Times are as bad for dairy producers as many of them have seen in their lifetimes; federal and state governments and producer associations are scrambling to find ways to keep the farmers in business, but nobody sees a quick turnaround.
Just two years ago, half of the equation, at least, was working for dairymen; although the cost of production was at an all-time high, so was the price of milk. In Sept. 2007, according to USDA’s Agricultural Marketing Service, Class I milk averaged $21.91/cwt. But by March, 2009, the average price was down to $9.43, a victim of rising production (up 11.4 percent in April compared to April 2007, according to the National Agricultural Statistics Service) and sharply reduced demand due to the recession. Meanwhile, USDA’s Economic Research Service estimated the national average cost of production in 2008 at $16.07/cwt, up more than 22 percent from 2007… and it’s not getting any cheaper.
Lonoke County, Ark., dairyman Woody Bryant told Ozarks Farm & Neighbor it was the worst he’s seen it since the early 70s, “simply because the things that we buy are so high compared to the price of the milk. And of course our biggest expenditure is feed, and it’s extremely high.”
But Bryant, a former chairman of the National Dairy Board, was in a position to do something about it. For the last two years he’s chaired the Arkansas Milk Stabilization Board; the five-member panel, created by a 2007 law, crafted a plan to help keep the state’s remaining dairy farmers in business, and this year the legislature adopted a version of that plan. It will pay producers up to $4 million over the next two years if their prices fall below two-thirds of the cost of production, plus additional incentives if they deliver high-quality milk or increase their milk output.
“I feel like it’s what a lot of people are waiting on,” Bryant said, “and I sure am waiting on that, because I see it’s going to be a big help. Any time you can put that much money into the hands of the farmers in a two-year period of time, it should be beneficial.” Individual producers are limited to no more than $5/cwt per month, and a yearlong average of $2/cwt; the program starts July 1, and checks should begin arriving by late August.
The money is coming from a fund set up to encourage biofuels production and distribution in Arkansas; the money went unused when the markets for ethanol and biodiesel crashed. The Milk Board had intended the program to be perpetuated through an assessment on wholesale milk; Gov. Mike Beebe objected, and the legislature changed the bill.
Bryant said that turn of events was discouraging; producers, he pointed out, will only be able to assure their bankers two years of income stabilization. But, he added, the money is “nothing to sneeze at… It, to me, will be enough to make a big difference as to whether I stay in or get out.” He’s hoping that someone – perhaps, the governor – can come up with another source of funds while the existing one plays itself out.
There’s also the prospect the federal government will come up with improvements in USDA’s dairy program. Pennsylvania’s two U.S. Senators, Democrats Arlen Specter and Bob Casey, have introduced a bill comparable to Arkansas’ on a national scale, pegging support payments to the cost of production. But the proposal has its critics; Sen. Chuck Grassley (R-Iowa) told OFN, “I know that the price of milk is very, very low and people are losing their shirt because of the cost of production is low. And I wouldn't want to say that there's not some chance for help, but the Specter-Casey bill will go nowhere because it is government enforcement – kind of a commodity-type government decision-making that is kind of contrary to the principles of a free market… We've been away from supply management in agriculture – even as a political debate – for 40 years. And I don't think we're going to go back there.”
Christopher Galen of the National Milk Producers Federation told OFN the co-op group has formed a strategic planning task force to look at potential long-term solutions – most of which, Galen said, involve either voluntary or mandatory government control over milk production. Galen said Specter-Casey is one of the ideas that will be considered, but Congress has a full plate and won’t pass a complete revamping of the dairy program in 2009. “We’ve got to focus on both the long term and the short term,” he said, “recognizing that there aren’t going to be any quick ways that we can all of a sudden restore prosperity to the dairy business.”
But Bryant said, “We have to have some type of supply-management program that’s mandatory for the whole nation to be able to keep milk production in synch with consumption. There’s a lot of different possibilities out there, and a lot of people don’t like those, but for us to have a stable price that we can work with – we know what we’re going to get, month after month after month – we have to have some type of government plan.”
