3 years ago

Genesee County Agricultural and Farmland Protection Plan

Genesee County Agricultural and Farmland Protection Plan


Genesee County: Agricultural Development Plan APPENDIX D: INDUSTRY PRACTICE SUMMARIES FOR GENESEE COUNTY, NEW YORK Copyright©, 2001: Agricultural & Community Development Services, Inc, Columbia, MD

APPENDIX D: INDUSTRY PRACTICES Dairy Industry Practices Like much of agriculture, the U.S. dairy industry has gone through significant changes in recent years. In the last 40 years, technological advances in the production, processing, and distribution of milk have dramatically altered the U.S. dairy farming sector. Since the 1960s, U.S. dairy farmers have increased output per cow approximately 3% a year as a result of scientific and management advances, such as artificial insemination, embryo transfers, and computerized management tools. As these technologies have been adopted, there has been a move towards larger dairy farms to take advantage of economics of scale in milk production. As a result, the last 20 years has witnessed a dramatic drop in the number of dairy farms but those that remain milk more cows. Some smaller farms are attempting to survive by switching management methods, utilizing what is known as intensive grazing. This approach substitutes a high-quality pasture feeding system for more expensive feed concentrate rations. Changing technologies in milk production have also influenced the location of dairy production. Where once the Upper Midwest and Northeast were dominant milk production regions, California and other Western states have grown significantly in the production of farm milk as large-scale dairy production has become more feasible. In addition, improvements in transportation and refrigeration have helped ship milk and dairy products over greater distances, implying a lesser need for dairy farms close to urban populations. While the structure of dairy farming has seen remarkable changes in recent history, pricing in the U.S. dairy industry remains largely regulated by the federal government, dating back to policies enacted in the 1930s. Although a number of different policy mechanisms have been used over the years to establish farm milk prices, the mainstay of dairy policy has been the Federal Milk Marketing Order (FMMO). The Federal Milk Marketing Order system institutes regional boundaries where milk prices are administratively set based on the final use of milk. This pricing system, known as classified pricing, means that processors who use milk to produce cheese or butter pay a different price than those classes processors that use milk to make fluid or drinking milk. Currently, there are four different milk classes: Class I (used for fluid milk), Class II (used for yogurt and ice cream), Class III (used for cheese) and class IV (used for butter and dry milk). Class I receives the highest price for milk, while class IV is the lowest price. Farms within a particular FMMO receive the same blend price for their milk, which is a weighted average of the class milk prices based on the utilization of milk in their region. Although new dairy pricing legislation was implemented in 2000, at the margin it created few changes as dairy farm prices continue to be regulated on a regional basis. Farmer-owned cooperatives also play an important role in the dairy marketing sector. Dairy cooperatives provide a number of functions for their members including bargaining for higher prices with processors, as well as direct marketing of processed dairy products and some fluid milk. Like much of the dairy marketing industry, dairy cooperatives have gone through considerable mergers and acquisitions over time as economies of scale in Copyright©, 2000: Agricultural & Community Development Services, Inc, Columbia MD 1

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