Recovery may skip dairy operations
WASHINGTON — The U.S. Department of Agriculture projects sharp increases in farm income for the year that is about to end, but dairy farmers appear to be missing out on much of the recovery.
Indeed, one effect of the farm recovery — higher returns for corn and soybeans — could intensify the pain for Northern New York dairy farmers who have to buy those goods to feed cattle, economists say.
The USDA predicted that net farm income would climb by an average of 31 percent in 2010 compared with a year ago and that cash receipts for livestock will increase 20 percent in part because of sharply higher prices for dairy cattle.
In a conference call with reporters, Agriculture Secretary Tom Vilsack cited industrywide increases in cash receipts and said agriculture appears headed "toward sustainable recovery."
While higher prices for farm goods and increased exports are largely responsible for the rosy outlook, Mr. Vilsack also credited farmers with keeping their debt in check, which could have long-term benefits.
"I think this will ensure success for decades to come," Mr. Vilsack said.
How much of the improved picture for farmers will find a way to the north country remains to be seen. Farmers benefit from higher prices for livestock when they sell cows for slaughter or other purposes, for instance, and some grow soybeans or corn for sale. The department also projected that the value of milk production will climb by 29.6 percent compared with 2009.
But the greater impact, economists suggested, comes in the higher prices that dairy farmers must pay for cattle feed and that eat into milk-production gains.
DAIRY OUTLOOK BLEAK
The outlook for dairy is "still pretty bleak," said Brent A. Buchanan, a dairy and livestock expert with Cornell Cooperative Extension of St. Lawrence County. Although prices have recovered from the deep lows of the past two years, they remain below farmers' cost of production, he said.
Farmers who survived the price crash have borrowed heavily against the equity in their farms, dampening their ability to expand and making them more vulnerable to weak milk prices, Mr. Buchanan said.
Andrew A. Novakovic, a prominent dairy economist at Cornell University, Ithaca, has said the outlook may even be souring for dairy farmers in the next year. With feed prices climbing, he wrote in a market update in October, "dairy farmers will be in for rough seas in 2011. With milk production increasing and demand growth still very sluggish, it is hard to come up with an optimistic scenario for milk prices."
Mr. Novakovic predicted milk prices holding around $16 per 100 pounds in early 2011, well below the level that Mr. Buchanan and other dairy experts say would spur expansion in upstate New York.
"I'm not really happy until we're approaching $20," Mr. Buchanan said.
NEW FARM BILL LOOMS
The improved situation for many farmers comes as Congress prepares for the next five-year update of farm and rural development programs. Discussions will intensify next year, and a bill would be due for completion in 2012.
Prosperous times generally are not the best for writing a farm bill, said Roger Johnson, president of the National Farmers Union. When farmers are doing well economically, he said, farm groups have trouble gaining support for government assistance — even though a downturn is always somewhere on the horizon.
"It does make it harder. That's always the case," Mr. Johnson said.
The NFU is pushing for aid programs that take effect only during a sharp downturn for farmers, he said.
That also is the approach at the National Milk Producers Federation, which represents farmer-owned bargaining cooperatives. The NMPF has urged a new dairy program that pays farmers based on declines in profit margins, rather than focusing just on milk prices.
This week's income report bolsters that position, said Christopher Galen, the NMPF's vice president for communications.
"It helps make the case that a safety net addressing margins, not just prices, is the right way to go," Mr. Galen said.
Mr. Vilsack declined to comment on the possible effect on farm bill negotiations, noting that discussions in Congress have yet to begin in earnest. But with spending reduction now dominating the discussion of the federal budget, he defended the USDA's efforts to trim spending already and said the department will continue to ensure a safety net for farmers.
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Farm-income projections...
