Tuesday, November 5, 2019

THE VERMONT AND NATIONAL DAIRY DILEMMA---BALANCING MILK SUPPLY AND DEMAND, A HISTORICAL PERSPECTIVE

According to historical documents, it was inevitable that Vermont would become a dairy state after the demise of Merino sheep due to national and international competition,.  It had the soil, climate, and the topography that grew grass well for livestock that have the ability to convert this energy to meat or milk.  By 1850, St. Albans had established itself as the butter capital of the state and region, with many buyers showing up on market day, Tuesday during the spring, summer and fall.  According to records, this change happened quickly, as prior to 1850 dairy was incidental to other things grown on the farm.  With the growth in butter and cheese, the Vermont Dairymens Association was formed in 1870.  It is said to be one of the oldest in the United States.  By early 1900, there were 186 creameries and 66 cheese factories in the state.

By 1900, Western competition became acute, and the introduction of margarine created new economic threats.  Cities like Boston began to reach out for a source of fluid milk, and the first milk train left Bellows Falls in 1890, resulting in new challenges to dairy pricing from city buyers.  This led to the enactment of state and federal laws that encouraged cooperatives as a way to bargain for better pricing from buyers. In 1924, Vermont Commission of Agriculture E.S. Brigham remarked that unless stimulation of dairying in other parts of the country is checked, Vermont farmers may expect competition exceeding that which they have earlier experienced with consequently lower pricing.” 

Over a period of many years, various approaches have been used to help create conditions for better farm gate pricing for Vermont and other dairy farmers.

Historical perspectivebalancing milk supply and demand.

• 1917 New England Milk Producers Association:  During this period, there was deep concern over adequate pricing to dairy farms in New England when fluid milk demand from the cities resulted in a few buyers controlling the price to dairy farmers. It is said that the rapid urbanization of the 1880’s and 1890’s pushed city milk sheds far into the rural hinterlands, induced farmer specialization, and encouraged the growth of large milk distributors.  By 1914 a few companies sold 40 percent or more of the milk in New York, Chicago, Boston, Detroit, and other cities.  Smaller dealers often followed price leads from these large firms, thereby diminishing the economic leverage of individual producers. Herbert Hoover, then United States Food Administrator, formed a producer consumer Commission to determine ways to provide adequate pricing.  Under the agreed upon formula at the time, dairy producers were to receive a fixed price plus a reasonable profit.  Seasonal surplus of milk was to be manufactured into products without profits to dealers.  Farmers were to receive a surplus price (what the product brought in the market less the cost of manufacturing).  A milk administrator was appointed to police the surplus plan.  It is said that this mechanism for balancing supply and demand of milk production while quickly dismantled after the WWI Armistice, became the foundation for massive intervention in a highly demoralized industry after 1933.  Should be noted that in 1915 the Boston Chamber of Commerce did a thorough analysis of the marketing constraints faced by Vermont dairy farmers and recommended that farmer cooperatives be formed to guarantee better pricing for farmers.  Federal legislation to include Capper-Volstead Act in 1922 gave these farmer cooperatives limited anti-trust protection against price fixing.

• 1929: The Federal Farm Board was established by the Agricultural Marketing Act of 1929. The Board was President Hoover’s response to the downward spiral of crop prices in the years leading up to the Great Depression. The AMA promoted cooperatives (in 1926 a division of cooperative marketing was created within USDA), and the federal board had eight members representing the major farm cooperatives in the U.S.   The intent of the law was to have the cooperatives control production of crops and to increase exports as a way to better pricing.  The Board had $500 million from the U.S. Treasury to carry out its activities.  To increase dairy pricing, for example, the Board made a loan to Land of Lakes Dairy Cooperative to withhold butter sales and to purchase additional product from the market.  The Board also organized a dairy program with five regional butter-marketing associations as a way to provide aid to dairy cooperatives on production controls and marketing.  Dairy farmers were angered when it was suggested that farmers would be paid by the government to reduce the size of their herds in order to cut surplus dairy products.  This voluntary effort by farmers to cut production implemented through the farmer cooperatives failed to produce the desired results.  Prices continued to decline, and Treasury funds were depleted. This experiment on voluntary approaches through farm cooperatives to production controls set the stage for new farm legislation within the first 100 days of the Roosevelt Administration.

• ACTIONS OF ROOSEVELT ADMINISTRATION ON FARM PRICES

With the failure of voluntary approaches through cooperatives to address declining farm prices, there was an increased urgency among farm organizations for more direct federal intervention.  President Roosevelt asked Secretary of Agriculture Wallace to assemble farm leaders to reach a consensus on what could be done.  The centerpiece of the New Deal was developed by a well-organized farm-lobbying group, “and the statute was drafted largely by Frederick P. Lee, legislative counsel to the American Farm Bureau.” (see Libecap paper).  The aim of the Agricultural Adjustment Act was to raise agricultural prices relative to the purchasing power of farmers that had prevailed during the period 1909 to 1914.  The law allowed farmers to enter into agreements with the Secretary of Agriculture to reduce their acreage or production in what was deemed to be seven basic commodities; wheat, cotton, corn, rice, tobacco, hogs, and milk.  In return farmers would receive payments derived from taxes levied on processors.  Better compliance with classified pricing issues in markets like Boston was addressed through the issuance of federal licenses to milk dealers.

