The Trouble With Milk

The Trouble With Milk. I'm Greg Martin with today's Line On Agriculture. The milk industry has been on quite a roller coaster ride lately and according to Rob Vandenheuvel, General Manager, Milk Producers Council they are trying to smooth out some of the bumps. VANDENHEUVEL: The nature of milk in the fact that it is so perishable makes it a very difficult product to sell on a fair negotiating table. It's not like buying a car. You and I buy a car where you are the seller and I'm the buyer...I don't have to buy today, you don't sell today we've got to come a price we can both agree on but if we can't we move on and we go to the next day. The problem with milk is you don't have that same flexibility because as a dairy farmer I have to sell it every day. The down side is the buyer has the control since he can decide if he want to buy or not and from whom. VANDENHEUVEL: Inherently that creates an uneven balance of power when you are negotiating the fair price and so what the government has done is come in and play a role as a referee but what the government does in a vast majority of the countries dairy areas and the northwest is no exception is they create a order, they create a pool and so when you are a buyer of milk you buy from the pool and the pool represents all the dairies in that area. The theory is that that creates an even playing field. VANDENHEUVEL: It doesn't really matter if you buy from this guy or that guy or the guy down the street whatever farm you buy from you are going to pay the same price and you're going to pay the same price as other plants similar to yours. So we've got that system and while that system has been very good for the dairy farmers in the sense that dairymen have continued to be very independent. The downside of that kind of system is that you really mute market signals. You mute the signals that say we either have too much or not enough. That has created situations where there is either a glut of milk in the market or not enough and that signal doesn't always get translated back to the producer. VANDENHEUVEL: You don't get a direct market signal and so consequently as the price is moving down, as we have an oversupply situation that signal back to diary farmers is extremely muted because you don't feel it on an individual dairy; it's felt as an industry and it just takes a while for that to be felt by the dairy and so the joke is "When prices are good dairy farmer expand production. When prices are bad, dairy farmers expand production. Tomorrow we'll talk more with Vandenheuvel about what is being done to fix this problem. That's today's Line On Agriculture. I'm Greg Martin on the Ag Information Network.