Dairy farmers are hoping to find a way to make the dairy industry more profitable with a big finesse in a way that’s not as dramatic as a $300 million settlement in the industry’s past.
They’re also trying to protect their profits by putting the blame for poor quality on the dairy processors.
But while a settlement is a good thing, the dairy farmer might be looking at losing money in the long run, says Gary W. Crain, executive vice president of the Dairy Farmers of America.
“They’ll be looking to the long term,” he says.
“But I think it’s probably going to be a $100 million-plus loss.”
The dairy farmers and processors that are the most vulnerable to the finesse include farmers who make cheese and butter and who don’t sell the products directly to consumers.
That leaves the rest of the dairy sector in the lurch.
“The whole industry is on a downward trajectory,” says Gary V. Lappin, president of Crop Protection Inc., a firm that contracts with farms to inspect dairy products.
“We’re seeing a lot of farmers having their production systems broken down, their farms are being destroyed.”
Lappins firm says its farmers have been receiving threats and threats of lawsuits from processors, farmers, and consumers who say the farmers are selling cheaper products than they should.
A recent survey of more than 600 farmers in seven states found that one-third of the farmers surveyed said they were under contract to processors and a third said they would be cutting down their herds if they received a finesse of more.
Crop Protect, which represents more than 2,300 dairy farmers, says it’s the largest firm of its kind in the U.S. and the third largest in the world.
The finesse, which is based on inspection reports, requires farmers to pay a $500 fine for each of their milks or 1,500 per ounce of their butter and cheese, plus $500 for each additional kilogram of milk produced.
The total cost of the finesense is calculated by dividing the amount of milk or butter or cheese produced by the average size of the milk or cheese in the products.
Farmers have been told they must pay the fineses on their farms within 10 days of receipt of the orders, and must deliver milk and butter within 90 days of the inspection.
Farmers are required to submit their reports to the processor within 15 days.
Farmers must also provide the processors with a report within two months.
Farmers can apply for the finesses by mail or fax, and can file a complaint with the agency.
If the processors file a fine within the required time, they are required by law to pay it.
The processor can then file a civil complaint, which must be investigated and determined by a judge.
Farmers who are not satisfied with the results of the investigations may also have the fines paid by the processor, which can be a costly process.
The processors and the processors are also required to give farmers a written notice of any corrective action they intend to take, and the farmer must receive written notice within 30 days of that corrective action.
The farmer is also required by the processors to notify the dairy association of any further corrective actions they intend.
“If the processors and processor are successful in making the milk and the butter cheaper, that’s good,” Crain says.
The dairy industry says the fines, which are meant to deter farmers from making cheaper milk and cheese that is inferior, are just a way for processors to make more money.
“Dairy farmers have to take some of the blame, and we have to deal with the consequences,” says Jim C. Johnson, president and CEO of the American Dairy Farmers Association.
Johnson says the penalties are designed to discourage farmers from selling their milk at lower prices.
“That’s not fair to farmers,” Johnson says.
Johnson said the industry was working with a group of dairy processors that had already agreed to the changes.
“What we have done is to take advantage of the situation,” Johnson said.
“These new guidelines are not a one-time thing, they’re part of a long-term approach to better protect farmers from price gouging.”
Dairy processors and processors’ trade groups disagree, saying the changes have nothing to do with protecting farmers and everything to do to protect processors from paying fines.
The trade groups have opposed the fines for years, because it was not clear what the penalties would do.
“It’s really a punitive step,” says Steve H. Lassen, the president of National Dairy Producers Council.
“As far as I’m concerned, they don’t even have a penalty.”
Farmers say the new rules are a good step toward making milk and milk products cheaper.
But the dairy farmers say the industry needs to get its act together.
“A lot of us are concerned that it is a knee-jerk reaction, but this is not going to solve the problem,” says Johnson