Wisconsin Dairy Pricing Gives Nation's Farmers a Sour Taste

A cheesemakers' rebellion is quietly brewing in the rumpled hills of Wisconsin.

After watching the price of cheddar plummet 25 percent at the National Cheese Exchange (NCE) in Green Bay, Wis., local dairy farmers decided they'd had enough cheap cheese.

Their angry protests in front of the exchange and on the capitol steps in Madison, Wis., are prompting dairy farmers across the country to call for federal pricing reform. At the National Farmers Organization Convention in New York last week, delegates urged the US Department of Agriculture (USDA) to declare a state of emergency.

Wisconsin farmers have such vocal allies because even though less than 1 percent of the nation's cheese changes hands at the NCE, the Agriculture Department uses those prices to calculate the minimum farmers nationwide receive for their milk.

The furor could reach consumer pocketbooks and even their breakfast tables: Some farmers are threatening to withhold milk unless state and federal officials investigate NCE trading practices and change the pricing system. And behind much of their fury is fear over the survival of the small dairy farm. "There's a growing sense of frustration and almost panic," says Ed Jesse, a dean of agriculture at the University of Wisconsin.

The current price decline could threaten the livelihood of thousands of small farmers who say they can't survive a market system that doesn't pay enough to cover operating expenses. "We'll survive this, but I'm not sure a lot of dairy farmers will," says Dave Kretzschmar, whose family farms 200 Holsteins in Wisconsin.

Milk prices fell from a record high of $15.37 per hundred pounds this summer and are now around $11.61. In 1994, the USDA estimated the average farmer spends $16.49 to produce 100 pounds of milk.

If farmers withhold milk next year, it will come 30 years after the last collective action by dairy farmers,who poured their milk into rivers and barn drains for two weeks to protest declining federal milk pricing subsidies. Federal officials raised subsidy prices after farmers resumed milk shipments.

While the recent price drop affects all dairy farms, agricultural economists say smaller farms will be the hardest hit, especially in the East and Midwest, where farms of 50 to 100 head of cattle compete with herds of 5,000 in California and the Southwest.

Mr. Kretzschmar estimates the price drop cost him $160,000 in revenues - money he would use to pay for $200,000 in annual feed costs and to make payments on the barns and milking sheds he built last year.

"If you're dairy farming, you better be better than average or you won't make it," he says, adding that many farmers are quitting in the face of an uncertain future.

Cost-efficient corporate farms have made family farming tougher - Bureau of Labor statistics show milk production rose 9 percent from 1986 to 1995 while the number of milk cows fell 12 percent. In the same decade, 44 percent of family farms shut down.

Concern over the plummeting prices has led some federal officials to seek alternatives to the NCE. The USDA has committed to some changes in milk pricing calculations, and secretary Dan Glickman recently agreed to make early purchases for federal food assistance programs.

But the agency has been trying to eliminate agricultural subsidies since the 1950s, not strengthen them.

Farmers have had little success in their fight for higher prices, in part because they haven't been able organize. The NCE uproar may change that. "[No matter] where you go, that's all farmers are talking about," says Paul Olsen, a dairy farmer and member of the National Farmer's Organization, a national lobby group.