The Agricultural Adjustment Act was challenged immediately, and in the case of the U.S. vs. Butler, the Court found 6 to 3 that many provisions of the Act were unconstitutional based on the fact that they were an encroachment upon the rights of the States, and that it was illegal to tax one group (processors) to support another (farmers).  There were major divisions within the Court on the opinion.  Nevertheless, the Roosevelt Administration moved quickly to overcome these legal obstacles (later also trying to pack the Court with its supporters).  The Agricultural Marketing Act of 1937 provided clear authority for federal marketing orders and reaffirmed the marketing agreement provisions of the 1933 Act.  Instead of taxing processors to support farmers, general federal funds were used.

• 1933:  Following the major flood of 1927, Vermont undertook major study of all aspects of the State.  The report, Rural Vermont, A Program for the Future, The Vermont Commission on Country Life, 1931, had a section on agriculture to include dairy.  On dairy supply and demand, it states that the trend should be toward more nearly even or adjusted production, especially since a higher price without increased production costs is likely to result.   It recognized even then that the control of supply and demand was important in more favorable milk pricing.


• VERMONT AND NEW ENGLAND DAIRY FARMERS INTEREST IN 1937 ACT

In June of 1937, a conference of dairy leaders from four of the New England States (including Vermont), organized by the Governors of those states, unanimously adopted a resolution approving the federal control of dairy pricing (see Lewiston Daily Sun, June 26, 1937).  The resolution described those states’ control of the milk shed as being impossible because of interstate commerce laws.  The majority of the milk and cream going to Boston and surrounding cities came from states outside Massachusetts and so pricing controls could not be imposed.  This was due to the Commerce Clause of the U.S. Constitution.  Governor George Aiken described the dire economic situation facing Vermont dairy farms (approximately 10,000 at that time) and said that federal control of milk pricing “would save hundreds of dairy farmers in the State.”  In the same year, when Congress was debating the 1937 Agricultural Marketing Act, Governor George Aiken sent a terse telegram to Capitol Hill. “Informed that the Senate was stalled on a procedural issue, Governor Aiken wrote in true New England style: Dairy industry in peril, act without delay.” (See N.Y. Times Opinion on Milk Pricing, Oct. 3, 1994).    Prior to 1937, Aiken’s predecessor, Governor Charles Smith, had also expressed concern, saying that if action was not taken to overturn a Court injunction (in 1935, the federal government lost its case when it attempted to enforce the provisions of the federal license to milk dealers for classified pricing, but later over-turned on appeal), the Boston market would crumble and there would be a disastrous effect on interstate and intrastate commerce in milk and cream from Vermont (See Lewiston Daily Sun, May 5, 1936, Boston milk case). In his farewell address to the Vermont legislature, Governor Aiken said “state officials and several farmer cooperatives appealed for a federal marketing order.  As sufficient farmers voted, it went into effect and has led to the stabilization of milk prices in Boston and later New York milk shed.”

There have been discussions from the beginning and over a period of time whether the 1937 Act and the resulting marketing orders for dairy were intended to establish parity prices for farmers by controlling the supply and demand for milk.   However, USDA from the beginning of the Act, has contended that the chief objective of marketing orders was to stabilize milk markets through orderly marketing, not to raise milk prices to artificially high levels.  This interpretation relative to dairy marketing orders exists to this day.

• TODAY’S CHALLENGES

While there still are dairy market orders to assure “orderly marketing,” the majority of Vermont dairy farms today still face economic challenges due to wide pricing swings as a result of changes in markets, periodic supply and demand imbalances, and a federal price support structure way below their cost of production, an outdated classified pricing system with changes in the product mix in the classified pricing formula away from fluid milk, and dependence of export markets for higher domestic pricing.    Methods to provide better financial returns to dairy farmers in Vermont and in the Northeast have been a continuing challenge to farm leaders and policy makers over a very long period of time. A minimum dairy parity pricing system was introduced into federal law in 1949 following WWII.  This law could not withstand cost increases to the Government resulting from too much production of milk in the late 1970’s and early 1980’s when the parity price was established, per the advocacy of dairy cooperatives and their national policy arm, NMPF, at too high a level(75 to 85% of parity) causing large surpluses of butter, cheese, and non-fat dried milk. (With then Congressman Jeffords of Vermont, an ardent supporter of the dairy industry, I worked as a staff aide to help negotiate a pricing replacement to parity as a result of federal budgetary pressures and as part of the 1981 Farm Bill Conference Committee. The dairy subcommittee of the House Agricultural Committee proposed a Canadian Quota System as a remedy, only to have it opposed by the dairy cooperative national leadership). This change in federal dairy policy in 1981with the elimination of the minimum of 75 percent of parity as established in 1949 under federal law, marked the beginning of deregulation of the dairy industry in the United States.  Other actions have been taken over time to address the pricing issues of dairy farmers to include the whole herd buyout, the Northeast Dairy Compact, National Milk Producers Federation Dairy Farmers Working Together, and in the more recent past the milk income loss program, or MILC, and now the federal dairy margin protection program..  Some states have taken action to increase milk prices to farmers by imposing over-order pricing where they have more control over milk supply and are not confronted by interstate commerce clause issues (Maine). Some farmers have also moved to organic dairy production as a way to confront lower commodity pricing through supply and demand controls (Organic Valley Dairy Cooperative as an example).   Others have engaged in greater on-the-farm diversification to include energy systems and the production of value-added products such as award-winning cheeses and butter.  Still today, due to consolidation at both the retail and wholesale levels and independence of many dairy farmers, dairy cooperatives do not collectively endorse a national supply management program (National Milk Producers Board voted against a national program instead relying on export markets, the dairy margin program, and markets for pricing). They have not historically been able to agree collectively over any extended period of time on ways to reduce production to achieve higher pricing. The national cooperative leadership supports, by recent votes, the continued allowance of unchecked market-wide consolidation, including the trend toward greater scale and size of dairy farm operations.  This latest trend is now resulting in the establishment of mega-scaled operations in other regions of the country, with increasing capability to withstand volatile and low commodity pricing.  This is further problematic for the Vermont dairy industry because both national and market forces preclude the competitive establishment of similarly scaled dairy operations in Vermont. The dairy sector still represents the anchor of Vermont’s agricultural economy (75 percent or so of gross farm income in the state), and longer-term unstable milk pricing issues still confront farmers, their cooperatives, and policy officials, and the working landscape in Vermont. 

