Land O’ Lakes incorporate quota despite farmers’ concerns

Associate Editor

(Jan. 12, 2016) Dairy farmers and industry representatives reacted with mixed emotions to news last month that Land O’ Lakes, one of the nation’s largest dairy co-ops, has instituted its first ever production quota for its eastern region, including Maryland and southern Pennsylvania.
Many farmers in the co-op were troubled to hear of the change at a series of recent co-op meetings held in different parts of southern Pennsylvania, including Harrisburg, said David Roth, a dairy farmer near Hagerstown, Md., and a regional alternate delegate with the co-op .
“A lot of the fellas were upset about it at the meeting we had,” he said. “It kind of surprises me to some degree personally because if you read any kind of farm magazine you can see what production’s done. Exports fell off ... and production still increased.”
Land O’ Lakes is setting a base production level for each member based on their farm’s production between September 2014 and August 2015, members said.
If any member produces more than that, they would be charged extra to market that additional milk.
But farmers have also said the quota system will only be implemented if Land O’ Lakes feels it has no other choice.
“If production appears to go above that for a significant timeframe, and they cannot find a home for it with other third-party contracts, then they’ll have to implement the production quota system,” Roth said.
Bill O’Neary, the co-op’s senior director of member relations, could not be reached for comment.
A number of factors have pushed the co-op into a quota position, said Jason Myers, an ex-dairy farmer and member of the Maryland Agricultural Commission.
“It’s been a long time since there’s been anyone in this area who’s done supply control in the market,” Myers said. “We’re just having a lot of trouble with the manufacturing capacity here in the east coupled with the reduced Class 1 milk consumption.”
Midwestern dairy farms have also been expanding, sending more milk east, Roth said, and less northeastern milk is moving south as well.
Demand nationwide or worldwide hasn’t helped the industry either.
Long term, the outlook for improved exports depends largely on the strength of the U.S. dollar compared to other international currencies.
A strong dollar currently makes American dairy products relatively unattractive.
The USDA said it expects the price of all milk in 2016 to run between 93 percent and 98 percent of its 2015 price.
“I’m not sure where the dairy industry’s headed,” Roth said. “Hopefully, it’ll change, but there’s not a whole lot of light at the end of the tunnel yet.”