The following is a commentary by Wisconsin Farm Bureau Director of National Affairs, Tyler Wenzlaff.
The flow of raw milk is a complex ecosystem where producers, processors and consumers are interconnected. One crucial aspect of this chain is the concept of “make allowances,” which indicates the margin or compensation processors receive for converting raw milk into consumable goods. This system is designed to ensure processors can cover their costs and earn a profit. But, raising these make allowances may result in repercussions on farmers’ bottom lines.
Possible Harm To Small-Scale Operations
The new Federal Milk Marketing Order from USDA proposes to raise the make allowance. For farmers, this translates to receiving lower returns for their milk. For instance, dairy farmers might find that the price they get for milk drops as processors take larger cuts to cover increased make allowances. This reduction in income may harm small-scale farmers who already operate on thin margins and rely on fair pricing to sustain their livelihoods.
While processors may claim their gains will be offset by the return to the “higher of” pricing formula for class 1 mover, it’s important to remember the change simply returns the pricing formula to where it was before the change in the 2018 Farm Bill. This won’t return the billions dairy farmers lost because of the change, as well as the dairy farmers who struggled under the “higher of” pricing formula.
Possible Economic Implications, Decreased Food Security, & Farm Vulnerability
Farmers already contend with a variety of economic pressures, including volatile market prices, unpredictable weather and rising operational costs. The added strain of receiving lower payments due to increased make allowances exacerbates these challenges. For many farmers, additional pressure can push their financial situations to a crises, leading to farm closures or additional consolidation. This not only affects farmers, but can also have broader economic implications, including agricultural land loss and decreased food security.
When farmers face reduced profitability, their capacity to invest in their businesses diminishes. Investments in new technologies, equipment or practices that could enhance efficiency and productivity become less feasible. This lack of investment can stifle innovation and improvement within the farming sector, hindering long-term growth and sustainability. The inability to invest can make farms vulnerable to external shocks, including unfavorable weather conditions or fluctuating market prices. This further jeopardizes farm stability.
While make allowances are essential for ensuring that processors can cover their costs and remain profitable, increasing allowances can significantly impact farmers’ bottom lines. By increasing costs for farmers, reducing their profit margins, creating market imbalances and exacerbating economic pressures, higher make allowances may threaten the sustainability/vitality of dairy farmers. USDA’s Order 30 must strive to balance the needs of farmers and processors to ensure equitable distributions of profits across the dairy industry. This balance is crucial for maintaining a healthy and sustainable agricultural industry that supports both farmers and processors alike.
Your Voice Matters
Wisconsin dairy farmers have a choice to make in December. This choice is on whether to accept USDA’s proposed changes or dissolve the Federal Order altogether. In the meantime, Wisconsin dairy farmers should submit comments to the federal registry which can be found at: https://wfbf.com/policy/current-issues/ and ask USDA to lower the make allowance and return profitability to dairy farms of all sizes.
In the face of the USDA’s proposed changes, it’s crucial that you advocate for yourselves and livelihoods. This change threatens to further squeeze the incomes and stability of hardworking dairy farmers like you. By speaking out, you can highlight the detrimental impact higher make allowances will have on your business and rural communities. Stand firm and demand fair treatment to ensure a sustainable future for your farms and families. Advocate for fair prices, equitable market practices and the continued vitality of the dairy industry. Your advocacy can make a difference in shaping policies that support the entire dairy community.
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The Wisconsin Farm Bureau Federation is committed to embracing sustainable solutions for a stronger tomorrow. Made up of 61 county Farm Bureaus, it represents agriculturists and farms of every size, commodity and management style.