The recent determination by AgriMark/Cabot Cooperative to announce a supply management program for their farmer members does address the cost of the cooperative in balancing excess supply of milk into powder in the region served by the cooperative member farmers.  While important in controlling the cost of the operation of the cooperative, it does not address the need for a national system to control supply that has been the subject of discussion for many years.  Unlike Canada, that choose a policy to support farm income in its national policy approach, the US policy has always tilted toward increased growth of the dairy sector and efficiency of production on the farm with methods to control major imports of dairy products into the United States( a mature market), and increased emphasis on exports as a way to increase farm gate pricingUnlike the policy approach in Canada, supporting farm income through production quotas and very strict import controls has not been the policy objectives in the United States policy. 

It should be understood that dairy cooperatives today market over 85 percent of the milk produced in the United States. Just as farms have consolidated in the US (over one-half decline from 1997 to 2017, USDA Statistics), so have dairy cooperatives (1964 there were 1244 and there were 118 in 2017),       



SOME HISTORIC RECOMMENDATIONS MADE TO THE THEN BOARD OF AGRICULTURE RELATING TO THE FUTURE OF AGRICULTURE WITHIN THE STATE THAT APPEAR TO BE RELEVANT TODAY AS WELL, EVEN THOUGH MARKETS HAVE CHANGED SIGNIFICANTLY

• In a paper entitled “The Farmer’s Future”, by Rev. G. F. Wright of Bakersfield, delivered at a meeting of the State Board of Agriculture in St. Albans on March 6 and 7th, 1872, he stated that “… it is useless for the Vermont farmer to compete with those of the West in raising those few staples of product that can be naturally raised in the west, and that will bear storing and transportation without risk of injury, and without too much expense.”  He went on to say “that the Vermont farmer has a substantial hold on the future.  His soil, his climate, his abundance of pure water, his proximity to markets of the growing cities and villages, give him unrivaled facilities for success….   Only those will prosper who use their minds in studying how to cater to the demands of this growing market and this changing state of things.”    Others expressed similar views.
• G.G. Small, Esq. of Morrisville stated to the Board (see 1873-1874 Biennial Report of the Board) that, “Vermont as a State is well adapted to butter making.  We cannot compete with the West in beef, pork, wool or grain, and not much longer in butter unless we are making a superior product.”
• M. O. Howe of Fayetteville in the report of the State Board of Agriculture, 1875-1876, stated that, “it is the value of the products, not the quantity, that indicates the profits of agriculture.  There will continue to be the difference of freight and commissions between the markets of the East and the West.”
• Some seven years later, Lyman W. Peet of Cornwall, Vermont in a paper presented to the State Board of Agriculture in 1883-84 entitled “Eastern and Western Farming”, stated that “only by the use of greater skill and capital by which production shall be cheapened with a quality so superior as to command the highest price in the market, can we hope successfully to meet Western competition.
• In the Tenth Report of the Board of Agriculture in 1888-1889 a writer stated that “the selling price of all agricultural commodities tends to approach the lowest cost of production, and the West with cheap feed can produce at less cost than New England.”
• An author in the 15th and 16th Report of the Board of Agriculture for 1894-1895 stated that, “our own state has seen one industry after another go down under the fierce competition of cheap western land.  Our sheep, beef, and grain production have all been borne down through this cause, and today our dairymen are manfully contesting the ground with these same forces.”

These individuals, like some before and many after them, were visionaries.  They had seen change, had been part of it, and recognized the strengths and competitive advantages of farming in Vermont. As noted above, an important advantage to the Vermont farmer was being near emerging markets and growing and producing products of the highest quality to meet nearby consumer needs.  Even later, after the creation of the State Department of Agriculture, there were similar views.  Then Commissioner of Agriculture E.S. Brigham in his annual report stated, “The products that belong in the East are those that are adapted to our soil and climate and are needed in large market centers.” (Fifth annual report of the Commissioner of Agriculture, 1913). 

