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Milk prices spur calls for reform

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Posted on April 9, 2012 |
By Andrea Suozzo



ADDISON COUNTY — After two years of relatively strong milk prices, the United States Department of Agriculture last week announced that falling dairy prices and the high cost of feed has triggered support payments to dairy farmers.

This marks the first time since April 2010 that farmers have received payments under the Milk Income Loss Contract (MILC) program, which provides a safety net for farmers when payments for milk fall below a certain price. While milk payments remain above that threshold, the high cost of feed means that profit margins for farmers are falling.

John Roberts of Butterwick Farm in Cornwall said while the payments come as a help to those struggling to pay the high cost of feed and the rising cost of fuel, they also bring attention back to the flawed national dairy system.

“It’s the age-old problem with the system that we have right now,” said Roberts. “If the price is good, you want to make more milk, and if the price is bad you want to make more milk to increase your cash flow.”

While 2010 was a break-even year and 2011 a relatively good year for milk prices, Bob Wellington, senior vice president and dairy economist at Agrimark, which owns Cabot, said many farms are still struggling to recoup losses from 2009. He estimated that many farms saw losses of about $100,000 per hundred cows over the course of that year.

Rising production over the past year has flooded the national market, said Wellington. Milk prices have fallen about 25 percent since their high in the summer of 2011, to $17 per hundredweight (cwt), largely due to a five percent increase in production across the nation.

Vermont, he said, is the only state going against the grain and drawing back production, mostly due to high feed prices, but this has little effect on national prices.

“If the rest of the country was doing what Vermont is doing right now, milk would be at $25 per hundredweight,” said Wellington.

With one percent of national milk production, however, Vermont dairy farmers are stuck in a situation with little control over input prices or milk price.

“The one part that we have some control over is that we’re right at the beginning of the planting season,” said Roberts. “On our farm, the emphasis is going to be having enough feed, and having better quality stuff than we had last year.”

And while it’s not yet time to plant in Vermont, Roberts said it’s hard to imagine a year worse than the wet spring and very wet harvest time in 2011.

A CALL TO ACTION

Marie Audet of Blue Spruce Farm in Bridport said with renewed attention to dairy reform, she’s heard more discussion about federal reform from farmers, and has been encouraging others to contact legislators and get involved with the push for new dairy legislation.

“We’re all so busy with everyday work, so when the prices are good you go along with it,” she said.

Right now, many are looking to the proposed Dairy Security Act in the U.S. Congress as the best hope to address a highly volatile national market. The bill has undergone a number of changes since the House Agriculture Committee introduced it as draft legislation last summer, and legislators are now looking to roll the dairy reform measures into the 2012 Farm Bill being crafted in the House and Senate Agriculture Committees.

Sen. Patrick Leahy, D-Vt., released a statement upon last week’s milk price news stating that he and the rest of Vermont’s congressional delegation are working hard to keep dairy reform in the spotlight.

“We must find a way to offer dairy farmers a useful safety net to help when margins shrink, and also to help end the rollercoaster rides that have characterized milk prices,” he said.

The reform bill would replace the MILC program, set to expire in September of this year, with a supply management program that would reduce payments to farmers who ramped up production when milk prices began to fall. The program would encourage dairies across the nation to decrease milk production, in turn sending prices back up.

Farmers who entered the supply management program would be eligible for an insurance program similar to MILC, establishing price support payments when the margins between feed price and milk price were small.

This, said Wellington, would prevent the spiraling effect of past dairy downturns, when producers across the nation have upped production as prices fall, flooding the market and sending prices down even further.

And, added Roberts, the act actually stands to save the federal government millions of dollars by making the price stabilization program — not payments to farmers — the first line of defense when milk prices fall.

“The act will actually remove farmers from needing federal money,” said Roberts.

Some of the country’s larger dairy buyers have come out against the bill, as they say it would impose unnecessary government regulations on the dairy market.

Wellington said this is not the case for Agrimark: the best thing for the business at this point, he said, is to make sure that supply of milk is in line with demand.

“Some of (the buyers) liked $13 per cwt milk (in 2009),” said Wellington. “But the best thing for our business is not this price volatility. What we need more than anything is a stable price at a fair level for farmers and a fair level for consumers.”

“Nothing is perfect, but this is the best thing out there,” said Audet. “The act would help farmers take charge.”

Reporter Andrea Suozzo is at andrea@addisonindependent.com.

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