Recently, an editorial was sent to me that appeared in the Utica Observer Dispatch on Nov. 8. The editorial appears to be approximately the same as an editorial that appeared in the New York Post in late October.
The gist of the editorial starts out by attempting to analyze why Chobani, Inc., decided to build a new, large yogurt plant in the state of Idaho rather than expand their operations in the state of New York.
However, the editorial seems to be spending more time criticizing what they call “… a complicated and opaque pricing system…” in which New York state dairy farmers are paid for their milk under “… outdated regulations that make… producers (sic) pay more for …milk.” (The same system is used to price most of the milk in the United States).
The milk in Idaho is primarily unregulated, but the prices paid to the dairy farmers in that state are influenced by the states of Washington and Oregon which are both in federal milk marketing orders. In addition, the large amount of milk in California is regulated by state orders.
The most blatant remark in the article states that the present “… pricing system… rewards milk producers at the expense of milk consumers.” This remark should make all dairy farmers boiling mad, and the dairy farmers should support the efforts of the advocates that are trying to obtain a new pricing formula for all dairy farmers.
I would like to make a few additional comments concerning the article.
1. The article refers to dairy farmers and yogurt processors as “producers.” In general, the industry refers to manufacturers of dairy products as processors, and dairy farmers are the producers.
2. The article states that milk prices paid to dairy farmers are not determined by supply and demand. This is absurd. The starting point for milk prices is clearly determined by the dollar value for which a large number of milk processors are willing to sell their manufactured dairy products onto the open market. The USDA backs these prices into a formula that determines the price for the dairy farmers’ milk.
Clearly, this is supply and demand at work. However, many times, this system does not return a price to dairy farmers that covers their cost of producing milk.
Yes, the yogurt industry is playing an important role in the dairy industry, and it certainly appears that Chobani officials are leading the way in the same manner that Leprino Cheese did in the late 1970’s when they constructed a large mozzarella cheese plant in South Waverly, PA. Jim Leprino was a private owner as is Hamdi Ulukaya, who heads up Chobani.
3. The article also seems to indicate (according to the author) that sooner or later, yogurt manufacturers will attempt to obtain their milk from other areas (so-called “cheaper milk”). This is completely unfounded.
Approximately 65 percent of the milk produced in the United States is regulated by one of the 10 milk marketing orders across the United States. The price for milk in all of these orders that is used to manufacture dairy products, including yogurt, is the same!
4. In addition, the dairy farmers in California produce nearly 20 percent of the nation’s milk supply. The starting point for their milk is the Chicago Mercantile Exchange (CME). Different processors bid on the price they will pay for manufactured dairy products. California State officials use these prices to start the value of milk in California. Many California dairy farmers are attempting to have the California milk regulated by federal milk marketing orders.
5. Several other states, including Pennsylvania, Maine, and others, play an important role in regulating the dairy industry.
Certainly, we need to change the pricing formula that determines the value of milk at the farm. All dairy farmers need a pricing formula that will be based on the national average cost of producing milk. Such a formula is contained in the Federal Milk Marketing Improvement Act. This Bill has been introduced in Congress by the late Senator Arlen Specter and Senator Robert P. Casey (D-PA).
This Act would be fair to dairy farmers, milk processors, and certainly to consumers as compared to the current Farm Bill’s Dairy Margin Insurance program, which does not relate to 43 percent of the dairy farmers’ cost of production. Many dairy farmers are now starting to realize the shortfalls of the Dairy Margin Insurance program.
I would strongly urge the authors of the editorials (and maybe they have) to contact the high officials in Chobani and obtain their reasons for expanding to Idaho. Please remember that Chobani has already expanded their operations in Central New York, which allows them to process a tremendous amount of milk.
Finally, I have heard Hamdi Ulukaya say several times that he wants to treat dairy farmers fairly — “without dairy farmers, I would have no plants.”
Clearly, dairy farmers are not being rewarded a pay price at the expense of consumers. Let’s not throw the baby out with the bath water.
Pro Ag can be reached at 570-833-5776 or by e-mail at email@example.com .
Arden Tewksbury, Manager, Pro Ag