Hello my name is Bryan Gotham. I operate a 700 cow dairy along with my family in the upstate New York. Earlier this year I began to realize that the solutions to the challenges in dealing with the coming low prices were off my farm and not on it. I then started a quest in search for solutions to the challenges and this quest has resulted in this power point. To tell you a little about my self I am a graduate from Cornell University in Animal Science but I feel my higher qualifications come from my life experiences. I consider myself a professional survivor and aggressive problem solver and I have developed these skills as a result from a farm accident I was in at the age of 21 years old. I was entangled in a discbine mower and I farm and live today with my left arm and leg amputated. I have adapted to my challenges and do most things normal bodied people do. This is where my true skills at looking at this dairy crisis and finding solutions come from.
This is how I see the Dairy Industry today. We are confused on who we are actually competing against. We have so much chaos dairy economist can’t even come close to predict milk prices.
I have had to overcome so many of my own excuses as a Double amputee Dairy Farmer that I actually get annoyed and challenged when I hear excuses. I hate hearing all the excuses of why the industry can’t pay the Dairy farmer enough to pay their bills. S.889 crushes these excuses. Its my kind of bill.
I calculated that the Cow protein equivalent of just these imports equal a extra 200000 cows and that’s not calculating Casein's.
MPC can increase cheese yields close to 40%. That is some real over production. Globalization will not be reversed so we need an “ Out of the Box Solution”
Commercial disappearances have exceeded farm milk production every year since 1996. In 2000 the all milk price was $12.32 when farmers produced 1.57 billion pounds less milk than the commercial disappearances indicate. Just three years later in 2003 the all milk price was $12.52 and the commercial disappearances exceeded production by 4.3 billion pounds. The media harps on supply and demand problems for milk but farms are systematically being replaced by concentrated imports
The yellow line represents the retail price index of dairy products. The green line is the producer price index for raw milk. I like to call it Apex pricing.. Like an Apex predator is on the top of the food chain. I see Apex pricing as a form of predatory marketing that our Government should be protecting the Farmer from instead of giving us handouts. Today's market has twice as many unprofitable months as profitable because a stable price is demanded on the consumer. The supply doesn’t balance quickly so dairy farmers cant completely recoup our loses.
1. Volatility and manipulation is reduced because the Cost of production price is based on multiple market trends that affect our costs and not one thinly traded market like the CME. A stable price is demanded on the consumer level and this stable price discovery for the farmer complements this
1.Small business needs to rebuild this country again and it starts with our farms 2. since they get a 3 million lbs exemption and do not pay any penalty if there is an oversupply at the time. It provides a stable price for lenders to count on and gives the young farmer the ability to stimulate rural America’s economy.
Just as I was forced to adapt my life to my amputations American Dairy farmers must adapt to globalization by working together Some producers still do not want to accept responsibility to produce what the market demands. To keep the Status Qou we will fail to adapt. With today's global market place we must adapt to a new set of rules for the Big picture of the industry and our own personal survival. We need to become smarter supply managers to compete
After the great depression income was redistributed by paying farmers more money. Wealth was more balanced from 1942 to 1982. Early 1980’s farm policy changed and wealth was transferred from rural America to Corporate America with cheep food policy. It may be time to reverse this wealth back to rural America to rebuild this country again through small business in rural America. Another reason Farmers need more money it is healthier for the economy.
S.889 Power Point Embedded
<ul><li>presents </li></ul><ul><li>Law and Order must be established to the Dairy Industry’s </li></ul><ul><li>“ Wild, Wild West Market Chaos” </li></ul>by Bryan Gotham Hermon, N.Y., Dairy Farmer http://18.104.22.168/T-Shirts/nanmv/wildwest.JPG
Today's Wild, Wild West Chaos in the Dairy Industry No law and order. Farmers squirting Milk in each other’s eyes.
