Hearing Testimony

Hearing Testimony

Testimony given at the Dairy Farm Family Crisis Hearing in Lairdsville, PA, July 24. 2018.

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Gerald Carlin

Testimony for the Dairy Farm Family Crisis Hearing, Lairdsville, PA

July 18, 2018

I want to thank everyone for taking time out 0f your busy schedules to attend this important hearing. I also want to thank my wife Tina for all of her hard work in helping to organize this hearing.

My name is Gerald Carlin. My wife Tina and I are former dairy farmers and are now raising beef cattle and vegetables on our century farm in Susquehanna County, PA.

I was asked to speak today on some of the history of event leading to this dreadful state of affairs in the dairy farming business and farming in general. The list of events is too long to cover, but I will mentions some of the important ones.

In the period following the Civil War, a number of industries became monopolized including: Railroads by Vanderbilt, Oil by Rockefeller, Steel by Carnegie, and there were efforts by some to take control of agriculture. The Sherman Anti-trust Act of 1890, made monopolizing trade a felony and gave the Attorney General and US Attorneys, the responsibility to prosecute those who monopolize, attempt to monopolize, or conspire with others to monopolize trade among the several states. Enforcement of Anti-trust has been lacking at best.

Farm owners are not allowed to unionize but in 1922 Congress passed the Capper-Volstead Act which enabled farmers to form marketing cooperatives to market their products as a group, and to bargain for fair prices. The farmer-owned coops were granted special protections. As cooperatives have merged and morphed into giant corporations, distant, detached, and unaccountable to their farmer-owner members, these giant coops now hide behind their protections granted to them by the Capper-Volstead Act, while they abuse their farmer-owner members with immunity.

In 1937, Congress passed the Agricultural Marketing Agreement Act (AMAA) which established the Federal Milk Marketing Orders (FMMO) which created equal pay for farmers through pooling within the orders to create a uniform price for milk regardless as to how the milk was used. 7 U.S.C Section 608 (c) 18 of the 1937 AMAA mandated that the Secretary of Agriculture consider regional production costs in the raw milk pricing formula. FMMOs still exist as a result of the 1937 AMAA but the cost of production part has been ignored and scorned for the last 37 years.

In July 1962, the Committee for Economic Development (CED) made up of some 200 corporate executives, economists, and other distinguished experts (not one farmer) released An Adaptive Program for Agriculture with a stated goal of reducing the farming population by one third within five years. The report complained about wasted resources in farming, particularly labor, as technology increased productivity in agriculture and the large public expenditures for vocational training for young farmers in public schools. They proposed a policy of actively discouraging young people from getting into farming as well as actively trying to coax existing farmers to exit agriculture and even proposed public funds be spent to assist farmers in moving expenses to relocate their families off of the farm.

Kenneth E. Boulding, Ag Economist with the Department of Economics at the University of Michigan and member of the research advisory board for the CED stated the following: “The only way I know to get toothpaste out of a tube is to squeeze, and the only way to get people out of agriculture is likewise to squeeze agriculture. If the toothpaste is thin, you don’t squeeze very hard, on the other hand, if the toothpaste is thick, you have to put real pressure on it. If you can’t get people out of agriculture easily, you are going to have to do farmers severe injustice in order to solve the problem of allocation.” Although this quote does not appear in the text of An Adaptive Program for Agriculture, the sentiment is still evident. The sentiment expressed by these distinguished experts was that farmers were merely disposable pawns in an economic plan. If the inefficient farmers would just leave farming, the farmers who are left will prosper. Efficient farmers will produce food more cheaply, people will spend less money for food, leaving more disposable income to spend on consumer goods, which will cause economic growth and increase income for all, or so the theory goes. Of course, consumer food prices have continued to rise even as farmers get less and less of the retail dollar. I guess there is a fly in the ointment somewhere.

