Federal milk marketing orders exist under the authority of the Agricultural Marketing Agreement Act of 1937. The current northeast order came into effect in the late 1930s after farmers voted for it in a referendum. In 1937 UVM Extension published a booklet titled "This Milk Problem" by Harry R. Varney to educate farmers so that they could make an informed vote. (Click on the photo to see a larger view.)The booklet gives a good overview and history of the dairy industry in Vermont as of 1937. Times on the farm were difficult in the 1930s, as they are now. It is interesting to compare and contrast the situation in the 1930s with today. If any reader of this blog would like a copy of this booklet please contact Ruchel St. Hilaire for a paper copy.
The best minds in the northeast have been thinking about "this milk problem" for over 70 years. (Click here for a recent example.) It's still a problem, perhaps now more so than at any time since the 1930s. I certainly do not have the answer to the problem. But that doesn't mean I don't think about it. I have spent most of my life around dairy farmers, and yet there are many things about the marketing of milk that I don't understand. While I don't have answers, I certainly have questions. Please note that the questions below are only "George" questions. They are not "Yankee Farm Credit" questions.
I often hear it said that "the system is broken." I wonder if this is true. It seems to me that the system of federal milk marketing orders was designed to make sure that all farmers receive "equal" prices, adjusted for such things as milk composition and distance to market. No matter how good a job a farmer or his/her cooperative does in marketing milk, all farmers receive the "blend" price. The system was designed to make sure that all farmers benefit when market prices are high. And of course all farmers suffer when market prices are low. Isn't the system working exactly as designed? Maybe we should ask the question: Is it still the right system? Does the current system itself inhibit innovative thinking about marketing?
I also often hear it said that proximity to the Boston and New York fluid markets is a strength of the northeast dairy industry. The booklet "This Milk Problem" discusses the importance of the Boston fluid market in some detail. This was certainly a strength at one time. I wonder if it is still a strength or if it has become a weakness. Perhaps a mortal weakness. Does the northeast dairy industry's strong attachment to fluid markets inhibit innovative thinking when it comes to marketing?
A few observations lead me to wonder about this. First, it was not always this way. Before 1900 fluid milk shipments to Boston were not significant because there was no easy way to transport milk. Butter and cheese production were more important. In the 1890s the largest butter factory in the world was in St. Albans, Vt. ("This Milk Problem" p. 8) If fluid markets were not always king in the past, will they necessarily always be king in the future? Second, New Zealand did not become a world power in the dairy industry by selling fluid milk. They found a way to be profitable with other dairy products. Third, the parts of the northeast dairy industry that have become famous and (often) successful in recent years are not selling fluid milk. Examples: Ben & Jerry's, Stonyfield, Cabot, Jasper Hill and the many onfarm cheesemakers. Whether through old technology (cheesemaking) or new technology (ultrafiltration) maybe the value in milk is in the components. Does the current marketing system allow this value to be fully realized?
One last set of questions. I often hear it said that one goal of food marketing policy is to provide cheap food for consumers. I ask—why? The goal of a marketing policy should be to create and capture value. The organic sector has figured that out, and kudos to them for doing so. Perhaps the conventional sector could learn something about marketing from the organic sector. A question I would ask when formulating a marketing policy is: How does a policy of cheap food help farmers create and capture value?
Well, I'd better stop asking questions, and get back to my day job. I am only a banker. I leave the job of finding markets for the products that farmers wish to produce where it belongs: with the farmers themselves and their processing/marketing co-ops.
