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Income streams need to expand
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Income streams need to expand

CAMBRIDGE, Wis. – U.S. Department of Agriculture Secretary Tom Vilsack recently visited Hinchley Dairy Farm near Cambridge. After a tour of the farm’s robotic-milking systems and a conversation with Tina Hinchley and her daughter Anna Hinchley, Vilsack and a group of Wisconsin dairy-industry stakeholders met for a discussion about the recently updated Dairy Margin Coverage Program. They also discussed ongoing concerns about the Federal Milk Marketing Order.

Vilsack began the conversation noting that as efficient and productive as U.S. agriculture has been, profit often has been forgotten. The effects of the COVID-19 pandemic also have shown that the country’s agricultural system must be balanced with resiliency and opportunities for small- and mid-sized farms to “be able to make it,” he said.

In the United States currently, the majority of income on 89.6 percent of farms isn’t generated by the families who own and operate the farms, Vilsack said. Those farms often depend on additional income earned off the farm.

The country’s other 10 percent of farms are doing well and are probably very large, he said. But the USDA has a responsibility to determine ways to significantly expand the number of income opportunities farmers have. Midwestern-farmer revenue streams have traditionally been limited to selling commodities.

The USDA is looking to expand the number of income streams. New income streams could come as the USDA and the agricultural industry learn more about climate-smart agriculture and precision agriculture, Vilsack said. The conversion of agricultural wastes could create new revenues. Manure, for example, could be used for more than just fertilizing crops. It could be used in the production of a wide variety of fuel, energy, materials and chemicals.

There’s also the ability to store and sequester carbon to reduce the country’s environmental footprint. There’s a great opportunity in rural America to use land as a carbon reservoir, he said; farmers could be paid for the ability to do that.

Local and regional food systems play an important role in value-added agriculture. Wisconsin is one of the country’s leaders in that area, with its reputation for cheese. Cheese is a value-added opportunity that many small dairy operations are embracing to create another revenue stream, he said.

The USDA is and will likely continue to invest – until at least the middle of 2022 – in programs that support local and regional food and agriculture systems that create climate-smart opportunities.

“As we create more revenue streams and more information about how to be precise, hopefully that will provide even more opportunities,” he said.

Kevin Krentz is president of the Wisconsin Farm Bureau Federation. He thanked the USDA secretary for recent improvements to the Dairy Margin Coverage program. The production increase has been long awaited for a number of farms that have increased production in the past six to seven years.

The USDA recently expanded the Dairy Margin Coverage program for 2022. It will enable dairy producers across the country to enroll in supplemental production. Supplemental Dairy Margin Coverage will provide $580 million to better help small- and mid-sized dairy operations that have increased production through the years but were unable to enroll the additional production. Farmers will now be able to retroactively receive payments for supplemental production.

The USDA also updated how feed costs are calculated, to make the program more reflective of actual dairy-producer expenses.

“That’s greatly needed by small farmers across Wisconsin,” Krentz said.

He asked Vilsack what can be done to help fix the federal milk-marketing order to return more dollars to the farm gate, and to gain farmer trust in the pricing system and the de-pooling process. Vilsack said with the updated Dairy Margin Coverage program, farmers with small- and mid-size farms will be able to update and upgrade their production, which will lead to additional resources being provided now and the future.

“We estimate an additional $20 million coming into Wisconsin for producers as a result of the changes that have been made in terms of additional production history and the feed equation,” he said.

Disruption and challenge occurred with de-pooling during the COVID-19 pandemic. That was due in part to major purchases by the government to help people through a difficult time, he said, but it created an unfortunate circumstance,

“We’re in the process now of finishing negotiations with haulers and distributors to provide them resources to create a better balance,” he said.

That will help reimburse some of the people who weren’t treated very well during that situation, he said. Wisconsin and Minnesota dairy producers should see an additional $30 million coming this year. Every dairy farm is different, but the average dairy farm can expect to see an additional $13,000 in support as a result of the adjustment. As of Nov. 1, 2021, Wisconsin had 1.278 million milk cows in 6,618 licensed dairy herds. That's a state average of 193 cows per licensed herd.

The dairy industry’s challenge is to gain national consensus about the federal milk-marketing order. Dairy farmers from different regions have differing views on what it should be. Vilsack suggested the industry itself needs to work through the process and present a plan to the USDA. Dairy farmers from around the country need to propose solutions; the USDA then would likely be interested in providing assistance to help, he said. Krentz said he had just returned from an American Farm Bureau meeting, which is having farmers participate in those conversations.

Sarah Lloyd, a dairy farmer from Wisconsin Dells, Wisconsin, and a board member of the Wisconsin Farmers Union, thanked the USDA for the recent adjustments to the Dairy Margin Coverage program.

“We’ve used the program at our farm (where we milk 450 cows),” she said. “Our difficulty has been covering our cost of production as we see volatility.”

The Wisconsin Farmers Union is part of a coalition of organizations and farmers across the United States called Dairy Together. The coalition is trying to achieve consensus on policy mechanisms that can properly deal with the milk-price system.

Some people think the industry should replicate the Canadian supply-management system. Canadian farmers do well in that system, but Canadian consumers pay significantly more for dairy products – sometimes a dollar or two more for a gallon of milk, Vilsack said. The U.S. dairy industry needs to find a way where American consumers aren’t the ones paying for support.

“If they’re paying for it, they may encourage their politicians not to vote for it or they’ll buy another product,” he said. “And it’s not as if dairy is the only game in town. People understand there’s a lot more competition for food and drink today than there was five, 10, 20 and 30 years ago. We need to understand the competition so the pricing of products becomes more important.”

Canadian farmers were invited by the Dairy Together coalition to share how their system works. After hearing from the Canadians, the group decided it wasn’t politically feasible to have something like that quota system in the United States.

Dairy Together has been working with dairy economists at the University of Wisconsin-Madison to evaluate a market-access-fee mechanism. It had been introduced in a previous farm bill so it had some support then. The mechanism is a growth-management plan that tries to put the brakes on when overproduction happens, Lloyd said. With margin protection and other support systems for farmers, the taxpayer must pay when the market declines.

What the Dairy Together group aims to do is determine the signals the market is sending.

“(That’s so) people can take their foot off the gas rather than put the pedal to the metal,” she said.

Dairy-farmer groups from Wisconsin as well as California, Vermont and Michigan are in the Dairy Together discussions.

“We want to bring a unified solution so we don’t have to ask taxpayers to bail us out when the going gets tough,” she said.

Lynn Grooms writes about the diversity of agriculture, including the industry’s newest ideas, research and technologies as a staff reporter for Agri-View based in Wisconsin.

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