There were 1.1 million farms with dairy cows in the United States in 1964, 600,000 in 1969, and some 40,000 today, so those who are left are really prospering, right? Oh wait, they are struggling more than ever before. Obviously there are still too many. You get the point.

The official belief that there are too many farmers has grown and become entrenched in public policy evidencing itself in numerous ways, not the least of which are burdensome and senseless regulations on many fronts. Technology, including patented GMO and Terminator seeds, limits farmers’ ability to preserve seeds while increasing the power and control of corporate seed giants. Food additives extend yields of “food” with less raw product. Irradiation and Ultra-pasteurization, along with other questionable practices, ruin the real nutrition of food while extending shelf life. The list could be endless, but the goal is to put food under corporate control, with as few farmers as possible. This, of course, is called “progress”.

The belief that farmers are not important is evidenced in the attitudes and actions of both co-ops and processors as they believe that they are turning worthless raw product into something of value (Some believe that milk has no value until it is at least pasteurized). Dairy farmers are lucky that the milk truck stops at the farm, takes the hazardous material, and actually pays them for it. No wonder farmers are strapped with paying “make allowances” to insure that the processor can make a profit, and of course, farmers have to pay the hauling charges, advertising fees, and all other appropriate fees, as a co-op or processor sees fit. Countless rural communities that rely on agriculture and provide Ag-related services have been decimated. Social impacts are obvious.

On April 26, 1971, US Secretary of Agriculture, Clifford M. Hardin, announced the formation of the Young Executives Committee which consisted of 15 members, each of which represented an agency of the Department of Agriculture. They were asked by the Secretary to undertake a review of the farm income question. The following is quoted from their report, “Agriculture should be viewed as an industry which consumes resources, provides employment, and produces goods of value to society. The Committee believes that national agricultural policy should aim at creating an environment which would enable the industry to provide adequate supplies of food and fiber at reasonable prices to meet domestic needs and compete in world markets. The level of farm income earned from the production of agricultural commodities, either per farm or in aggregate, should not be end in itself. That is, the Department’s objective should not be to assure any particular level of income from farming for the nation’s farmers. Income from farming should be of concern only to the extent that it affects the level of resources attracted to the industry, and, hence, the industry’s ability to produce efficiently, adequate supplies of food and fiber. The industry should not be evaluated on its ability to provide an adequate level of living for all participants regardless of the size of their operation or managerial ability. If adequate of supplies of food and fiber are being made available at reasonable prices, we should conclude that the nation has a healthy, viable agricultural industry. . . Agricultural policy should be directed toward maintaining agriculture as a viable industry and not as a way of life . . . Given these conditions, agriculture cannot and should not be expected to provide employment opportunities sufficient to preserve the nation’s rural towns and communities. If these towns and communities are to grow, additional off-farm employment opportunities must be found.” The Committee also called for the elimination of parity pricing.

In April 1973, Agricultural Trade and the Proposed Round of Multilateral Negotiations aka the Flanigan Report was published. This document basically sought the elimination of any and all protections and trade barriers for farmers domestically and worldwide. It was their dream and goal that eventually no country on earth would be able to offer any special protections for their farmers. Farmers would be forced to be “efficient” and would no longer be able to be such a pesky, if not powerful, lobbying force in Washington, DC, or any other country in the world. Eventually through a number of trade agreements, negotiated by “esteemed” and unaccountable experts, the farmer has essentially lost all protections and all rights to seek redress of wrongs because international trade agreements supersede farmers’ rights and domestic food policy. Politicians can throw their hands in the air and declare that there is nothing that they can do, or, as most have chosen, just ignore the concerns of farmers, because, after all, there are more important issues to deal with and more important people to talk to.

On April 1, 1981, President Ronald Reagan signed legislation that decoupled farm milk prices from parity and incrementally decreased the support price from $13.60 at that time down to $9.90 and eventually the support price was eliminated in the 2014 Farm Bill.

