On the edge of the cliff

Milk does a body good, except when the thought of skyrocketing prices got the public’s collective heart racing as Congress worked up until the New Year’s Eve deadline passing a one-year extension of the 2008 farm bill.

“Having been involved in the industry for some time now, I knew there would be some kind of deal made before the end of the year,” said Jerry Messer, Midwest Dairy Association chairman who farms with his brothers in Richardton.

U.S. milk prices were poised to double in 2013 without a reauthorization of the five-year farm bill that expired Sept. 30.

Under the extension, the federal government will manage the milk supply by setting milk production limits for farmers enrolled in a market stabilization program.

“The extension of the current farm bill means business as usual for our dairy producers,” said Gary Hoffman, executive director of the North Dakota Dairy Coalition. “The current milk-to-feed price ratio has put dairy producers into a very difficult financial situation. If the extension hadn’t passed, the dairy program would have reverted to the old parity system. In the short term, it would have raised milk prices on the farm, but long term, it could have been a disaster for the industry.”

No action by lawmakers meant prices the federal government paid to farmers would have reverted back to 1949 standards and doubled the amount paid to dairy farms, while doubling the cost of a gallon of milk.

“The reality is that the government would not have wanted milk to be priced at $7 or $8 a gallon and producers wouldn’t have wanted that either,” Messer said. “We want to provide consumers the best and most cost-effective product we can.”

December Farmer’s Share statistics indicate dairy farmers received about $1.81 for per gallon of fat free milk sold at the average price of $3.54 per gallon in November, the latest U.S. Bureau of Labor Statistics data shows.

Hoffman’s concern was milk prices rising and destroying domestic and foreign dairy markets.

“Once you lose established markets and customers, it’s hard to get them back,” he said. “Long term, it could have been devastating for their market. Not passing the extension would have doubled in-store dairy prices which would immediately reduce domestic consumption of milk, cheese and other dairy products. This would increase foreign dairy imports because we wouldn’t be competitive anymore.”

It wasn’t a win for the government either. A continuation of the 2008 farm bill would cost the federal government nearly $1 trillion over the next 10 years, according to the Congressional Research Service.

“It is a stark reminder that U.S. family farmers and ranchers need certainty and Congress’ inability to pass the farm bill directly will impact their operations,” said National Farmers Union President Roger Johnson.

Both the House Agriculture Committees and the entire Senate passed versions of the bill this summer before it died in the House.

The House Agriculture Committee’s bill would reduce spending by $35.1 billion, compared to the Senate’s version that recommended $23.1 billion in cuts, according to the Congressional Research Service.

“I think the original bill the Senate proposed would have been good for producers,” Hoffman said. “It addressed the deficit with some real spending reductions and it incorporated the Dairy Security Act which was a voluntary program that gave producers some price protection and helped reduce production during low milk prices.”

Messer hopes the farm bill extension gives lawmakers time to perfect the legislation, particularly dairy policy.

“I think dairy producers would like to see a revision in the law that would give dairy producers an insurance program kind of like crop insurance,” he said. “This way if our inputs are higher than what we’re making, the insurance that we would pay for would kick in.

“It would cost us something, but it would be protection if there are high feed costs. Dairy farmers had a tough year because the cost to feed our cows went up, both because of the drought and the rise in commodity prices.”

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