Jessica A. Chittenden|
April 14, 2008
Commissioner Releases Results of Milk Hauling Study
Reactivates Dormant Milk Marketing Advisory Council
New York State Agriculture Commissioner Patrick Hooker today announced the release of a study that assessed the financial impact of transportation costs on dairy farmers in New York State. Initiated by legislation sponsored by former Assemblyman, now State Senator Darrel Aubertine and State Senator Betty Little, the study assessed milk hauling costs over a twenty year period and compared those costs to the farm value of milk marketed.
"Milk is a pure and nutritious food, but milk marketing is complex," the Commissioner said. "Because milk is produced daily, is a perishable product, and is in great demand, milk must be picked up from farms frequently and delivered to processing plants. Hauling is a critical component of the milk marketing system and this study focused on the costs associated with it, and we will continue to analyze those costs in order to be sure farmers are treated fairly."
Hauling charges paid by dairy farmers are determined in part by the number of stops and the number of miles traveled for a given farm to plant milk pick-up route. The study showed that additional route stops at small farms needed to fill up a tanker have resulted in higher average hauling costs for smaller size dairy operations.
The study found that hauling charges paid by dairy producers ranged from an annual average of $0.50 to $0.57 per hundredweight of milk marketed from 1991 through June 2007 for all size farms. For the period 1991 to 1999, the hauling charge included a $.15 per hundredweight transportation credit. The average hauling charge, including transportation credits, ranged from 3.1 to 4.4 percent of the gross value of the farm milk marketed for the entire study period.
However, hauling charges shown on milk checks only represent a portion of the true and total hauling charges. A recent study of neighboring Vermont’s hauling charges shows two-thirds of the actual cost of hauling is paid by producers, while one-third is absorbed by cooperatives or is passed up the marketing chain.
Senator Darrel Aubertine said, "As a farmer, it was no surprise to me that this study shows that the cost of hauling and stops are pushed back to the farmers. It is evident that we need to take action now to mitigate the impact that these charges have on our farm families’ bottomlines. I would like to commend Ag & Markets and the industry experts involved for their diligence in this study and for their continued thoughtful focus on this and other practices."
Senator Betty Little said, "While this study has provided a useful historical perspective, further examination is needed, particularly given the continuing rise in fuel prices and the impact of added costs on the dairy industry. I support Commissioner Hooker’s proposal to reactivate the Milk Marketing Advisory Council and will be talking with dairy farmers in my district to get their thoughts and suggestions as we move forward."
Efficiencies in the milk hauling industry are credited with reducing costs of milk assembly and transportation. These efficiencies have benefited farmers to some degree since cost increases have not been fully charged back to producers. Recently, higher fuel costs, higher equipment replacement costs, weight limit issues on roads and bridges, hauling loads longer distances due to plant closures and issues of segregating the milk supply as organic, "rBST free" and conventional are putting pressure on the milk hauling industry and has resulted in increased hauling rates charged to farmers.
Researchers at Cornell University are currently involved in a project to update an accounting program that will enable milk hauling companies to better determine the actual costs of operating milk assembly routes.
The Commissioner said, "Dairy farms are one of the few businesses that are charged a portion of the hauling costs when their product is purchased and shipped to a processing plant. That issue was raised numerous times during this study, questioning the ownership of milk in relation to hauling charges. While there are no state laws or regulations on milk hauling charges, we need to approach this topic carefully to be sure any attempt to help our producers does not have unintended negative consequences."
"To better prepare New York to meet future dairy market needs, I am re-activating the Milk Marketing Advisory Council to discuss this issue further, as well as other dairy industry concerns."
The Milk Marketing Advisory Council (MMAC) was created to advise the Commissioner on dairy policy matters. The Commissioner will reinstate the MMAC with new appointments from dairy manufacturing, processing and production sectors in addition to representatives of milk consumers and milk retailers, as prescribed by Agriculture and Markets Law. In addition, the Commissioner plans to hold a milk marketing listening session in June that will be open to the public.
The milk hauling study utilized information from three sources – the Department’s milk dealer and cooperative monthly reports that itemize total payments and marketing deductions to dairy producers, Cornell University’s Dairy Farm Business Summary that includes production costs and profits from a selection of successful operations, and USDA Agriculture Economic Research Service reports which contain monthly estimates for milk production costs by state. The average hauling costs reported by each of these sources were all in relative agreement.
New York’s dairy industry ranks third in the nation for total milk production with more than 12 billion pounds produced annually from 627,000 dairy cows. New York has 6,200 dairy farms and generated over $2 billion last year from the sale of milk, which represents half of the State’s total agricultural receipts.
New York’s dairy industry also consists of over 100 dairy processors and manufacturers, numerous dairy support services such as veterinarians, feed dealers, equipment dealers, and others, as well as approximately 23,000 retailers that provide milk and dairy products to New Yorkers throughout the State.
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