In 1996, the United States Congress instructed Secretary of Agriculture Dan Glickman to reform the Federal Milk Marketing Orders. In July 1999, USDA put their order reform up for producer referendum. Only Option 1B was offered. Although many did not like 1B, the referendum passed because cooperatives like Dairy Farmers of America (DFA) used the “block voting” option. Several dairy cooperatives sought an injunction against the proposed order reform on the basis that 1B would financially harm milk producers in most of the country. In the St. Albans Cooperative Creamery, Inc., et al., Plaintiffs versus Dan Glickman, Secretary of Agriculture, Defendant case an injunction was granted. U.S. District Judge William Sessions III did not focus on the merits of 1A vs. 1B but rather cited Dan Glickman for failure to consider dairy farmers’ cost of production. Judge Sessions made clear in his “Opinion & Order” that”. . . this Court looks to the direct language of the statute to determine the sufficiency of the Secretary’s consideration, which makes no mention of indirect consideration being adequate in meeting the requirements of 608c(18). The record shows no direct consideration of regional costs in feed, feed availability, or other region specific economic factors.” Judge Sessions also stated that “. . . the Court finds the Secretary’s Final Order and Decision violates Congress’ mandate under the 1937 Agricultural Marketing Agreement Act (AMAA) . . . “and “. . . that Plaintiffs have a likelihood of success in their claim that the Secretary’s Final Order and Decision violates the AMAA by failing adequately to consider economic factors regarding the marketing of milk in the regional orders across the country.” Furthermore, Judge William Sessions found “. . . that the balance of hardship weighs heavily in favor of the Plaintiffs.” Judge William Sessions, III made no fewer than five references to USDA’s failure to act according to the 1937 Agricultural Marketing Agreement Act, section 608c(18). In his “Opinion and Order” statement, one such discussion spans seven pages. In late 1999, Congress instructed USDA to implement Option 1A. This satisfied the Plaintiffs, (were the Plaintiffs following the intent of the Capper-Volstead Act?) and the case was dropped without resolution of the cost of production issue.

In May 2000, USDA held hearings on Class III and IV pricing in which testimony was offered in support of implementing a cost of production factor in these formulas. In December 2000, USDA released the Tentative Decision on Proposed Amendments for Class III and IV pricing. Once again, USDA ignored the mandates of 7 U.S.C. 608 (c) 18 maintaining that the Class III and IV prices “. . . are such prices as will reflect the aforesaid factors. . .” [General Findings (b)]. This is ludicrous in light of the volatility of Class III and IV prices. However, USDA did concede that “if a sound mechanical concept could be advanced that overcomes the objections relative to supply and demand, it should be considered.”

United States Department of Agriculture issued an invitation for proposals on changing Class III and IV pricing in the summer of 2006. Approximately 40+ proposals for cost of production were submitted. National Family Farm Coalition submitted a somewhat detailed proposal to base Class III and IV pricing on a national average cost of production. In the pre-hearing, February 2006, USDA officials insisted that they do look at 608c (18) regularly and implied that they are following it. USDA turned down NFFC’s proposal. As a result, several members of the Dairy Sub-committee, particularly Arden Tewksbury and Gerald Carlin of Pro Ag, drafted legislation using the NFFC proposal as its basis. Senator Arlen Specter’s office put the draft into bill form, and it was introduced in the Senate on June 27, 2007, by Senator Arlen Specter and Senator Robert Casey, Jr. The bill is known as the Federal Milk Marketing Improvement Act of 2007 or S1722. Senator Casey, who is on the Senate Agriculture Committee, was unable to get support for S1722 to become part of the Farm Bill. The Bill was reintroduced in 2009 as S889 and then after a few changes introduced again as 1645. The Bill was introduced again in 2011 as S1640.

Forward Contracting appeared in the 2002 Farm Bill as a pilot program which was to expire on December 31, 2004. The industry and lenders continue to pressure farmers to forward contract in an effort to undermine Federal Orders and secure milk at lower prices.

