The 1st meeting of the Subcommittee on Rural Issues of the Interim Joint Committee on Agriculture was held on Tuesday, November 10, 2009, at 10:00 AM, in Room 131 of the Capitol Annex. Representative Johnny Bell, acting Co- Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Johnny Bell, acting Co-Chair; Senators David Givens, Kathy W. Stein, and Ken Winters; Representatives Mike Cherry, James R. Comer Jr., C. B. Embry Jr., Tom McKee, Steven Rudy, Dottie Sims, Wilson Stone, and Tommy Turner.
Guests: Maury Cox, Executive Director, Kentucky Dairy Development Council; Bill Crist and Bob Klingenfus, Kentucky dairy producers; and Lewis Ramsey, Director, Kentucky Milk Safety Branch.
LRC Staff: Stefan Kasacavage and Susan Spoonamore, Committee Assistant.
Chairman Bell introduced Maury Cox, Executive Director, Kentucky Dairy Development Council, Bill Crist and Bob Klingenfus, Kentucky dairy producers to discuss the problems faced by the Kentucky Dairy Producers.
Mr. Crist, who has two dairy farms, one in Barren County and the other in Metcalfe County, stated that between both farms he has 270 cows, 250 heifers, and 2 steers. He said that in 2008 the gross income was $2,300,000. In the past, he has been able to keep 10% to 20% of the gross income, and the other 80% - 90% went back into the general economy.
Mr. Crist said that presently he was operating and living on the equity that had accrued during the last 12 years. He said that the farms were losing approximately $30,000 per month, and since January, they had lost $190,000. In January, 2009, the debt per cow was less than $800, but now the debt has increased to $2,000 per cow. He said the goal of owning 500 cows debt free, purchasing land, and building new dairy facilities was not attainable in the current financial climate.
Mr. Crist asked that the legislators or the Milk Commission help find out what happens to the money on its way from the store back to the dairy producer. Dairy producers are getting paid less than 30% of the price of milk at the store.
Rep. McKee asked how much longer he would continue to milk with the prices being what they are today. Mr. Crist said that he would not be able to continue much longer. When the corn silage runs out, he will be selling his cows.
Rep. McKee and Rep. Rudy stated that the loss of dairies is declining to the point that it is becoming critical.
Sen. Stein asked if the federal government was playing a role in the supply and demand of dairy products. She also asked if producers were a part of the Kentucky Proud Program. Mr. Crist stated that the dairy industry is based on the world-wide market, and it fluctuates with the decline of the stock market. Dairy producers are not making money, but the processors are enjoying record earnings.
Mr. Cox explained that Kentucky actually imports milk. There are federal issues that are regulated through a federal system, just as the price of milk is set federally. There are four entities involved in the system: the federal government, the processors, the marketers, and the producers. The first three entities set the rules. The producers have very limited information with which to make decisions. Mr. Cox stated that producers are exploring opportunities to become a part of the Kentucky Proud Program.
Rep. Sims asked how many dairy producers have gone out of business, and how many dairy producers are still in business. Mr. Cox stated that there are 967 dairy farmers still in business. Over the past couple of years Kentucky has lost 200 dairy producers.
Chairman Bell stated that the dairy farmers in Barren County were losing at least $10,000 a month. He was concerned that some entities associated with the milk producers were getting rich, while the producer was starving to death. He asked what action could be taken by the legislative body to help the producers. He asked for written information addressing the issues facing dairy producers.
Mr. Bob Klingenfus, a dairy producer from Oldham County, Kentucky stated that his family owns 300 acres and rents 1,200 acres. He milks 120 cattle and has 120 replacement heifers. He stated that 66% of his farm revenue comes from the dairy. He said he has been milking for 45 years and has seen his share of bad years, but for the last ten months he has been losing approximately $300 to $400 a day – the worst ever. He said the most vulnerable producers are those who expanded their facilities and are now in debt.
Mr. Klingenfus explained that Kentucky dairy farmers produce 1.2 billion pounds of milk annually, but Kentucky dairy plants process 2.2 billion pounds of milk annually. In other words, milk must be transported into Kentucky for processing. Mr. Klingenfus said that he has concerns regarding cost sharing. For example, he said that Kentucky producers could very well be sharing the costs of supplying non-local milk for the market which would reduce the margins of profit for Kentucky producers. If that is happening, then the reduced margins would limit Kentucky producers’ ability to expand and be competitive. He listed several issues for review by the Milk Commission.
Sen. Winters asked if the sale of raw milk would be an option for dairy producers. Mr. Cox, Mr. Crist, and Mr. Klingenfus all agreed that legalizing the sale of raw milk would not be beneficial.
Rep. Stone asked if Kentucky producers were at a specific disadvantage compared to other states. Mr. Cox stated that Kentucky producers should not have a different price for milk compared to other producers across the United States. He said that the disadvantage is the price for transportation costs of milk.
Sen. Givens stated that if federal officials would not listen to the Milk Commission’s issues, then he would like the Commission to consider drafting a Resolution and present it to the Agriculture Committee for consideration.
Sen. Givens also asked if Kentucky milk should be branded. Mr. Cox stated that before branding could happen, the whole industry would need to agree and participate. He also stated that the Secretary of Agriculture is in the process of forming a Dairy Advisory Committee.
Mr. Cox stated that it was important to connect the producers with the consumers and processors. The Milk Commission will be meeting soon and would like to come back and speak to the Committee around the first of the year.
Rep. Sims asked how many facilities produce Grade A products. Lewis Ramsey, Director, Kentucky Milk Safety Branch, stated that there are 24 facilities that produce Grade A products, and 8 fluid plants where bottled milk is processed. There are 200 milk haulers and approximately 120 samplers who sample the milk at the plants.
Sen. Givens asked if Mr. Ramsey worked with Chris Thompson of the University of Kentucky Regulatory Services. Mr. Ramsey stated they have been able to work with them to create a milk truck with cutting edge technology that has a security system that can be locked down. The hauler has a hand-held computer which allows him to input data that was once done by hand. Mr. Thompson has developed a new way to pull milk samples from the tank to test for antibiotics.
Chairman Bell thanked the presenters and the committee members for their attendance. There being no further business, the meeting was adjourned.