My Search for Law and Order <ul><li>Unchecked markets have created high levels of unfair lawless market Chaos. </li></ul><ul><li>To survive globally we must adapt and reduce chaos by becoming better organized supply managers. </li></ul><ul><li>Milk Market Improvement Act of 2009 (S.889) provides solutions for Law and Order. It is not another band aid and it eliminates excuses. </li></ul>
Import Chaos <ul><li>Globalization - American dairy farms have a resource disadvantage compared to New Zealand and Australia. We cannot compete. </li></ul><ul><li>The effects of Globalization must be managed because it is not going away. Today Globalization is dominating our market and history has proven it adds to volatility and mostly negative Market direction. </li></ul><ul><li>Imports of food should be driven by need not by greed. </li></ul>
Imports Need Law and Order <ul><li>In jeopardy for consumers: food Sovereignty, food safety and food quality. </li></ul><ul><li>American Dairy farmers can not be responsible for the worlds oversupply Burdon caused by imports. With order, we will be responsible for our own domestic oversupply. </li></ul><ul><li>Dairy imports have grown at a rate faster than domestic production past two decades. $3 billion today. </li></ul><ul><li>(source: Jerry Kozak of National Milk Producers Federation) </li></ul><ul><li>Concentrated Imports have a higher milk equivalent than exports dollar for dollar. </li></ul>
Why do we continue to Import when we have a surplus? <ul><li>Milk Protein Concentrate Imports are Higher in first quarter </li></ul>
MPC Import Spikes have uncanny relationship to Class III Price Trends and Volatility
Today we don’t have a Supply & Demand Challenge We have an Import Export Challenge
“ Asymmetric pricing" Needs Law and Order Wanted Symmetrical Pricing from Farm to Retail
Our milk/retail market should correlate like the oil/gas market
The Sheriff is in Town S.889 – Shoots Down Asymmetric/Apex Pricing <ul><li>S.889 provides a stable price Based on National Average Cost of Production. </li></ul><ul><li>S.889 provides simple price discovery calculated by the Economic Research Service on 23 states </li></ul><ul><ul><li>Note: research is already conducted, no expanded government </li></ul></ul><ul><ul><li>The price is not set by the Secretary of Agriculture it is adjusted according to changing market data compiled by ERS </li></ul></ul><ul><li>S.889 would raise on farm receipts annually from est. 28 billion to 42 billion if it was in place today. </li></ul><ul><li>ALL Manufactured Milk Price Class II </li></ul><ul><li>State & Federal orders and Class I Differentials remain intact </li></ul>
16.93 16.96 17.08 17.70 18.45 Total operating costs 0.34 0.34 0.35 0.35 0.35 Interest on operating capital 0.00 0.00 0.00 0.00 0.00 Other operating costs 0.82 0.83 0.84 0.85 0.86 Repairs 0.67 0.66 0.64 0.67 0.70 Fuel, lube, and electricity 0.67 0.67 0.68 0.69 0.70 Custom services 0.33 0.33 0.33 0.33 0.33 Marketing 0.62 0.63 0.64 0.65 0.67 Bedding and litter 1.07 1.08 1.11 1.12 1.13 Veterinary and medicine 12.41 12.42 12.49 13.04 13.71 Total, feed costs 0.15 0.15 0.15 0.15 0.16 Grazed feed 6.09 6.11 6.12 6.31 6.61 Homegrown harvested feed 6.17 6.16 6.22 6.58 6.94 Purchased feed Feed-- May April March Feb Jan Operating costs: Pennsylvania, monthly dairy costs of production per cwt of milk sold, 2009 ERS
ERS Source: Based on USDA's 2005 Agricultural Resource Management Survey of milk producers and updated using current USDA milk production per cow and production input indexes. 27.15 27.27 27.61 28.21 29.02 Total costs listed 10.22 10.31 10.53 10.51 10.57 Total, allocated overhead 0.71 0.73 0.74 0.73 0.75 General farm overhead 0.35 0.35 0.36 0.36 0.37 Taxes and insurance 0.06 0.06 0.06 0.06 0.06 Opportunity cost of land (rental rate) 3.84 3.88 3.94 3.86 3.83 Capital recovery of machinery and equipment 4.22 4.26 4.37 4.42 4.47 Opportunity cost of unpaid labor 1.03 1.04 1.07 1.08 1.09 Hired labor May Apr Mar Feb Jan Allocated overhead:
S.889 Rebalances Profit <ul><li>S.889 provides new growth and economic policy for Rural America. </li></ul><ul><li>S.889 is the Young Dairyman’s bill. </li></ul><ul><li>S.889 supports the trend towards promoting local food. </li></ul><ul><li>It secures the Homegrown food supply for National Security, food sovereignty and sustainability . </li></ul><ul><li>Farmers will have a chance to pay income taxes and contribute to this economy. </li></ul><ul><li>S.889 rebalances the profit back to small business from “Big Food”. </li></ul>