In late 2004, a massive investigation of DFA and Dean Foods was launched by the United State Department of Justice in conjunction with over 20 state Attorneys General. The investigation focused mostly on abusive, anti-competitive market practices in the Southeast, where farmers were paid less than minimum FMMO prices. Small co-ops were cohearsed, gobbled up, or controlled by DFA and farmer members were sucked into DFA and its affiliates against their will. Some 200 file boxes of evidence were reportedly collected along with scores of sworn affidavits. The investigation ground to a halt in the fall of 2006. It may have been completed by that time but no action was taken by the Department of Justice in spite of numerous calls to do so from politicians and others.

Another investigation of dairy coop Anti-trust issues was started during the Obama administration then promptly terminated.

The 2014 Farm Bill eliminated the MILC program and Dairy Price Supports and replaced them with the failed MPP Program and the meaningless Dairy Product Donation Program.

On January 8, 2018, the Report to the President of the United States from the Task Force on Agriculture and Rural Prosperity was released, with five main objectives related to agriculture. 1) Increased e-connectivity 2) improve H-2A visa program to facilitate more H-2A work visas 3) expand biotechnology and public acceptance of genetically modified products 4) increase ag exports 5) increase access to capital. No mention of farm price or consumer choice in the report.

The 2018 Farm Bill continues the globalist agenda with apparently no intention of correcting low farm product prices and bad farm policy.

On the trade front, President Nixon pushed for expanded trade with China. Ag trade surpluses were to offset trade deficits in manufactured products. This never happened.

On January 1, 1994, NAFTA went into effect. US investment went south for cheaper wages and Mexican wages actually decreased as our trade with Mexico went into deficit.

In a 1994 lame duck session of Congress, the massive General Agreement on Tariffs and Trade (GATT) passed, putting more control of our economy in the hands of unelected and unaccountable people.

In 2000, the US Congress approved Permanent Normal Trade Relations (PNTR) with China, and as many predicted, our trade deficit with China exploded as companies invested in China for even cheaper labor. China has become a growing threat to our nation’s security even as we have lost our ability to produce basic necessities for our own people.

In dairy trade the United States imported far more dairy products than we exported from the late 1990s to early 2000s. The USDA has become much less transparent on dairy imports as they tout increased dairy exports. Even so, we are still importing a large amount of dairy products. The “oversupply” in dairy has been created in large part by the use of Milk Protein Concentrate (MPC), Milk Protein Isolate (MPI), and Ultra-filtered Milk (UF). I will talk more about MPC later.

So where does this leave dairy farmers? Dairy farmers have lost their equity, lost their retirement, lost their ability to pay their suppliers in a timely manner, lost their dignity, feel misunderstood, marginalized, and scorned. They have lost their next generation of dairy farmers, lost their hope, in some cases lost their marriages, and some have lost their lives. They have been scoffed at by their cooperatives and experts. They have been ignored by politicians. The list of politician ignoring farmers is long, but to save time I will just say that not one of the 66 member of the House and Senate Ag Committees had the decency to respond to a thoughtful survey sent to them by Farm Women United. Also, Governor Wolf and Governor Cuomo have not had the decency to respond to letters sent to them by FWU. Agri-Mark was also sent letters, but they too have failed to respond. It doesn’t matter what a politician may say in private. If they do not openly and publicly declare their support for Dairy Farm Families and offer constructive solutions to this crisis, there is no other choice but to conclude that they simply do not care. If they cared they would speak out. Further, if dairy cooperatives cared, they too would take constructive steps to solve this crisis. Your silence and excuses are deafening and damning.

We urge support for a $20 Emergency Floor Price and hearings to determine a path forward to create a sustainable future for the dairy farms that remain. Failure to act will result in the near total destruction of traditional family dairy farms as we have known them and the continued decline and access to locally produced wholesome food.

