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Dairy farmers lose federal safety net

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Posted on October 8, 2012 |
By Michelle Monroe (St. Albans Messenger)



ST. ALBANS — When the U.S. House of Representatives adjourned on Sept. 28 without passing a new Farm Bill, it not only left dairy farmers without a safety net, it raised the specter of chaos in agricultural markets.

In effect, Congress’s failure to act could trigger a so-called permanent law that, it is estimated, could raise the parity price of milk to the $40 per hundredweight (cwt.) range.

The Farm Bill, which authorizes most of the spending done by the U.S. Dept. of Agriculture (USDA), must be renewed every five years. As part of that renewal the bill suspends permanent law — decades-old agricultural laws that no longer work with contemporary markets.

Additionally, the Milk Income Loss Contract (MILC) program, which supported farmers when the price of milk dropped below a trigger price, expired on Sept. 30. Other programs, including export programs and the dairy price support program, will expire on Dec. 31, absent a renewal of the farm bill.

Expiration also threatens the nation’s largest nutrition program, Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps.

According to the Congressional Research Service (CRS), in the past the specter of permanent law taking effect has served as a stick forcing to Congress to act.

Under permanent law, the government must intervene to raise the level of crops and milk to “parity,” which is defined as the purchasing power of those crops in 1910-1914. The parity price of milk, according to the CRS, would be $49.70 per hundredweight (cwt).

The law requires the USDA to act to raise the price of milk to 75 percent of parity, or $37.28 cwt. The USDA, through purchasing dairy commodities such as cheese, would be forced to try and raise the price for all milk, including skim, to $37.28.

While $37.28 per hundredweight of milk may sound like a boon for struggling dairy farmers, Highgate farmer Bill Rowell, head of the National Dairy Producers Organization, said the price increase would drive American farmers out of the international market. Currently, the U.S. is exporting about 14 percent of its milk.

“It’s going to skew the whole thing to the point where it won’t work for anyone,” said Rowell. Absent a new farm bill, “we’re gong to be in serious trouble,” said Rowell.

The House will have a second chance to pass the bill when it reconvenes during the lame duck session after the Nov. 6 election. Should it fail to pass, the bill will expire in full at the end of December.

In addition to milk, the government would have to raise the support price for numerous crops, including corn, barley, oats, cotton and rice. Currently, the USDA must step in if the price of corn falls below $1.95 a bushel. Permanent law would obligate the USDA to, in essence, purchase corn at $5.70 per bushel.

The support price for cotton would nearly triple, from $0.52 a bushel to $1.29. In addition to having to essentially purchase cotton at $1.29 a bushel, the government would also begin making acreage allotments to control the price and supply of cotton.

In its report the CRS reiterated several times that permanent law does not fit with the current functioning of agricultural markets or reflect current production methods.

Vermont Secretary of Agriculture Chuck Ross last week issued a statement expressing disappointment with the House for failing to pass the Farm Bill and thanking Vermont’s Congressional delegation for their efforts.

“The dairy community relies on this safety net, which is administered by the Farm Service Agency, when milk prices plummet,” Ross said of the expiration of the MILC program. “This Congressional stalemate is yet another threat to our dairy industry here in Vermont, and across the nation.”

Sen. Patrick Leahy, D-Vt., a longtime proponent of measures to assist dairy farmers, also released a statement expressing concern.

“It was irresponsible and unprecedented for House leaders to head for home leaving the Farm Bill undone,” said Leahy. “With high feed costs and other challenges, dairy farming is tough enough these days without piling this needless uncertainty on farmers’ shoulders.

“Now that the Farm Bill has expired, USDA today has far fewer tools to help America’s farmers and rural communities. Expiration of the Farm Bill also strands vital research, nutrition and agricultural trade initiatives.”

Farmers had been prepared to see the MILC program end because the new farm bill was to replace it with two programs — a crop insurance program for milk that would allow farmers to purchase insurance on the margin between the cost of feed and the price of milk. The other program was a supply management program intended to stabilize the supply and price of milk and reduce the need for federal supports.

Franklin County farmers were among those who led the fight for the proposed changes. Farmers were able to get the changes through the Senate and the House Agriculture committee, which after much haggling passed the bill on a strong bipartisan vote.

“It’s an extraordinary achievement that they succeeded in getting that through the Senate and the House Ag. committee,” said Rep. Peter Welch, D-Vt.

The Republican leadership of the House has declined to bring the new farm bill to vote on the House floor, claiming a lack of votes to pass it.

The largest programs in the farm bill are the nutrition programs. Funding for SNAP will remain in place, because while the farm bill authorizes the spending it does not allocate the funds. However, once the farm bill expires fully on Dec. 31, SNAP will be vulnerable to cuts to its budget.

Under current law, tax cuts and some appropriations must be offset by budget reductions elsewhere to avoid adding to the federal deficit. Without the protection offered by the farm bill, the SNAP program, which helps to feed 8,600 Franklin County residents each month, including 3,200 children, would be vulnerable to being cut in order to offset other spending or tax cuts.

In March, the SNAP program brought $11.7 million into Vermont, which provided nutrition assistance to 96,000 Vermonters, 33,700 of them children.

Note: Sen Leahy has posted highlights of the Farm Bill pertaining to its impact on Vermont (http://www.leahy.senate.gov/press/vermont-highlights-of-the-agriculture-...).

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