Recent CoBank Dairy Reports have made several recommendations relative to the future of the dairy industry and smaller farmers and their cooperatives (see A New 
Era of Dairy Price Cycles: Structural Change Ahead in the Dairy Industry).  These include;

• While small farms will be challenged to compete with their larger counterparts on a cost basis they can be positioned to quickly adapt to evolving consumer tastes and preferences and tap into niche markets for their milk.  Examples of this include organic, grass-fed, local, and other options marketed as premium dairy products.
• Cooperatives may best serve their members who operate smaller farms by investing in processing assets or branded products which can produce counter-cyclical returns to their membership.  The risks to the status quo may be greater than climbing up the value chain, the report maintains.
• The reports also note that dairy consumers are increasingly removed from the farm and are seeking more transparency when it comes to how and where their food was made. This will not be easy to achieve, the report notes.

BLOGGERS COMMENTS:  Vermont has used many approaches over the past based on many studies to address the dairy economic situation.  These has included direct payments to dairy producers, the current use tax program (agriculture and forestry), the PDR or Purchase of Development Rights Program, protection of prime and statewide soils under Act 250, an agricultural lending program at VEDA, conservation cost sharing, funding for cow power and methane digesters, farm viability, and working landscape funding.  While these programs, as well as many federal initiatives have been of great assistance, they have not stemmed the loss of dairy farms in the state nor the trend toward economies of scale that continue to occur in the industryThe attainment of a national supply management program, based on past actions, is unlikely as well if history is any indication.   A recent NRP/VPR poll of 800 Vermonter’s indicated 72 percent felt that the dairy industry is very important to Vermont’s sense of itself (See Poll: Vermonters overwhelmingly support dairy industry, WCAX, Burlington, Oct 33, 2019).  With this interest, it is clear that a new and BOLD approaches are needed as called for in the recent papers to include the Call to Action by the Vermont Dairy and Water Quality Collaborative.  This is a pivotal turning point for the state’s cultural and historic identity as a “dairy state”.  Without BOLD State governmental policy changes and action to resolve the crisis, farm attrition and destressed operation will persist, and the Vermont dairy industry and working landscape will continue to confront only a perilous future.

Some of the BOLD recommendations that have been put forth from recent studies and reportsinclude:
*Create a new quasi-public entity that brings together many functions scattered now all over the place, under-resourced, and without a unified strategic focus: A vision for the future of agriculture and the working landscape in Vermont is critically needed that also addresses the emergency in the dairy sector, with goals and a set of policies to achieve that vision.  Over time it has been demonstrated, from the creation of Act 250, to renewable energy standards, to the Council on the Future of Vermont, to Farm-to-Plate to the creation of the Vermont Housing and Conservation Board, that citizen leadership outside of the structures and constraints of state government is where change happens. It notes, in its recommendations (Vermont Dairy and Water Quality Collaborative), that the state should provide coordinated, qualified technical assistance and investments through this entity dedicated to the future of environmentally sustainable agriculture.  To be effective, this entity must be housed outside of regulatory and compliance programs and must be closely coordinated with state and federal agencies.
*Revise State’s regulatory powers over milk pricing and farm practices:  It is contended by a recent study (Allbee and Smith), that the state now has the regulatory authority to address the fundamental producer pricing problem confronted by Vermont dairy farms, and the accompanying distressed over-supply of raw milk production, and thereby also is able to achieve remediation of harmful farming practices at substantially lower public costs.  It contends as a majority of the milk is now processed in the state so that the state is not confronted as in the past on the federal commerce clause issues, and like Maine has an opportunity to price the raw milk product resulting in a more sustainable price for Vermont dairy farmers. It notes that the Vermont dairy industry has become a leader in the production of high-value dairy products, and the State has renewed regulatory authority over the producer pricing of raw milk used to make these products.  As a result, the industry, and the state, are no longer solely dependent on remote federal oversight of pricing.
*Governor should convene a Blue Ribbon, Cabinet level, Vermont Dairy Industry Task Force: This Task Force needs to be challenged to implement an integrated program of market regulation and economic development, to renew a durable future for the Vermont dairy industryand other agricultural enterprises and the state’s working landscape, and to restore effective environmental stewardship.
*Develop a comprehensive, and cross-government, economic development plan:  Such a plan is badly needed, it is suggested, to support expanded and new processing and manufacturing capacity for the production of high-end Vermont milk and dairy products, to move up the value chain from commodity products.  This should be a visionary, comprehensive and cross-government, economic development plan, as has been provided for other signature Vermont companies, to support expanded and new processing a manufacturing capacity for the production of high-end Vermont milk and dairy products.
*Restructure Vermont’s regulatory framework to achieve farm and watershed nutrient balance and to focus on outcomes rather than on mandates that require specific practices and institute a transition program for land that should not be in intensive agriculture (see Vermont Dairy and Water Quality Collaborative Action Plan).  The whole farm nutrient balancing for farms has been used in the Netherlands and for Lake Taupo in New Zealand to address very significant Ph and N issues to water bodies.
*Encourage coalitions of farmers, conservationists, environmentalists, residents, consumers, policy officials, and ag development and business leaders in taking an active role in developing mutual solutions. It is stated in the Journal of Dairy Science, American Dairy Association, in an invited review: Sustainability of the US Dairy Industry,2013, that sustained engagement between and among producers, various sectors of the industry, consumers, and citizens will be essential to recognize and implement more sustainable farm practices.

It has been stated that the quality of our water, the viability of our farms and associated businesses, and the fabric of our rural communities are all at stake.  Immediate, incisive, effective, and enduring leadership and action are needed immediately (see Vermont Dairy and Water Quality Collaborative Action Report). 

