September 15, 2021
Text From Senator Kirsten Gillbrand, it’s what she said at this morning’s hearing:
“I call this hearing of the Subcommittee on Livestock, Dairy, Poultry, Local Food Systems, and Food Safety and Security to order. Thank you all for joining us this morning as the subcommittee meets to receive testimony on the growing need to modernize the Federal Milk Marketing Order System to bring the nation’s dairy pricing into the 21st century market.
I look forward to hearing from all of you and thank you all for sharing your time and expertise with us today.
Milk pricing is, rightfully, considered one of the most complicated economic systems in the country. When that system isn’t working for farmers, the ramifications reach from coast to coast, including in my home state of New York. New York is the fourth largest dairy-producing state and the nation’s largest producer of yogurt, and home to more than 3,000 dairy farms. When the milk pricing system leaves those farmers without adequate pay, the impacts are felt across our economy.
Dairy farmers are facing rising costs of production and current dairy prices aren’t covering them. Farmers’ costs for needs like labor and fuel have been increasing for years, and the corn and soy used for feed are seeing a historic price rally. The consolidation and corporatization of the dairy industry has only exacerbated these issues. Large dairy operations have driven prices well below the cost of production, and family farms can’t compete with the economies of scale that mega-producers have. Too many farmers across the country have been driven to bankruptcy, and in tragic cases, to suicide. Thousands of family farmers have been left with no choice but to leave the industry entirely. Between 2003 and 2020 there has been a 55% decrease in the number of dairy farms operating nationwide. We are in the midst of a modern day dairy crisis.
Those struggles have only been magnified by the fundamental change made to the Class I pricing formula in the 2018 Farm Bill, which switched from using the higher of Class III and Class IV to the average of the two plus 74 cents and applicable differential.
The 74 cent addition was based on the historic price difference between the two classes, but the historically calculated formula has failed to meet the needs of the present-day market.
Any time the price differential between Class III and IV is larger than one dollar and 48 cents, farmers are losing money. During the pandemic, government intervention left the price differential magnitudes larger than that.
Class III prices skyrocketed while Class IV prices increased only slightly, so using the average of the two meant the pricing never fully captured the change in the market. It left Class I prices as much as four dollars and 57 cents per hundredweight lower under the new formula than the old.
That, in turn, led to 436 million dollars in revenue loss to pools, record amounts of milk being de-pooled, and record low producer price differentials. All told, by summer of this year, the new formula had already cost dairy farmers more than 750 million dollars in lost income.
I want to be clear – the pandemic and the economic downturn are not the only causes of this problem, but they did exacerbate it. This system cannot adapt to market conditions and thus is not fairly compensating our dairy farmers. The 2018 formula change is a symptom of the larger problems with our federal orders. The current FMMO system is confusing, convoluted, and too difficult to fully understand. Different orders have different rules and some parts of the country are not even under orders.
The system is inadequate and out of date – we are using an almost 100-year-old system, which had its last major reform more than 20 years ago, for pricing for an industry where no dairy farmer is running their farm the way they would’ve 100 years ago. They should not be beholden to a price system that operates as if they are.
We must put the power back in farmers’ hands, help them recoup their losses, and build a system that ensures they get better prices moving forward so they aren’t put in this position again. To do that, it’s going to take the combined efforts of farmers, processors, and cooperatives. Today, we will be hearing from all three on why the current system is in need of reform. I look forward to their testimony.
And I look forward to working with you, Senator Hyde-Smith, to address these issues and more. With that, I recognize my friend Senator Hyde-Smith for any opening comments she’d like to make.
Also, State Senator Tom O’Mara has joined other members of the Senate Republican Conference in a letter to Governor Kathy Hochul calling on the Wage Board to delay any further action until at least December 31, 2024. The Board is scheduled to meet again later this fall to reevaluate the 60-hour overtime threshold. O’Mara says the threshold was put in place as part of a comprehensive “Farmworkers Fair Labor Practices Act” enacted by former Governor Andrew Cuomo and the Legislature in 2019. O’Mara voted against the act and at that time singled out the Wage Board provision for particular opposition. The three-member board was granted the power to change the law without the Legislature’s approval. In a September 13, 2021 letter to Hochul, O’Mara and his colleagues wrote, “The downstate interests that continue to push for lowering the threshold have argued that a 40-hour work week and overtime pay are standard in manufacturing and other industries. Their position suggests a misguided understanding of the nature of New York’s agricultural community, which is not dominated by large, corporate-supported factory farms that are common in the Midwest and West. In New York, 96 percent of farms are small, family-owned businesses. These hardworking agricultural producers drive the economies of rural communities across the state and help ensure the availability of quality, in-state sourced farm products for New Yorkers.”