House rejects dairy reform
Dairy farmers expressed frustration this week with the failure of Congress to pass a farm bill, saying the uncertainty makes it hard to do business and some could go under without changes to the federal milk program.
Farmers also worried that if a current nine-month extension of the 2008 farm bill expires with no action, a 64-year-old farm law will kick in, sending milk prices spiraling. While that might provide short-term profits, they say, it'd hurt them in the long run because no one wants to buy milk at $6 a gallon in the grocery store.
The U.S. House voted down a farm bill June 20, about a week after the Senate approved its own version of farm policy.
It was the second straight year the House failed to pass the five-year bill that sets funding for agriculture and food programs. Last year, the farm bill never even made it to the floor of the House for a vote, prompting passage in January of a slimmed-down extension of the 2008 law.
The impetus for passage of that extension was fear of the jump in dairy prices - what many called at the time "the dairy cliff."
The Agricultural Act of 1949 sets a much higher price for government purchases of cheese, butter and other dairy products than the U.S. has seen in decades. The government cut those prices in recent decades because if it didn't, more companies would sell to the government than to the marketplace, unless consumer prices rose to match.
Farmers fear that if the higher prices kick in on Jan. 1, milk and other dairy prices will rise until consumers just stop buying their products.
"I don't think that's good for anybody because we would destroy demand," said Pete Kappelman, a Wisconsin dairy farmers who is board chairman of Land O'Lakes, a farmer-owned company that markets milk, eggs, butter and many other products.
The farm bill failed in the House mainly because lawmakers disagreed on food-stamp funding and dairy program reforms that farmers say are needed to keep them in business.
The problem in recent years has been the high cost of feed due to the ethanol industry's demand for corn as well as last year's drought. Farmers say milk costs almost as much to produce as they can sell it for - sometimes more.
Kappelman, who has a 450-cow farm in Manitowoc, worked on a national dairy industry committee that proposed a margin protection insurance program that pays farmers when the price difference between milk and feed reaches a certain point.
He also supports a market stabilization program that would require farmers to either reduce the amount of milk produced when prices drop too low or give up a portion of their margin protection payments.
The U.S. Department of Agriculture would then use that money to buy and donate dairy products to food banks and help low-income families.
The margin protection and market stabilization programs would be voluntary, but farmers couldn't participate in one without the other under the plan included in the Senate's farm bill and in the House Agriculture Committee's version.
When the bill reached the House floor, Republicans voted to remove the market stabilization program. Minnesota Rep. Collin Peterson, the senior Democrat on the House Agriculture Committee, said a number of Democrats changed their vote to no at that point.
Randy Roecker, 40, was among those desperately hoping the complete package would pass. He and his wife farm with his parents at Loganville.
They were doing well in 2008 when they renovated to expand from 50 to 300 cows. The next year, milk prices plummeted and feed prices rose.
At one point they were losing $100,000 a month - Roecker lost his savings, his parents lost their retirement and the farm went into debt.
They and many of their neighbors are still struggling, even though milk prices have risen slightly. Feed prices have not gone down substantially.
"Just last Friday, another one of my friends got rid of his cows," Roecker said. "It's just getting to the point where you can't afford to keep going anymore."
Wisconsin farmers grow more of their own feed than those in states like California, the nation's top milk producer. Dean Strauss, 41, who milks 1,900 cows in Sheboygan Falls, said growing 3,000 acres of feed provides some protection from high feed prices but doesn't reduce the need for a new farm bill, which would likely have better crop insurance programs.
Strauss, who described himself as a "free-market" person, was among the farmers who opposed the market stabilization program (supply management), fearing that any reduction in milk production would stifle growth in the Wisconsin cheese industry, which buy most of his milk.
Jamie Bledsoe, who has 1,300 cows in Riverdale, CA, had similar concerns about the effect on his state's growing, international dairy exports.
"My personal view is, the government does not effectively manage anything, let along the supply of milk," Bledsoe said.
But Kappelman said that without a way to control supply when milk prices fall too low, farmers would keep producing, the margins would stay low and the government would have to keep shelling out.
Even with disagreement over the stabilization program, farmers were united on the message they wanted to send to Congress. Failure to pass a farm bill, Bledsoe said, "leaves us in a big cloud of uncertainty."
Associated Press writer Gosia Wosniacka in Fresno, CA, contributed to this report.