In the publication, The Vermont Difference, Perspectives from the Green Mountain State, in the Chapter, The Vermont Destination: Working Countryside and Bucolic Retreat, the author states the importance of the working landscape.  “Defined by its iconic rural countryside of farms, forests, villages, and small cities, Vermont’s working landscape has emerged as key to the brand and quality of life of the state and to its future.  In many ways, the land shapes Vermont’s perceived authenticity and its attractiveness to visitors from around the world.”  

Vermont has the rare opportunity to help rescue its largest agricultural industry and to plot a unique Vermont future for agriculture and the dairy industry in the state. Healthy food, clean water, respect for labor, care for animals, profitable farms, bucolic pastures—all are images that Americans have of our state.

REFERENCES:

• See blog dairy issues in blog Whatceresmightsay.blogspot.com
• See Vermont Dairy and Water Quality Call for Action, March 2019
• A 2018 Exploration of the Future of Vermont Agriculture, October 2018, by UVM Extension, VHCB, Vt Land Trust, Farm to Plate, VCRD, et al.
• Re-establishing a Viable Vermont Dairy Industry-Report and Call for BOLD State Policy Change and Action, DRAFT REPORT, by Roger Allbee and Dan Smith Esq, September 2019
• Agricultural Supply Control: Lesions from the U.S. Dairy and Potato Industries, Choices Magazine, 4th Qtr., 2015
• Herbert Hoover, the U.S. Food Administration, and the Dairy Industry, 1917-1918, by James L. Guth, Associate Professor of Political Science, Furman University, The Business History Review, Vol. 55, Np 2(Summer 1981), pp. 170-187
• National Milk Producers Federation, Herd Retirement Program, Dairy Farmers Working Together, 2003-2009
• Farm Relief, 1929-1941, Encyclopedia.com
• Hoover Federal Farm Board History according to historical documentary, 1929
• National Farm Bureau, Reviewing U.S. Dairy Supply Management Efforts, Market Intel;. April 15, 2019
• USDA, Milk Diversion Program, Jan 84-Mar 85
• Dairy Market Stabilization Program, 2014 Farm Bill
• Farmers Increasingly Look to Supply Management, Successful Farming, Leah Douglas, May 3, 2018
• Milk Pricing and the Vermont Dairy Industry, James M. Jeffords Vermont Legislative Research Service, The University of Vermont 
• See U.N. Food and Agricultural Organization Report, Commodity Stocks and Supply Management by Thomas Lines, January 2014 “Policies known as supply management came to define farm policies in late 20th Century”
• Seeking to Ensure the Future Viability of Vermont’s Dairy Industry, Report of the Thirty-Third Grafton Conference, The Windham Foundation, Grafton, 2009
• Agricultural Focus Group, Report to Governor’s Commission on the Economic Future of Vermont, November 1989
• Committee Passes Lawrence Bills to Aid Struggling Dairy Farmers in Pa, My ChesCo Website, October 27, 2019
• Dairy Monthly Imports, September 17, 2019, USDA, Foreign Ag Service
• US Trade Policy on Dairy is Simple: We Basically Allow No Imports at All, Mother Jones Commentary by Kevin Drum, June 20, 2018
• Chapter 14, Vermont’s Agricultural Future, The Vermont Papers, Frank Bryan and John McClaughry, Chelsea Green Publishing Co., 1989
• The Vermont Difference, Perspectives from the Green Mountain State, The Woodstock Foundation and Vermont Historical Society, 2014
• How the U.S. system of dairy import quotas and tariffs may be as protectionist as Canada’s, by Tom Blackwell, National Post, September 11, 2018
• A New Era of Dairy Price Cycles: Structural Change Ahead in the Dairy Industry, by Ben Laine, CoBank, Senior Economist, October 2018
• U.S., Mexico, Canada are worlds apart for dairy farmers: here are the major differences and how the dairy industry works in each country, by Rick Barrett, the Milwaukee Journal Sentinel, Oct. 28, 2019
• The Northeast Dairy Compact, by ILSR, The Institute for Local Self-Reliance, November 2008
• Background Information, The Commodity Credit Corporation, the Farm Service Agency, USDA, August 1996
• Food and Agricultural Policies in the 1980’s, Major Crops and Milk, The Congress of the United States, Congressional Budget Office, March 1981
• Dairy Co-Op to Impose Penalty on Farms That Make Too Much Milk, John Dillion, VPR, October 21, 2019
• Trump trade war with China takes toll on struggling Upstate NY dairy farmers, by Mark Weiner, Syracuse.com, October 29, 2019
• The Economic Shifting Winds that continue to negatively impact the longevity of conventual dairy farming in Vermont, A Model to Achiever A Sustainable and Economically Viable Dairy Farm Sector in the State, Testimony of Roger Allbee to Vermont House and Senate Agriculture Committees, 2017
• We must reject the ‘go big or go home’ mentality of modern agriculture, by Roger Johnson, National Farmers Union Opinion Contributor, The Hill, October 8, 2019
• The Farm Economy, Forum of the Farm Foundation, October 22nd, 2019, Washington, D.C.   Discussion by Dr. John Newton, National Farm Bureau Economist; Dr. Keith Knobel, Miss State University; Dr. Seth Meyer, FAPRI
• Dairy Cooperatives: Potential Implications of Consolidation and Investments in Dairy Processing for Farmers, US Government Accounting Office (GA)-19-695R) published September 27, 2019

