University of Wisconsin Center for Wisconsin
Rural Cooperatives, September/October 1999, p. 19-21.
Published by the Rural Business and Cooperative Development Service
The Changing Role of Dairy Trade Groups and Co-ops
By Jerry Kozak
Chief Executive Officer
Years before the Capper-Volstead Act allowed cooperatives to ~ collectively bargain on behalf of their members' economic interests, U.S. dairy leaders established the National Milk Producers Federation to create a single, national presence for dairy associations. NMPF was formed back in 1916, making it one of the first national, commodity-oriented organizations to promote the economic and political interests of farmers and their collectively owned creameries and marketing organizations.
But - as the cliche goes - times have changed. While milk itself is still essentially the same as it was 85 years ago, the dairy industry is structurally very different than before. And with a new century sure to pose new challenges, it's important to examine how a membership association like NMPF must evolve to better represent the needs of its member cooperatives. Let's start by looking at how the industry has changed.
A historical perspective
At the end of World War II, there were roughly 3.5 million dairy farms in the United States. Today, 50 years later, there are 100,000. There were more than 1,000 dairy cooperatives half a century ago. Today, while there are still more than 200 dairy co-ops, just 20 of those market half of all the milk produced in the United States (roughly 160 billion pounds annually). The top three cooperatives alone (Dairy Farmers of America, Land O'Lakes and newly merged California Dairies) market approximately 50 billion pounds of milk annually.
It's also worth noting that, 30 years ago, only 65 percent of the nation's dairy farmers marketed their production through a cooperative. That figure has grown to 83 percent today. So, while the number of farms and cooperatives has declined, the marketing presence of farmer-owned dairy co-ops has actually expanded during the past generation.
One of the primary missions of our organization, like countless others based in Washington, D.C., is to provide representation in Congress and with the federal agencies that regulate our industry. That's a key reason why NMPF was formed, and it's still at the forefront of what our members look to us to do. As long as the government has a presence in the production and distribution of dairy products, it will be important to have a Washington-based presence for dairy farm organizations.
In fact, there was a time not long ago when the dairy cooperatives that belong to NMPF asked whether they still needed a national presence. And after looking at their needs and the realities of the dairy industry, the answer they arrived at was a resounding "yes" - they need to have a recognized and consistent voice on Capitol Hill and with the USDA, Federal Drug Administration, Environmental Protection Agency and other agencies whose activities have a daily impact on the operation of dairy farms.
Dairy co-op issues changing
So, National Milk continues to fill a unique and important role for its members. But the assortment of issues in which we're involved is changing, and thus our role is evolving in relation to where we've been in the past. For example, take the issue of international dairy standards.
Ten years ago, the manner by which European nations determined the composition of their cheese was of little or no concern to U.S. cheese manufacturers. We didn't import or export enough of the product for us to bother comparing notes with other cheese-producing countries. But as the U.S. government and other nations work through the World Trade Organization to increase global trade in products such as cheese, ice cream and butter, it is critical for the U.S. dairy industry to involve itself in that process. And it's the role of NMPF to give American farmer-owned dairy cooperatives a seat at the table when international dairy standards are constructed.
Environmental regulation is another area where NMPF has evolved to better reflect the needs of its members. As most farmers are aware, the USDA and EPA are developing a new regulatory approach to managing the environmental impact of animal waste. The regulations that result from this process could have as significant an economic influence on dairy farmers as the Federal Milk Marketing Order program or dairy price supports. So, it's important to have a national organization such as NMPF to bring dairy producers' concerns to federal regulators as they design the new animal waste guidelines.
Our evolving mission also reflects an increasing concern with consumers' attitudes towards our members' products. The leading concern of dairy consumers, according to most attitudinal surveys, is not price, variety or taste, but food safety. Dairy has an admirable record of providing safe, high-quality products, but in this information-intensive age, one isolated pathogenic outbreak can have national—even international—consequences. NMPF must serve as an educational voice for the media and consumers during times when a national presence is required to keep consumer-oriented issues in their proper context. No individual cooperative, or regional organization, has the same capability.
Sorting through information
Another factor that will determine how NMPF changes in the future is the transformational influence of information technology. At the core of our mission is the exchange of information— not so much data, such as a financial services or marketing organization would manage—but ideas, news and perspective. For decades, NMPF served as a conduit for opinions and ideas both from Washington to our members, and vice versa. That exchange often took weeks or months, and was reliant on paper correspondence. Today, thanks to the ubiquity of computers, we have the capability of moving that information much more thoroughly and rapidly. The use of email and the Internet enables NMPF to more rapidly and effectively communicate both to our members and the rest of the world.
Truth be told, thanks to information technology, the same news that we provide to our members sometimes can be obtained by them directly from the source (Congress, USDA, WTO, etc.). Where NMPF's role becomes more crucial is the addition of context to that information. Our interpretation of events, and our assessment of the impact of those events on the dairy industry - these are where NMPF adds value to the daily flow of information within the industry. And as we all become increasingly bombarded with the facts, figures and conjecture of the Information Age, the role of a trade association increasingly will be screening this flow of information so that it is useful and instructive to our members, and not just confusing.
Ultimately, the role and scope of NMPF is a mirror image of its own membership.
NMPF reflects both the hopes and fears of dairy producers and their cooperatives. As the number of farms declines and those remaining get larger - and the same pattern applies to cooperatives themselves - NMPF will continue to evolve to best reflect the needs of its changing membership base.