Dairy Producers of New Mexico
President's Letter
Allen G. Squire
March, 2010

A New Approach to Federal Milk Pricing
For Discussion Only

GOALS WHY A CHANGE IN PRICING POLICY IS NEEDED WHAT WE NEED TO DO SUGGESTED NEW MILK PRICING FORMULA
Part 1: Part 2: EXAMPLES
Dairy A: Dairy B (excess supply market): Dairy B (shortage supply market): CONCLUSION

We dairy farmers should not have to attempt to guess at a futures market that is always moving to be able to make a profit. When we are assisting a cow having a calf at midnight, then getting up before dawn to start a new day, we should not have to wonder whether, overnight, the traders decided to drive down the price of milk and suddenly we are working for free again! We need to remove our financial future from the hands of a select few traders, processors, and market manipulators; whether you own a small 50-cow herd or a large 2000-cow herd, the same problems confront us all. We cannot produce milk for less than our cost of production. While it is easy to say that the market will eventually work it all out, many of us will wind up being “worked out” at the same time.

This program, as designed, would allow individual dairymen the opportunity to produce their historical production base as efficiently as possible. In times of excess, extra production would be discouraged and the individual dairyman would be incentivized to shut off his excess milk at the farm gate—not allowing it to keep depressing our prices as it sits in private or government commodity warehouses. No counter-productive MILC, DELAP, DPSP, or any other government programs, no CWT programs, just good old-fashioned business management and something that we can put into effect IMMEDIATELY!

Please note that when milk is in excess, the 90% formula Part 1 would not change, only the 10% Part 2 formula would be drastically decreased and a portion would be “no pay.” The result would be that an individual dairyman could afford to and would cut enough production to comply if he had a stable price for 90% of his historical production. Most dairymen would cut their “no pay excess” immediately and produce their Part 1 formula as efficiently as possible. Otherwise, as in our current situation, all producers continue to make as much milk as possible to dilute their overhead and production costs because they receive a much lower price on all 100% of their milk. It’s apparent that the current pricing mechanism was designed to keep milk prices as low as possible for as long as possible. If this is going to take an act of Congress to be accomplished, now is the time to get started. I believe that we, the American Dairy Farmers, can fix this problem!!

Allen G. Squire, D.V.M.
65 East Ottawa Road, Hagerman, NM 88232
575-752-0172 phone and fax; alsquireswd@yahoo.com