Representatives of Western United Dairymen and the Alliance of Western Milk producers testified at an informational hearing today held by the Senate Committee on Food and Agriculture on “Evaluating the Ongoing Necessity of the Milk Pool Subsidy and its Impact on Consumer Prices.”
The pooling program’s greatest value, testified LaMendola, is that it “regulates the timely, accurate and equal payment from processors to producers. This may sound simple but the function is vital. No new money is created by the pooling program but it does ensure that neighboring dairies who produce milk of equal composition will receive similar prices for their milk, regardless of where they ship their milk to be processed.”
Retail prices are not set by the state’s milk pooling and pricing system. “Pooling simply collects the state’s milk revenues and redistributes them to farmers in an equitable manner,” explained LaMendola. “Farm level prices are driven by the marketplace and follow the basic laws of supply and demand. Retail prices are set by the retailers and the state does not regulate retail prices.
LaMendola pointed out that the pooling program “does not guarantee high farm level prices. Producer prices are dictated by the marketplace. Supply and demand dictates the prices for commodities that are used in the minimum pricing formulas that set producer prices across the nation.”
The basic reasons for creating the system that existed 40 years ago have not gone away. “Pooling was designed to prevent the economic hardships created when milk from one farm competed for customers against neighboring farms. With such a perishable product, farmers saw the need to create a more stable marketing environment, allowing all dairy producers’ products to reach a willing buyer,” explained LaMendola. “Dairy processors were willing to give up the advantage of farmers’ competition for their business in exchange for an equal raw product price for all processors of the same product.”
SOURCE Western United Dairymen