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Dairy in Crisis - Part 2: Legislators helpless to change milk pricing

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Posted on March 19, 2009 |
By Kathryn Flagg



lunchstevens.jpg
STATE REP. WILL Stevens answers a question at Monday’s legislative lunch at the Bridport Grange. Stevens and other local legislators were on hand for the lunch with local farmers. Legislators voiced frustration at their inability to change the federally set milk price paid to dairy farmers. Independent photo/Trent Campbell

BRIDPORT — As dairy farmers from around the county sat at tables at the Bridport Grange Monday for an annual lunch with legislators sipping coffee from paper cups emblazoned with “Vermont Milk,” the depressed price of milk couldn’t have been far from their minds. These days, farmers are selling their milk at prices well below the cost of production.

Despite the grim financial circumstances, struggling farmers aren’t necessarily looking for a bailout from those legislators, according to Addison County Farm Bureau President Bill Scott, who handled the microphones at Monday’s event. Many would be too proud to take the additional help, were it available, Scott speculated.

“I don’t think they are looking for handouts,” Scott said. “They just want a decent price for their product, and a decent living.”

But as dairy farmers struggle to keep their heads above water, legislators have been stymied in their attempts to help. Much like the farmers, legislators find themselves powerless to change a federal milk pricing system that’s currently paying Vermont dairy farmers between $10 and $11 per hundredweight (cwt). The USDA and farmers themselves estimate it costs anywhere from $17 to $25 to produce that same amount of milk.

Now, legislators are left looking for ways to provide only token assistance around the edges of a huge problem.

“Frankly, it’s hugely frustrating,” Rep. Will Stevens, I-Shoreham, said to Monday’s slim crowd. “We can write resolutions, we can send them off to our federal delegation — and we’ve done all that.”

With the dairy industry accounting for roughly 80 percent of Vermont’s agricultural sales — and dairy farming tied to the state’s rural identity and working landscape — legislators are worried about what the loss of dairy farms could mean for the state. This year alone, the downturn in milk prices is anticipated to cause a $200 million impact on the state.

But Stevens pointed out that in the dairy world, Vermont is a little fish in a big pond. None of the representatives on the federal House Subcommittee on Livestock, Dairy and Poultry — or indeed the entire U.S. House Agriculture Committee — are from New England. Vermont’s closest geographic ally on the committee is from Pennsylvania.

“If you think there’s going to be a change in dairy policy nationwide, look no further than the House Ag Subcommittee,” Stevens said.

Rep. Chris Bray, a New Haven Democrat who, like Stevens, is on the Vermont Legislature’s House Agriculture Committee, echoed his colleague’s frustration. Like many, he points to the shortcomings of the federal milk pricing system.

“We have very little influence over the federal milk order,” Bray said. “I don’t expect much in the way of relief in the federal milk order changing in a way that’s helpful to farms.”

When milk prices go down, he said, the question for farmers is, “How long can you hold your breath?”

“Vermont farmers will be between $150 and $200 million poorer at the end of 2009 than going into the year,” said Bray. “They will, in effect, have subsidized … producing the milk for the year. Clearly it’s not a sustainable pattern.”

GRASPING FOR SOLUTIONS

With commodity milk prices out of their hands, what — if anything — can local legislators do to ease the plight of dairy farmers?

As it turns out, state and federal governments have pitched in before when the dairy industry has floundered. On a federal level, the Milk Income Loss Contract (MILC) program kicks in when milk prices drop below $16.94 per cwt. The program refunds farmers a percentage of the difference between that price and the price they’re actually being paid for their milk on the commodity market.

U.S. Sen. Patrick Leahy, D-Vermont, sits on the Senate Agriculture Committee, and paved the way for the extension of the MILC program in the 2007 Farm Bill. Leahy was also a strong proponent on that committee of the now-defunct Northeast Dairy Compact, which he argued helped farmers earn fairer prices for their milk, and opposes the over-consolidation of the dairy processing industry.

Though Leahy is a senior member of the Agriculture Committee, he is the only senator from New England on the committee, and many industry observers say lobbyists for large industrial farms in the Midwest and California often overpower the interests of northeast dairymen when it comes to federal legislation.

These days, farmers are anxiously awaiting their MILC checks to arrive, said Rachel Cadieux, a program specialist at the Vermont Farm Service Agency office.