Roger is a former Secretary of Agriculture, Food and Markets for the State of Vermont.  He has been the Ex. Director of the USDA Farm Service Agency for Vermont, has been a Vice President and member of the Senior Management Team for the former Farm Credit Banks and Banks for Cooperatives of Springfield, MA (then the largest farmer and cooperative lender in the Northeast U.S.)  He has served on the professional staff of the U.S. House Committee on Agriculture for the late U.S. Congressman Jim Jeffords, where he was responsible for dairy and soil conservation policies. He was the first consultant to the Governor’s Current Use Advisory Committee in 1979. He has served in the past as Chair of the Animal Products Advisory Committee on trade to the U.S. Trade Ambassador and the U.S. Secretary of Agriculture.  He has been a member of the international practice group for a D.C. law firm, where he participated as an NGO in the Seattle Round of Multi-National Trade Negotiations. He has a B.S. and M.S. Degrees in Agricultural Economics. He is a veteran serving in the U.S. Army as a Captain during the Vietnam period.  He is the recipient of numerous honors and awards.


Monday, February 18, 2019

CELEBRATING 100 YEARS OF THE HISTORY OF TWO DAIRY COOPERATIVES

This year is the 100th year of operation of two well known cooperatives that have farmer members in Vermont, the St. Albans Cooperative and the Cabot Cooperative.  Both were started in 1919, at a time of great economic turmoil in the US, when prices to farmers were being challenged.  As business units, both have changed over time to better meet consumer and their farmer member needs.  Cabot merged with AgriMark Dairy Cooperative in 1992 and today is part of a larger cooperative organization that serves its farmer members in the New England States and New York.  Cabot is well known for its specialty cheddar cheeses.  St. Albans today supplies both Ben and Jerry’s with quality cream for its Ice Cream, and Commonwealth Dairy with milk for its yogurt.

The early 1900’s was a very interesting time in agriculture in Vermont as well as the entire United States. Due to the economic disparities between urban and country life in the late 1800’s and early 1900’s, President Teddy Roosevelt had created the Country Life Commission.  The recommendations from this commission were later investigated by both Presidents Taft and Wilson. They had both sent people to Europe to study agricultural cooperatives and rural credit (see 63d Congress, 1stsession, Senate Doc 214, Agricultural Cooperation and Rural Credit in Europe, 1913, GPO).  As a result of this investigation, and based upon the report, Congress passed, and President Wilson signed, the Federal Loan Act of 1916, establishing the first part of what became known as the Federal Farm Credit System.

The late 1800’s and early 1900’s was the beginning of a period of agricultural policy activism in the United Sates.  The Grange movement was started in 1867 as a fraternal organization, but quickly became active on a number of fronts to include railroad rates, fair pricing to farmers, and promoting farmer cooperatives (see Early Cooperatives, March 7th, 2011, Extension).  It is said that cooperatives flourished during the three decades from 1890 to 1920, and as many as 14,000 were organized after this period.  The American Farm Bureau Federation, started originally as part of Cooperative Extension, became an activist organization in the early and later 1900’s advocating for cooperatives, as well as the Agricultural Adjustment Act of 1933 (challenged in federal courts and reauthorized with changes in the Agricultural Adjustment Act of 1937, that created the Federal Marketing Order System for dairies that exist to this day).

Vermont was becoming a fluid milk state after 1890, as the cities reached out for a source of product (see www.whatceresmightsay.blogspot.com: Historical Perspective: Why Vermont Became a Dairy State, Thursday, August 23rd, 2018).  It is interesting to note from the history, that in 1917, as head of the Federal Food Administration during World War I,  Herbert Hoover appointed a commission to determine a fair price to dairy farmers in the Boston Milk Market, a cost of production plus a reasonable profit, and a way to price surplus production during the flush milk production period (see Agriculture of Vermont, Ninth Report of the Commissioner of Agriculture, July 1916 to June 30, 1918).  It is said that this mechanism for balancing supply and demand of milk production “while quickly dismantled after the WWI Armistice, became the foundation for massive intervention in a highly demoralized industry after 1933.” (See Business History Review, Vol 55, No. 2. (Summer 1981), pp. 170-187).

Many laws were put in place over the succeeding years to address farm cooperatives and farm viability. The Capper-Volstead Act, passed to allow farmers the ability to work together on pricing, evolved after the Sherman Anti-trust Act of 1890 which did not provide needed protection to these newly formed cooperatives. This law remains one of the key elements of cooperative anti-trust law protection today.

In 1932, the Report Rural Vermont, A Program for the Future, by the Vermont Commission on Country Life, was put forth (after the major flood of 1927).  In the section on agriculture and dairy, the report suggests that the future of dairy within the state is promising, provided: 1) farmers keep down the cost of production, 2) there is a mechanism to balance supply and demand, and 3) farmers develop a more efficient marketing system.

Over the years, changes have occurred on several levels on the farm, in markets served, in transportation and communication, with technology, and within the policy environment. Today there are approximately 700 commercial dairy farms in the State, and only one of these dairy cooperatives, St. Albans, has its office within the State.  Cooperatives in the country have all changed over the years (see: www.whatceresmightsay@blogspot.com: The Vermont Story: History of Farmer Cooperatives and How They Have Impacted Vermont Agriculture, December 20, 2012). Many studies have been done relative to the role and challenges of farmer cooperatives in serving the needs of their members in the future.  These challenges are reported in the blog www.whatceresmightsay@blogspot.com. 100 years of changes have occurred within the farmer cooperative movement and in the Vermont agriculture as it exists today.  

