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Genesee County Agricultural and Farmland Protection Plan

Genesee County Agricultural and Farmland Protection Plan

APPENDIX D: INDUSTRY

APPENDIX D: INDUSTRY PRACTICES milk handling and processing demand larger but fewer firms. In 1980, there were 435 dairy farm cooperatives in the United States but by 1992, the number of cooperatives had fallen to 265. As dairy cooperatives have merged and grown in size, so too has the discontent among farmers as many believe mega-cooperatives no longer serve the needs of individual farmers. In addition, some dairy farmers believe that the operating costs and investments made by cooperatives are too high, reducing any financial benefits that a farmer might receive from being a member. As a result, recent years have seen a growth in regional milk bargaining associations. The most prominent of these is the Regional Cooperative Marketing Agency (RCMA), headquartered in Syracuse, New York. More recently, Producers Equalization Agency in the Cleveland-Pittsburgh market and the Southeast Dairy Farmers Federation have been organized. These organizations and others like them attempt to draw dissatisfied cooperative members or independent milk producers into a regional milk bargaining agency for the purpose of collective bargaining with processors. Dairy farmers will have a new, voluntary tool for marketing their milk used in non-fluid products. USDA has issued final rules to implement a dairy forward contracting pilot program for milk marketed under the Federal milk marketing order program. The pilot program will be in effect for milk marketed August 1, 2000, through December 31, 2004. Under the new program, handlers may enter into forward contracts with dairy farmers or cooperative associations to buy milk that will be used to make non-fluid products such as butter, powdered milk, cheese, ice cream, and yogurt. For milk covered by forward contracts, a handler will not be required to pay dairy farmers the mandated minimum Federal order price. Instead, dairy farmers and handlers will agree to a price as specified in a forward contract. The pilot program is voluntary and intended to offer an additional marketing tool for dairy farmers. Although trends in the dairy farming and marketing sector have been fairly predictable, changing consumer preferences towards dairy products have been more perplexing. While consumers have moved towards lower-fat diets in recent years, this changing pattern in dairy products has not been universal. Annual per capita consumption of fluid milk declined from 31 gallons in 1970 to 24 gallons in 1996. In addition, the trend in fluid milk consumption is towards lower fat milk and away from whole milk. However, consumers have found other dairy sources for fat. Per capita consumption of fluid cream products-half-and-half, light cream, heavy cream, eggnog, sour cream, and dips-jumped from 9.8 half pints in 1970 to 16.4 half pints in 1996. In addition, cheese consumption has grown considerably over time, increasing 140 percent between 1970 and 1996, from 11 pounds per person to 28 pounds. Lifestyles that emphasize convenience foods were probably major forces behind the higher consumption. In fact, two-thirds of our cheese now comes in commercially manufactured and prepared foods (including foodservice), such as pizza, tacos, nachos, salad bars, fast-food sandwiches, bagel spreads, sauces for baked potatoes and other vegetables, and packaged snack foods. Advertising and new products-such as reduced-fat cheeses and resealable bags of shredded cheeses, including cheese blends tailored for use in Italian and Mexican recipes-also had an effect. These changes in consumer preferences have had important impacts on milk prices at the farm. Copyright©, 2000: Agricultural & Community Development Services, Inc, Columbia MD 2

APPENDIX D: INDUSTRY PRACTICES For one, milk productivity at the farm level has outpaced the demand for milk products, as consumers are generally demanding less milk products. In addition, shifts in consumer demands away from fluid milk and towards cheese means that farmers are finding more of their milk priced at the lower Class III price and less at the higher class I price. These two factors have kept farm-level milk prices at relatively low levels for much of the last 20 years. The future development of the dairy industry will likely continue the path established in the last 20 years. The number of dairy farms in the aggregate will continue to decline and their size will continue to grow from forces of technology and a continuation of consumer preferences away from fluid milk. Consolidation in the marketing sector will also continue along a similar path. Strategic alliances among marketing firms will be needed to maintain efficiency and manage costs. As such, those farmers that remain will find fewer buyers for their products. Copyright©, 2000: Agricultural & Community Development Services, Inc, Columbia MD 3

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