To Reduce Import Chaos S.889 uses a Carrot <ul><li>S.889 balances the responsibility for the over supply from Globalization between the farmer and manufacturer. To take advantage of the guaranteed market funded by farmers imports must be less than exports . This puts responsibility on manufactures for over production caused by excessive imports. </li></ul>
S.889 provides Farmer Funded Supply Control <ul><li>When needed, the Supply Management is two tiered. The first tier is funded by all farms on up to 5% of milk on up to 50% of the class II price. The overproduction base on the second tier and it is a Temporarily Active Base. I personally am not in favor of a permanently active base. </li></ul><ul><li>The S.889 oversupply production base is only used as a last resort to control supply. You can produce all the milk you want but only get paid for what the market needs when there is an extreme oversupply. </li></ul><ul><li>Each tier has the potential of generating a Billion dollars to rebalance supply. </li></ul><ul><li>S.889 treats all farms sizes equally on both tiers. </li></ul><ul><li>Food pantries, School lunch and other food programs benefit from the Dairy Farmers Abundance. </li></ul>
Less Government, Taxpayer $avings <ul><li>The cost of S889 would be minimal since it would use existing entities such as ERS, Market Administrators, FSA and FAS. Much of the required data collection is already being done or could be done with little additional expense. </li></ul><ul><li>Support Program will be obsolete. Products are purchased at the market not support. </li></ul><ul><li>MILC Program eliminated. </li></ul><ul><li>All current Government food program obligations remain in effect like WIC. </li></ul><ul><li>S.889 was written by farmers and not Government. </li></ul><ul><li>Our Government’s role changes and finally brings Law and Order to the greed and corruption that has wiggled into our market. </li></ul>
Adapting to Globalization to Survive <ul><li>We need a new Business Attitude. </li></ul><ul><li>Common sense, law and order is needed to prevent the damage for everyone involved. We must think like other small business (retail stores) managing their inventory surpluses. </li></ul><ul><li>I Argue we can still be American Dairymen that strives to be above average. </li></ul><ul><li>To compete globally, we must become organized supply managers rather than chaotic supply managers. We must swim together or we all will sink together. </li></ul>
Trade Issues? <ul><li>Is S889 consistent with the U.S.’ WTO obligations? </li></ul><ul><li>Since the supply management is farmer funded, the main target is domestic supply and demand. Therefore, the legislation does not rely on government subsidies allowing us to believe it is consistent with the US’ WTO obligations . </li></ul><ul><li>Will S889 require changes to the current tariffs and quotas pertaining to imports of dairy products into the U.S.? </li></ul><ul><li>No changes in current tariffs and quotas would be required under this legislation. </li></ul>
Dairy Da’J’a Vu 1982 Changed Farm policy started the Wealth Transfer From Rural America
The Big Hurdle How do we Get this Done? <ul><li>“ United States Dairy Farmers & Friends” a new Grassroots political force. email@example.com </li></ul><ul><li>Represents the silent majority </li></ul><ul><li>Low cost lobbying using farmers and interested volunteers </li></ul><ul><li>Goals are oriented toward building unity between farmer and dairy consumer interests. We have built relationships with “Food Democracy Now” a Consumer Group on the cutting edge of lobbying. </li></ul><ul><li>Lobbying specifically for Dairy farmers and Dairy Consumers only </li></ul><ul><li>Uniting Dairy Farmers across country by using internet technology, communication and a name that we can all belong to. </li></ul><ul><li>Today we endorse S.889 for its Solutions. We are open to other solutions that correct the challenges before us. However, today farmers are running out of time. </li></ul>
S.889 In Summary <ul><li>New Non corrupt Price Discovery </li></ul><ul><li>Processors have incentive to Curb Imports when there is oversupply </li></ul><ul><li>Farmers have new signals to reduce supply instead of having milk price disasters </li></ul>