Solutions to dairy crisis are debated
WASHINGTON — Some dairy industry groups are reviving an old idea to deal with the latest crisis in the milk business.
A handful of farm organizations has called for a system to manage the nation's supply of milk, from government-sponsored herd retirements to penalties for farms that expand production. Although the industry has not built a consensus around the concept, it is gaining more attention on Capitol Hill as lawmakers look for long-term solutions to dairy's boom and bust cycles.
Some highly detailed proposals have been submitted to Congress. But the basic idea is to slow the growth in milk production that economists partly blame for this year's crisis, which has sent milk prices well below the cost of production. The fall in prices from record-high levels was the greatest in more than a generation, and experts say many farms in Northern New York are likely to go out of business in the next few months.
Industry groups and the government have debated supply management for years as a way to prop up milk prices. But the United States has never had a far-reaching program such as the quota system in Canada; some groups such as the American Farm Bureau Federation have long been opposed.
However, the discussion has grown louder because of the low milk prices and an important advance in genetics — "sexed semen" that gives a 90 percent chance of a heifer, rather than a bull, being born. More heifers mean more milk.
The main proposal making rounds in Congress is from the Holstein Association of America, which calls it a "price stabilization program." Farmers would be assigned a "base" of production, much as grain farmers are for government farm programs, and would be assessed a "market access fee" to exceed that amount. Fees collected would be distributed to farmers who kept within their limits.
The fee might range between $6 and $9 per 100 pounds of milk on the additional production — a hefty amount considering farmers usually take in from $15 to $20 per 100 pounds.
Participation would be mandatory in states that are included. The program would be administered by the U.S. Department of Agriculture. Administrative costs would be covered through a mandatory assessment deducted from farmers' milk check, which might be as much as 2 cents per 100 pounds but probably would be less than a penny, said Gordie Cook, director of the Holstein Association's legislative affairs committee.
Mr. Cook, who farms in Massachusetts but said he is familiar with farms in Lewis County and other parts of upstate New York, said the potential benefit to farmers outweighs the cost of the program.
"Hopefully, we can do something to keep them in business," Mr. Cook said.
Dairylea Cooperative Inc. in Syracuse is touting a "dairy growth management initiative" with the National Milk Producers Federation, which would create a mandatory but privately run system similar to the federal milk dairy promotion programs. The program could include herd reductions, as well as production limits in parts of the country that want them, said Edward Gallagher, vice president of economics and risk management at Dairylea, in testimony to the Senate Agriculture Committee last month.
Supply management was one of the themes at the hearing, organized by Sen. Kirsten E. Gillibrand, D-N.Y. She has not said whether she believes supply management should be a goal, but she did ask a New York farmer who testified whether a mandatory government-run system makes sense — and the answer was no.
"A federal program would be slow to respond," said Eric Ooms, a Columbia County farmer and vice president of New York Farm Bureau. He said an industry-run program called Cooperatives Working Together, which exports dairy products and pays farmers to retire their herds, has been more effective.
"It's responsive to the industry and it works fast," Mr. Ooms said. "Overall it has been successful and it could do more."
But in his testimony, Mr. Ooms acknowledged that "there is a great deal of dialogue in the industry" about the issue and hinted that Farm Bureau might change its position in the next few months.
The CWT approach also has critics within the industry, who see the herd reductions as inhumane and question the program's effectiveness.
Dairy processors maintain that the industry already has supply management — the free market, which spurs farmers to produce more or less depending on prices. A system to limit production would hurt farmers and consumers alike, the International Dairy Foods Association told lawmakers.
"The public policy implications of such proposals are profound and the inequities they would create are mind-boggling," said Paul Kruse, chief executive officer and president of Blue Bell Creameries in Brenham, Texas, in testimony on behalf of the IDFA.
Propping up U.S. milk prices would dampen exports, leaving more milk on domestic markets while encouraging processors here to import more dairy ingredients, Mr. Kruse said.
"Programs that manage supply or limit milk production would raise milk and dairy product prices for our nation's consumers and would encourage them to purchase less costly and often less nutritious foods," he said.