It should be noted, that many of the so called old timers who had witnessed the sharp decline in Vermont’s world class merino sheep industry, and then the relatively quick movement away from its world class butter production, indicated that Vermont’s future was never competing with the West on a commodity basis, but in developing those products that consumers in the growing markets in the Northeast would want.  It appears that is where Vermont agriculture is today as well.  There is a need to understand the past to appreciate the future (see blog post In Vermont Agriculture and Food Systems, Understanding the Past Reinforces the Future, www.whatceresmightsay@blogspot.com).

                                                              -30-

Note:  Roger Allbee is the former Secretary of Agriculture for the State of Vermont.  He also has been a member of the Senior Management Team of the former Farm Credit and Bank for Cooperatives for the Northeast; a former Chair of the Animal Products Advisory Committee to the a former U.S. Secretary of Agriculture and U.S. Trade Ambassador.  He lives in Townshend, Vermont with his wife Ann.

Thursday, August 23, 2018

HISTORICAL PERSPECTIVE: WHY VERMONT BECAME A DAIRY STATE

According to historical documents, it was inevitable that Vermont would become a dairy state. It had the soil, climate, and topography that grew grass well. Livestock have the ability to convert this energy to meat or milk. This had already been demonstrated with the livestock that the first group of settlers brought with them after the French and Indian War in 1763.

As towns grew, the demand for products like cheese and butter increased.  Farmers used milk produced on the farm to make cheese and butter for their farm families and sold the excess. With the Erie and Champlain Canals, and eventually the railroads, crops and livestock grown on cheaper western lands reached the East and many other products from the land were no longer competitive. They then turned to butter and cheese as a way to increase their income and wealth.

 By 1850, St Albans had established itself as the butter capital of the state and region, with many buyers showing up on market day, Tuesday during spring, summer and fall.  As many as 300 teams (horse pulled wagons) laden with butter and cheese would come in from all directions.  According to the records, this change happened quickly as very little of dairy produced in Franklin County found its way to Boston or New York prior to 1840. Prior to 1850, dairy was incidental to other things grown on the farm. In 1854, the Vermont Central Railroad commenced running its butter cars, supplied with ice, once a week during summer months, between St. Albans and Boston

Vermont was well suited for butter production, as well as cheese. As noted by a farmer then, “Vermont farms have a substantial hold on their future.  The soil, climate, abundance of pure water, the proximately to the markets and growing cities and villages give him facilities for success.” Other remarked in 1872 (Vermont Agricultural Report) “that the increased production of grass and hay will necessitate the keeping of more stock, the manufacture of larger quantitates of butter and cheese, and what is of equal importance, of a greater amount of manure, the proper application of which will still further increase the production of our meadows, and we are then at once on the road long sought for, that will lead us onward in the path of progress and improvement.”

With this growth in demand for butter and cheese, and the need for quality standards and better animal genetics and husbandry, the Vermont Dairymen’s Association was formed in 1870.  It is said to be one of the oldest in the U.S.  There was a recognized need to move away from the common cow.  In order to improve their herds, many turned their eyes to Scotland, to Holland, and to the Isles of Jersey and Guernsey, the homes of known dairy breeds.  The growth in demand and product production continued, and by 1900 there were 186 creameries and 66 cheese factories in the state.  An infrastructure of support businesses existed as well like the Farm Machine Company in Bellows Falls that manufactured farm and dairy equipment (butter churns), and in Montgomery Vermont a mill that turned out 295,000 butter tubs each year, of various sizes.

Vermont’s reputation and position as a renowned butter state did not last.  By 1900, Western competition became acute.  In addition, the growth from the newly introduced margarine created new economic threats that resulted in state and federal laws against this imitation product (see Vermont’s involvement in the butter and margarine wars at  www.                                        whatceriesmightsay.blogspot.com).  

In 1910, Dr. Rick Washburn, a professor of dairy husbandry at the University of Vermont, the Land Grant Institution, stated that “due to Vermont’s location, the time is in sight when butter and cheese factories in the state will largely be closed down due to the demand for fluid milk from the cities.  The first fluid milk train left Bellows Falls in 1890, resulting in new challenges to dairy pricing from city buyers.  This led to the enactment of state and federal laws that encouraged the establishment of farmer cooperatives as a way to bargain for better farm prices.

 Many were concerned with this marketing change.  For example, Vermont Commissioner of Agriculture E.S. Brigham remarked in 1924, “unless stimulation of dairying in other parts of the country is checked, Vermont farmers may expect competition exceeding that which they have earlier experienced with consequently lower prices.” 

Today the dairy industry is in a prolonged economic slump, brought on primarily by being tied to a national commodity model of pricing where better farmgate pricing relies on strong foreign demand.   Milk production continues to shift toward Western states and to larger farm operations that are capable of taking advantage of economies of scale.  This is making it difficult for even the most efficient dairy operations to compete on the world stage where being the lowest cost producer is key to economic sustainability.  The decision to put tariffs on imported products from Mexico, Asia and other countries key to increased farmgate pricing of dairy     only further threatens the longer term economic sustainability of Vermont’s iconic dairy sector that is the foundation of agriculture in the state. 

