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Immediate need for a co-op “supply equals profitable demand” policy

Friday, April 3, 2020 CME class III closed showing May price at $12.18 and the Apr-Dec ’20 to average $14.19. Mr. Peter Vitaliano, chief economist at National Milk Producers Federation states in the below link “dairy difficulties to reverberate for several months”. Jim Mulhern, COO of National Milk Producers Federation in his April 1 newsletter states “…..and the guidance we received from our farmer and cooperative-leaders proved invaluable, as we set our policy and member-service priorities…..”. Other than asking for government handouts and reopening the (useless) 2020 Dairy Margin Coverage Program sign-up, was there a resolution passed to institute a national milk supply reduction to balance milk supply with ‘profitable’ demand? No. Please ask Mr. Vitaliano for his opinion on this idea.

It seems when dealing with the dairy industry, the producers’ pay price is always reduced to allow everyone in the industry to make a profit and/or lofty (guaranteed) salaries. Co-operatives, especially DFA should/cannot operate this way because Kansas law, Article 17-1602 7b states: Associations organized under this act shall be deemed non-profit, as they are not organized to make a profit for themselves or for their individual members, but only for their ‘members as producers’. DFA seemingly violates this law every day, and I’m sure the corporate folks will explain this away, BUT……….per USDA: “directors’ ‘standard of care’ would include, besides relying on co-op employees, the use of outside independent experts”. Therefore, DFA or any attorney DFA recommends likely lack independence to properly advise any board member on co-op issues. It is very well known that the board is very heavily influenced by DFA’s management. And yet, Rick Smith frequently stands behind the “actions of the board”.

Rick’s April 3rd “member update” does not suggest the obvious supply reduction concept and only discusses government solutions. An announcement by DFA tomorrow that it requiring a 5% production cutback across the nation, would increase our producer pay prices immediately. National Milk Producers Federation should announce this too. It is the co-op’s legal responsibility to profitably market its’ member’s milk, and the stated co-op’s priority “to deliver value” to DFA’s members, has not a profitable pay price. We producers do not want “value”, we want a sustainable producer pay price.

So, as the May $12.18 price comes around, my dairy will not get that price, we have gotten $1.50+ below the class three price for over 4 years, the lowest producer pay prices in the country! You board members have the leverage to change our future, why not adopt a permanent “supply to equal profitable demand” policy tomorrow? Ask Peter Vitaliano and Jim Mulhern to get this started at NMPF too. Thank you.

Gary Genske
NDPO Board Member

Reference: Article by Peter Vitaliano