Thank you for your time and patience

Gerald Carlin, Meshoppen, PA

2 Attachments

How Much Milk is MPC/Ultra-filtered Milk Displacing

By Gerald Carlin

No one really knows how much milk MPC/Ultra-filtered Milk is displacing since the Federal Milk Marketing Orders (FMMO) do not collect data on MPC/Ultra-filtered Milk production and use. This is considered proprietary information. MPC and Ultra-filtered Milk are now being used in all four classes of milk products.

MPC and Ultra-filtered Milk are not approved ingredients in standardized cheeses, but Food and Drug Administration (FDA) has “exercised discretionary enforcement” in this area, as reiterated on August 11, 2017. FDA went further and stated, “. . . we do not intend to take action against companies that manufacture standardized cheeses and related cheese products that contain fluid Ultra-filtered Milk or fluid Ultra-filtered Non-fat Milk without declaring them in the ingredient statement, as long as their labels declare milk or non-fat milk in the ingredient statement.”

We can, however, look at cheese production compared to Class III utilization in the FMMOs and California Class 4b (cheese) utilization to gain some insight. The traditional yield factor for cheese is 10.01 lbs. per 100 lbs. of fluid milk containing 3.5% butterfat and 2.99% true protein. Higher average components may yield 11 lbs. of cheese per 100 lbs. of milk. National cheese production last year (2017) for cheese falling under Class III or California Class 4b was approximately 12.4 billion lbs. Class III utilization (weighted average) in all Federal Orders was 41%. If this rate of utilization is true nationally, the average cheese production would be 14.1 lbs. per 100 lbs. of milk. The Class 4b utilization in California for 2017 was 46.2%, making an average cheese yield of 13.66 lbs. per 100 lbs. of milk. Given this information, it seems unlikely that the national average cheese yield is less than 13.5 lbs. per 100 lbs. of milk. This translates into at least 20 billion pounds of farm milk being displaced by the use of MPC/Ultra-filtered Milk in cheese. Low-fat and Non-fat dairy products are being promoted. The fat that traditionally would go into these products is used with MPC/Ultra-filtered milk to produce substandard cheese. Much of this use violates cheese standards. How much milk is being displaced in other dairy products because of MPC/Ultra-filtered Milk? Prices are in the gutter because of a supposed 4 or 5 billion pound surplus.

Source: California Dairy Statistics Annual 2017

Market Summary and Utilization Report Agricultural Marketing Service

Dairy Products 2017 Summary USDA NASS

Milk cows and production by state and region NASS and ERS

Dairy Market News

7/22/18

Thoughts Concerning Free Market in Dairy

In a functional free market system for dairy, dairy farmers form cooperatives to give them both bargaining power and marketing ability. The co-op would be owned by, and controlled by, its farmer-members.

Today, National Milk Producers Federation (NMPF) is the only voice for dairy farmers in Washington, as it claims to represent some 75% of the nation’s dairy farmers. NMPF is made up of “farmer-owned” co-ops and processors who are associate members.

Let’s examine the current “benefits” of being a farmer-owner of a large modern-day co-op. The farmer-owner, hereafter referred to as owner, pays the dairy cooperative management, hereafter referred to as employees, to market the owner’s milk. The employees are not required to pay the owner the Federal minimum milk prices.

The owner has no right to know what the employee’s salary is.
The owner has no right to know where his milk is going on any given day.
The owner has no right to know who all of the other co-owners are.
The owner can lose his market if he is critical of, or even questions his employees, therefore, most owners remain silent in fear of retaliation. Employees make examples out of owners who get out of line.
The employees vote in Federal Order referendums without the consent of the owner.
The employees have been seen at Federal Order hearings trying to get more money out of the owner without the owner’s knowledge.
The owner has no ability to call a meeting of fellow owners.
The owner has no practical ability to fire an employee.
The employees try to dictate how the owner runs his business.
The employees have plenty of lobbyists at all levels of government to ensure that their control over the owners continue.