Simple reason for dairy crisis - too much milk! And "free market" means CAFOs and more farm failures

The country’s farm crisis is showing no signs of abating soon, especially when we look at the plight of dairy farming in Wisconsin. More than 2 farms a day have closed in Wisconsin over the last 12 months, and while prices have rebounded some in the last couple of months, many of these losses are already baked in.

So why are we in this mess? The clear answer is “overproduction”, which depressed prices and also gave advantages to larger, corporate farms over everyday farmers. In fact, the US Department of Agriculture says that number of cows in Wisconsin hasn’t changed much at all in the last 5 years, and more milk is being made in the state than ever (2019’s figures for milk are based on the 1.5% increase in milk produced in Q1 2019 vs Q1 2018).

At the same time, there hasn’t been anywhere to sell all of this extra milk. “Data Wonk” Bruce Thompson had an in-depth article on the Wisconsin dairy industry in Urban Milwaukee last month, and he noted that Americans just don’t drink milk like they used to.

Long term dairy farm employment has suffered a double whammy. Like most agriculture, technology advances allow more production with fewer people. In addition, demand for milk has experienced a long-term decline, as shown in the next graph, based on data from the US Department of Agriculture. Since 1975, milk consumption per person has declined by 40 percent

As the chart above also shows, several products made from milk have enjoyed large percentage increases. However, the scale for milk products on the right is one-tenth that on the left for milk. Thus, growth in demand for milk products is unable to compensate for the decline in demand for fluid milk.

Ok, well what about selling the extra milk out of the country, as our econ textbooks teach us to do? This is where President’s Trump’s tariffs have caused an extra problem for Wisconsin farmers, because places like Mexico, Canada and the EU retaliated by putting duties on dairy products, which makes it harder to sell the products in those markets. As a result, more product ends up staying in the US, which causes even more of a surplus, and more downward pressure on prices.

But trade troubles seem to be minor factor in the big picture for the dairy industry, and more an indicator of Trump/GOP cluelessness in general. Kevin Drum in Mother Jones notes that while there has been a slight decline in cheese exports in the last year, it’s the flat prices and California’s extremely low cost of production is a bigger culprit.

Wisconsin Farmers Union president Darin Von Ruden added his two cents on the topic in an article written for WisPolitics.com. Von Ruden says that pumping out as much milk as possible and hoping to sell it overseas isn’t going to solve the economic issues that are literally killing dairy farms across the state.

We are deluding ourselves if we think that exports alone will forge a viable future for America’s dairy farm families. We’ve had 25 years of steadily increasing trade, and look where it’s gotten us: 352 Wisconsin dairy farms lost in 2016, 465 Wisconsin dairy farms lost in 2017, and 691 Wisconsin dairy farms lost in 2018. The ‘more exports’ mantra is not getting the job done for America’s Dairyland. The sooner we start exploring some other options, the sooner we’ll start to turn the tide of devastating farm losses in Wisconsin and all across the country.

In addition to being insufficient to help family farmers, the current ‘produce all you want, and we’ll export the surplus’ strategy articulated by USDA Secretary Sonny Perdue and others is phenomenally costly to taxpayers. Government spending on our current dairy insurance programs is expected to balloon to billions of dollars in the coming years.

In contrast, dairy economists Dr. Charles Nicholson from Cornell University and Dr. Mark Stephenson from the University of Wisconsin found in a recent study that if Congress had adopted policies in the 2014 farm bill designed to give dairy farmers an incentive to balance production with market demand, it would have significantly decreased government spending on taxpayer-subsidized dairy insurance programs, while doubling farmers’ Net Farm Operating Incomes and saving hundreds of dairy farms each year over the past four years. Impact to consumers would have been negligible – less than 12 cents more for a gallon of milk.

The evidence is clear: In addition to increasing demand through exports and dairy consumption, we also need to be looking at the supply side of the equation. Anyone who claims to be helping dairy farmers but is not willing to look at proven supply management strategies is asking farmers to build a viable future for themselves with one hand tied behind their backs. Given the depth and urgency of the dairy crisis, we should be using every single tool at our disposal to help farmers be profitable – increasing demand, yes, but also getting a handle on supply.

And I agree. The magic of Mr. Market (as it exists in 2019) is the biggest problem for small Wisconsin dairy farms. If we want any kind of family farms to survive, we need to take steps to protect the dwindling amount that are left, including price supports and supply management that can give more money per unit sold.

The state must also include a slowing if not outright banishment of CAFOs and other mega-farms, who have not only caused environmental damage for their communities, and have the advantages of large-scale production that it lets them dump milk at prices that drive lower-volume farmers out of business.

I don’t care if that’s technically “inefficient”, it’s a lot better for our rural communities. And last I checked, that’s something Wisconsin's state government should concern itself with over the profits of large corporations.