WASHINGTON — Dairy farmers spend around $2.35 to produce a gallon of milk, by some government estimates. But they get about $1.80 in return.
That gap explains why Floyd M. Hall, a retired dairy farmer from LaFargeville, is complaining despite farmers being paid the highest milk prices anyone can remember the last few months.
Mr. Hall and a group called the National Family Farm Coalition are lobbying Congress to push milk prices still higher by mandating that the government link minimum prices to farmers' costs of production, a goal that has evaded supporters since the government revamped milk support prices in the early 1980s. The NFFC has asked lawmakers to tack a cost-of-production provision to the five-year farm bill that is already overdue for completion.
FARMS GOING UNDER
"We want fairness and justice restored to the dairy industry," said Paul Rozwadowski, a dairy farmer from Wisconsin and chairman of the NFFC's dairy subcommittee, in a conference call with reporters. He cited losses of thousands of farms in Wisconsin, a situation duplicated in many states, including New York.
The dairy industry is one of Northern New York's biggest businesses, supporting hundreds of farms and more than a dozen cheese plants throughout the region. Farm numbers have tumbled and some plants have closed, but many remaining farms have grown. Great Lakes Cheese is expanding its plant in Adams.
The farmers blame a series of ills in the milk business for cutting into dairy producers' living, including consolidation in the industry that has cut down on competition, blurred lines between milk processors and dairy cooperatives that bargain on behalf of farmers and limited help from Congress.
OUTSIDE SOURCES OF INCOME
Farmers stay in business by using old equipment and finding other sources of income, said Douglas DiMento, a spokesman for Agri-Mark Inc., a farmer-owned dairy cooperative with many members in Northern New York. In many farm families, someone holds a full-time job off the farm, he said.
"Farmers do it by selling wood off the land or any other creative way they can," Mr. DiMento said. Agri-Mark is not part of the farmers' effort but has supported a better reflection of production costs in milk prices.
Most recently, the farmers said, the Senate Agriculture Committee did not approve a bill that would have based minimum prices paid to farmers on a national average cost of production. Feed prices have risen dramatically in recent years, but farmers cannot simply pass those increases along to milk buyers; minimum milk prices are set by the government based on the price of dairy commodities like cheese and powdered milk. Farmers and milk buyers negotiate final prices off the federal minimum.
NATIONAL COST OF PRODUCTION
Production expenses include more than feed or electricity, reflecting the cost of having family members working on the farm without salary as well, for instance. Costs of production vary around the country, but the farmers want to settle on a nationwide average to avoid regional conflicts.
"This is a national cost of production," Mr. Hall said. "It's not pitting one region against another."
If the government based farm-level prices on farmers' costs, farmers would have been paid about. $30 per 100 pounds of milk in January, instead of $21 — itself a price that would have been unthinkable a few years ago.
In turn, milk at the supermarket could have cost considerably more than $3.63 a gallon, which skim milk averaged in Watertown in January, the New York Agricultural Statistics Service reported. That price also is historically high.
"You don't necessarily want to kill consumption," said Christopher Galen, a spokesman for the National Milk Producers Federation, which represents the farmer-owned cooperatives that sell milk to plants.
To Mr. Hall and the other farmers, the NMPF is part of the problem. Its members include some processors, whose interest is in paying farmers as little as possible, they complain. And its biggest member is Dairy Farmers of America, a giant farmer-owned cooperative that has been investigated — although nothing more — by the U.S. Justice Department for anti-competitive behavior that lowered milk prices paid to farmers. Some farmers consider DFA too cozy with milk buyers.
FARM BILL OVERDUE
Mr. Galen did not respond directly but said the NMPF is doing what it can to help farmers within the government's budget limits; the farm bill has stalled because of White House demands to limit overall spending. Lawmakers have warned farm groups not to expect big increases in commodity programs.
"We're trying to come up with safety nets that are also politically salable," Mr. Galen said. "We are trying to get a better deal for producers than they have now."
One of those deals is an expanded government subsidy program called the Milk Income Loss Contract, which pays farmers when milk prices fall below a federal target. The NMPF and New York Farm Bureau support it, but the National Family Farm Coalition calls it a government handout, preferring to see higher prices from dairy plants instead.
Dairy economists warn that high milk prices paid to farmers eventually would backfire. As the price climbed every year to reflect costs, farmers would make more milk and the government would have to establish Soviet-style supply controls, predicted Kenneth W. Bailey, an economist at Pennsylvania State University.
"Sorry, but markets always work better," Mr. Bailey said.
If nothing else, the NFFC wants to see one provision that's already in the Senate farm bill approved, said Irene Lin, the group's policy analyst. Sen. Russell D. Feingold, D-Wis., pushed through a measure requiring that a commission studying the milk pricing system examine fairness to farmers.
"We see that as an opportunity," Ms. Lin said.