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Welch unveils legislation to curb volatility in milk prices

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Posted on April 19, 2010 |
By Kathryn Flagg



FAIRFAX, Vt. — Rep. Peter Welch on Friday unveiled long-awaited legislation that could, if passed, create a “growth management program” for the U.S. dairy industry that supporters hope would curb the volatile highs and lows of the federal milk pricing system.

The announcement came after months of campaigning from regional and national dairy groups, including local organizations like Dairy Farmers Working Together, who have championed the idea of a growth management program. Such a plan, supporters say, could turn around a dairy industry that, regionally, has been in a nosedive since last winter.

Dairy farmers in Vermont are currently producing milk at a loss. The continued low milk prices come after a year in which dairymen in the state went into staggering debt to continue operating their farms, to the tune of around $800 to $1,000 per cow. For the average dairy farm in Vermont that equaled roughly $100,000 in debt in 2009.

“Following last year’s devastating dairy price crisis, the need for a plan to match supply with demand is clear. To delay in addressing the enduring challenges of price volatility is to leave Vermont farmers vulnerable to a system that simply is not working,” Welch said. “The introduction of this bill is just a first step, but it is an important step. Working together, we will refine it to ensure that it works for dairy farmers — in Vermont and throughout the country.”

The bill’s priorities call for reducing milk price volatility while ensuring that farmers still have the flexibility to enter the dairy industry or expand their farms.

The program would operate on a farm-by-farm basis. Each farm would be given a certain amount of milk they would be allowed to produce, and that number would be based on the amount of milk that farm shipped the year before.

Each quarter, the Secretary of Agriculture would announce the “growth rate” at which farmers could exceed last year’s production without paying any penalty fees. Farmers that exceed that level of growth would have to pay additional fees, which would be redistributed as dividends to farms that stayed within their quota.

The program would require a referendum of dairy producers to be enacted, and farmers would vote again in three years to determine whether to continue the program. Additionally, farmers from around the country would sit on a board that would advise the Secretary of Agriculture on the operation of the new plan.

OPPONENTS SKEPTICAL

Growth management plans are not without opponents. Though supporters point to the benefit of eliminating catastrophically low prices, some local farmers have argued conversely that such a plan could curb the earning potential of dairy farms by eliminating the boom times of high milk prices.

Others, like former organic dairy farmer and Leicester resident James Maroney, expressed skepticism that a growth management plan could even work.

Maroney, who has written about the economics of dairy farming, said that government officials and farmers have opposing purposes. Though farmers want and need prices to rise in order to stay in business, Maroney finds it unlikely that public officials will campaign for higher food prices when most of their constituents are customers rather than producers.

“I believe that any government official who stands up and says, ‘The price of food must rise,’ is a dead man,” Maroney said. “What (Welch) wants to do is mollify the farmers without enraging the consumers.”

He estimated that the national milk supply would need to be cut by at least five percent for farmers to see any significant change in milk prices, and was doubtful that a growth management plan would go to such extremes. He also said he finds it unlikely that farmers themselves would abide by the sort of dramatic cuts he thinks are necessary to bring prices up to a livable wage for farmers.

“For an industry that has been choking on overproduction for at least two decades, any plan that in its very first word enshrines the word ‘growth’ is doomed to fail,” Maroney said.

Reporter Kathryn Flagg is at kathrynf@addisonindependent.com.

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