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COL Redesigned dairy pricing isn't making progress

The December issue of the United States Department of Agriculture's excellent, 10-times-a-year magazine, Agricultural Outlook, hit my e-mailbox Nov. 25 with its usual weighty thud. Heavy with a dozen fact-filled stories on U.S and global ag issues and 25 pages of historical price and production tables from USDA's Economic Research Service, the December issue is a heaping helping of both meat and potatoes to this ag journalist's idea diet.

The December issue will be AO's last; USDA is killing it. Well, nearly killing it. Come February, ERS will debut a new publication that will fold three of its periodicals, AO, Food Review and Rural America, into a single, five-times-a-year (yet unnamed) magazine.

Making over an established winner into a diluted shadow is an often fatal disease in ag publishing. A half-decade ago, according to farm press legend, the boss of a national hog magazine asked its editor if the magazine's flagging circulation and declining revenue could be reversed with a design makeover.

"A redesign?" reportedly asked the famously droll editor. "What would really help is for your guys to sell an ad every now and then."

Shortly thereafter, the editor was fired, the boss promoted and the magazine dumped. Pray that AO avoids a similar fate. AO's final edition shows its uniqueness and often unintended irony. A December 2002 story -- like AO's inaugural June 1975 issue -- profiles the U.S. dairy industry. The startling change wrought on dairying in the intervening 27 years suggests that redesigning American agriculture, like redesigning farm magazines, isn't always progress.

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According to author James Miller, who authored the first AO dairy story, the U.S. dairy sector in 1975 sported 444,000 dairy farms with 11.1 million cows that produced 115.4 billion pounds of fluid milk. In 2002, however, America has 80 percent fewer dairy farms (97,560), with 20 percent fewer cows (9.1 million), producing nearly 50 percent more milk (170.3 billion pounds).

Just as the farm side of dairying has undergone redesign, so has the product side. In 1975, fluid milk was the dairyman's most important product, "absorbing half of all milk marketings," notes Miller. Today, the cheese market absorbs more milk than the fluid market.

In 1975, per-capita milk consumption was 29.5 gallons per year; today it's 22.6 gallons, a 23 percent collapse. Similarly, per capita cheese consumption in 1975 was 14.3 pounds; today it's 29.8 pounds, an amazing, 108 percent increase. Almost every ounce of the increase, notes Miller, came via restaurants or ready-to-eat prepared foods; retail cheese sales at supermarkets has not grown for decades.

As the "farm fresh" market shifted to a more "processed" -- including butter -- market, the method used to determine milk prices shifted, also. In the 1970s, the steady hand of government regulated milk prices. Now, volatile local, regional and global fluid and product markets drive prices.

That volatility is snapping dairy farmers' necks. In 2001, national Class I milk prices averaged about $16.25 per hundredweight. In 2002, Class I prices will be 20 percent lower, or $13 per hundredweight, just a tick better than 2000 prices.

The down-up-and-down-again market has brought government back into the dairy business. The 2002 farm bill initiated the Milk Income Loss program to pay dairy farmers direct subsidies during low-price periods. USDA modestly predicts those subsidies will total $2.8 billion 2002 and 2003, a sum greater than all dairy subsidies of the previous eight years combined.

This is progress?

Meanwhile, one dairy institution in need of a makeover hasn't changed since the mid-1980s. The mandatory dairy checkoff continues to spend most of its more than $200 million a year to boost sales of retail dairy products -- through programs like the "Got Milk?" campaign -- despite sustained evidence that retail dairy sales continue to lose ground to fast-growing dairy markets like restaurants and processed food.

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So why are dairy farmers still spending the money? Got me. Then again farm magazines -- and farm policies -- that need makeovers never get 'em and those that shouldn't be touched always get it in the neck.

Guebert is a syndicated columnist from Delavan, Ill.

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