No cure in sight for milk crisis

WASHINGTON — A House agriculture subcommittee held its third hearing of the month on the crisis facing the nation's dairy farmers, but didn't come any closer to consensus on what — if anything — to do to protect farmers from a long, deep slide in milk prices.

While lawmakers appear to agree that Congress cannot sit idly as farmers everywhere lose money, the hearings have yet to produce many immediate or long-term measures that the industry as a whole embraces.

At Tuesday's session, representatives for farmers and dairy processors disagreed about whether the federal government should raise support prices, speed the slaughter of cows or establish new controls on milk production in order to keep prices from tumbling so sharply in the future.

Since early this year, farmers have been struggling through prices well below the cost of production. After prices hit record highs around $20 per 100 pounds of milk in 2007, they have fallen to between $10 and $12 this year. Farms of all sizes are losing money, and farm advocates say failures will climb this fall as the effect of months of rock-bottom prices hits.

"This is one of the worst situations we've been in," House Agriculture Committee Chairman Rep. Collin C. Peterson, D-Minn., said at the hearing. "I realize this needs to be dealt with on a timely basis."

Adding urgency, perhaps, to the issue, lawmakers learned that the farmers' share of the retail price of milk has dipped to 91 cents for every $2.99, the average national price for a gallon. The rest goes to retailers and processors, said Gordon M. Cook Jr., member of the board of directors of Holstein Association USA Inc. Historically, the farmer's share has been about 50 percent, he said, which would be around $1.45.

So far, lawmakers have focused on ideas to put more money in farmers' hands, such as boosting support prices the government pays for excess dairy products and raising subsidies the government pays farmers when market prices fall below government targets. With much further delay, however, the odds increase that Congress will take those measures when prices begin to recover.

Processor groups and other critics have urged the Agriculture Committee to resist. Raising support prices will only make U.S. dairy products more costly on the world market and dampen exports, said Walter M. Guterbock, manager of Columbia River Dairy in Boardman, Ore.

Instead, Mr. Guterbock said, Congress should let the dairy markets sort themselves out, "as hard as that would be."

Indeed, any effort by Congress could do more harm than good, said W. Anthony Bostwick, chief executive officer of Braum's Ice Cream and Dairy Stores, Oklahoma City, Okla., who added that prices are beginning to climb again.

"The tide has already started to come back in," Mr. Bostwick said.

For long-term solutions, the committee is considering how to speed the slaughter of dairy cows without causing beef prices to tumble. One idea is to boost the Cooperatives Working Together program, in which farmer-owned bargaining cooperatives pay farmers to retire their herds. But that suggestion flopped earlier in the year when some advocates suggested including it in the economic stimulus package.

In addition to the reductions already achieved through the CWT program, about 3 percent of the nation's dairy herd would have to be taken out of production to affect milk prices significantly, said Craig Lang, president of the Iowa Farm Bureau Federation.

In the long term, Holstein USA of Brattleboro, Vt., has proposed a national system to manage the milk supply. A government-established board would determine the nation's milk needs and aim to hold producers to that level. Among other details, the system would charge "market access fees" of as much as $3 per 100 pounds of milk to farmers who exceed allowable milk sales.

That money, in turn, would be distributed to farmers who stayed within their limits, Mr. Cook said.