Many old timers who had seen the many changes in Vermont agriculture over time stated, in the late 1800’s that “only by the use of greater skill and capital by which products shall be cheapened with a quality so superior as to command the highest price in markets can we hope to meet Western competition.” Others went on to say, “that the only recourse for New England agriculture to protect her interest in the future, to successfully compete in her best markets with Western neighbors, seems to lie in improving excellence of her products.”  The production of products like award winning cheeses, ice cream, yogurt, organic milk and other specialty items is a recognition of the value of this approach.  Also, the continuing emphasis on soil health and clean water relates to the sage advice from those of the past relative to agriculture’s hold on its future in Vermont. 

                                                                    

Roger Allbee is a former Secretary of Agriculture for the State of Vermont.  He does a blog on Vermont’s agricultural history and changes since the 1760’s at www.whatceresmightsay.blogspot.com

Saturday, November 4, 2017

THE ERIE AND CHAMPLAIN CANALS, TWO HUNDRED YEARS OF HISTORY AND HOW IT TRANSFORMED THE FLOW OF COMMERCE BY OPENING THE WEST



It began just 200 years ago, on July 4th, 1817 when the beginning of a 40-ft. wide and 4 feet deep canal was begun connecting the Hudson River to the Great Lakes, 363 miles long in the town of Rome, New York.  It was completed eight years and four months later at a cost of 7.1 million dollars. Tolls paid off its construction costs within eight years.

It was not a new idea, connecting the West to the East, as the thought had been around since the 18th Century. However, federal funding for it had been rejected by President Thomas Jefferson, who is said to have stated that “talk of a canal 350 miles through wilderness is a little short of madness.”  It took the determination of De Witt Clinton, Governor of New York, and the New York legislature to make it a reality.   Detractors, and there were many, called it “Clinton’s big ditch.”  But it was an immediate success when it opened on October 26, 1825, eight years and four months after the first shovel was placed into the ground in that small town outside of Albany, New York. 

The canal quickly transformed North America, and was soon called the greatest engineering feat of the 19th Century in America.  Some even marveled when it was completed that it was The Eighth Wonder of the World.  It was, at the time, the longest artificial waterway and greatest public works project in North America.  But how it transformed America was its greatest achievement

It quickly transformed New York City into a leading economic and commercial city with the most important seaport in North America. Its population quadrupled between 1820-1850.  It opened the interior of the West to settlement from those in the East as well as those coming from Europe.  Many have concluded that this resulted in the demise of New England agriculture, as it was then known, to inexpensive goods from the mid-west.  Farmers, loggers, miners, and manufactures now had quick access to the markets of the East.  For example, a ton of wheat from the Mid-west to the Northeast before the Erie Canal cost $100 per ton, and only about fourteen thousand bushels were shipped East.  After the Canal, it cost $10 per ton to ship a product and it took one-third of the time.  In 1840, for example, about eight million bushels of wheat were shipped East from the Mid-west.  The East began to rely on the mid-west for food and other products, and New York City became the international gateway.  The Erie Canal made the West accessible and valuable, unlocking the floodgates to western settlement.

Canal building mania lasted a decade or so after the completion of the Erie, with some 3000 miles of waterway by 1840. The Champlain Canal, part of the New York system, was opened in 1823 and connected Lake Champlain to the Erie Canal.  This too led to a further transformation of the Vermont agriculture and forestry economy and marked the end of the Champlain Valley’s relative isolation from the outside world and its entry into the national economy. It is said that the opening of the canal “fundamentally affected the economic development of the Champlain Valley.”

Before the coming of the railroads, state legislatures chartered some of the most elaborate canal plans, many which were never developed.   The first canal system in the United States was in Bellows Falls, Vermont with the Connecticut River being the first major waterway in the country improved for travel by 1810.  In the 1820’s plans were discussed for a canal (Onion River Canal) connecting the Connecticut River to Lake Champlain in Vermont.   The coming of the railroads after the 1840’s led to the economic demise of the canal system and any plans to expand or create new systems. Railroads were faster, cheaper and did not freeze over in the winter. 

Today the Erie Canal still has some commercial traffic, but is primarily recreational and tourism use system.  In the year 2000, Congress created the Erie Canal National Heritage Corridor to recognize the canal’s historical significance in the transformation of North America.

COMMENTARY:

Transportation and improvements in travel have had a profound impact on agriculture and food systems.  In the beginning, the state legislature authorized “toll roads.”  Improvements in transportation have taken place over time.  Railroads were used to ship milk and other products. (note a butter train first left St. Albans in 1852, once a week to Boston.  The first milk train left Bellows Falls around 1890 for Boston).  Improvements in transportation have continued with the Interstate highway system in Vermont in the late 1950’s and early 1960’s.  With airplanes, products can be shipped overnight by air into and out of the U.S.  A lobster landed in Maine on one day can be in a restaurant in France the next, for example.  In the winter fruits, can be airlifted from places like Chile, or flowers from other places in South America too.  The internet has further allowed for communication instantly between buyers and sellers.  As Thomas Friedman, the author notes, “The World is Flat.” Amazon will today ship an order directly to a house the next day after an order is made.   The world has come far since the Wright Brothers flew their first plane at Kitty Hawk in 1903.

What will be the advancing in transportation over the next 200 years, and how will these changes impact Vermont agriculture and food systems and the working landscape?