Cadieux said that MILC payments haven’t kicked in for February yet, and checks won’t go out to farmers until the first week of April. The delay has to do with the new Farm Bill, and an additional component in the MILC formula that adjusts for feed prices.

The program doesn’t differentiate between regions — “California gets paid the same way Vermont does,” Cadieux said.

But once those payments kick into gear, they’ll roll out to farmers who’ve applied for the program on a regular month-by-month basis — that is, until prices go back up.

HELP FROM LEGISLATORS

Until recently, the federal government wasn’t alone in offering aid to farmers — Vermont did, too, at least when state coffers were full. 

Most recently, in 2007, the state pulled together $3 million in emergency payments to farmers. (That amount was tacked on to an $8 million allocation made the year before.) These programs paid farmers the difference between a target price per cwt and the amount they were earning on the milk market.

Bray and Stevens were both freshmen representatives on the House Agriculture Committee in 2007, and worked on patching together those payments. With state officials scrambling to cut programs to make up for multi-million-dollar shortfalls this year, though, there is no talk about coming to the rescue this time.

“That wasn’t even floating around in the air up (in Montpelier) this year,” Stevens said. “There’s been no discussion about any kind of subsidies or any kind of help that way.”

There’s also very little money for agriculture in the national economic stimulus package, though Bray and Stevens said Monday that they’re looking for creative ways to redirect some of that funding to farm sectors. 

In lieu of subsidies, some legislators have cast around for other solutions to the dairy problem. Last month, the Vermont Senate Agriculture Committee — on which Addison County Sen. Harold Giard serves — revived a plan to cap the retail price of milk, citing what senators called an unfair gap between the price farmers receive for their product and the amount consumers pay at large supermarkets. The legislation was targeted at protecting consumers. 

The bill proposed that the Legislature reclaim the power to set the maximum retail price of milk, taking the power away from the Vermont Milk Commission.

The Milk Commission weighed a similar proposal to cap retail prices last fall, proposing that processors and retailers — who the commission believed were pocketing large profits at the expense of farmers — pay a surcharge per gallon of milk and putting that money back in the hands of dairy farmers. But the proposal hit the skids in the commission after several months of hearings on the topic. Secretary of Agriculture Roger Albee has said that the commission didn’t have the evidence that the surcharge would help farmers. 

Giard reported Monday that the Senate Agriculture Committee is also sitting in on weekly conference calls with neighboring states to discuss potential partnerships to help dairy farmers. Talk of Giard’s one-time plan to charge milk processors for transporting milk from farm to plant has also cropped up again, as other neighboring states weigh the option. Vermont alone can’t risk charging processors for transportation because processors could opt instead to pull out of the Vermont market.

All in all, even if legislators are relatively powerless to change the circumstances of farmers’ current economic woes, Scott said he thinks farmers want to know that their situation is understood and appreciated.

“I think it makes (farmers) feel better to tell somebody about it,” Scott said. Farmers, he went on, take comfort in knowing that they’re not “in the boat alone.”

“It’s a little easier to row when you’ve got company,” he said.

OPPOSING INTERESTS

But some dairy advocates say that another discussion that should be happening has to do not with what legislators can do for farmers, but what farmers can do for themselves.

Local author and former organic dairy farmer James Maroney of Leicester warned farmers against looking to the government for changes in the federal milk pricing system. The real problem at the root of unfavorable milk prices is overproduction, Maroney said — overproduction to the tune of 9 billion extra pounds of milk per year.

(To put that into context, Vermont dairies produce just 2.6 billion pounds of milk every year — the state could stop producing milk entirely and there would still be a glut on the international milk market.)

Maroney warned that the milk order as it stands ultimately works to the benefit of the government and processors, and that farmers will face an uphill battle if they want to change the system.

“It always seems odd to me that the farmers continue to go to government for a solution to their problem when it was government that created their program,” Maroney said. “The government likes (the situation) the way it is, because government represents the other 99 percent of the people. … No government is going to help farmers by raising the price of food. That’s just never, ever going to happen. The way commodity prices change is when the people who produce them control them.”

Editor’s Note: In the short term, legislators remain relatively powerless to help struggling dairy farmers. Look to the next article in our “Dairy In Crisis” series on March 26 for stories about what farmers themselves are doing to get by, and learn about some of the ideas being proposed as long-term solutions to the dairy problem.

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