulas and large business groups throughout the nation and their ability to establish prices on the farmers goods that he has to buy these are simple mathematics to him in in that sense there seems to be a little bit of doubt in his mind possibly that he can get enough of his fellow man to go along with this type of a program but again I get down to the point of in the different discussions with a lot of non-members and so on at the different bargaining sessions talking contract on milk these people seem to believe that at today that this type of a program is coming they feel possibly that n Apple is maybe pushing it a little bit too fast but at the same time with the large number of sale bills we have hanging in the local banks the local stores your local county papers each month in each week at time is of essence if we are to save the dairy production in the areas where it's at well then I think this is very important the one thing that I think is so important is that the processes they understand farmers bargaining power they know that their processing plant is only worth junk price unless there's milk going through it if it's a milk processing plant and so they understand that right and so consequently when they see farmers organizing all they're doing is guessing where the farmers are going to successfully organized enough production or whether they're not and those processors say yes we want to sign the master contract they're saying really we want that production before it gets away this is really what they're saying to you now the whole thing seems to boil down to this that the farmers have to realize that by bargaining together by selling together they have the ability they have the power and I know from my discussions with you that now that we have the producers organizing great numbers over such a large area that as we're driving to get more of them organized as they join with the NFO that as we build our bargaining power that the steps that you're taking I'm sure that you're confident and I am too that they are going to start a price rise for milk at the farm level in the not-too-distant future we have the power the strength and now all we have to do is build on that in order to get the games that are necessary for farmers dairy farmers as well as others to get the cost of production plus a reasonable product the historic records of the united states government prove conclusively that farm prices must be in balance with wages and interest costs in order to have a fully operating economy and relative full employment for our nation's people government records also prove that each dollar of growths farm income generates seven dollars of national income how much longer can we afford to under pay our nation's farmers when it is costing our nation seven dollars for each dollar of underpayment to our American farmers the members of the national farmers organization are calling on the rest of the American farmers to join with them in an all-out effort to solve this farm problem join now