Help for dairy farms?
By PETER HIRSCHFELD VERMONT PRESS BUREAU | July 08,2009
Albert J. Marro / Rutland Herald
Neal Sharrow prepares a cow for milking at the Ruane farm in Clarendon.
U.S. Secretary of Agriculture Tom Vilsack says he'll consider an overhaul of the federal milk-pricing system blamed by many Vermont dairy farmers for the financial storm battering their livelihood.
Vilsack made the surprise announcement in New Hampshire on Monday, his latest stop on a "Rural Tour" of America intended to spotlight the economic importance of small towns. Dairy officials in Vermont, including Secretary of Agriculture Roger Allbee, say the antiquated milk-pricing system has exacerbated a fiscal crisis that threatens the viability of many dairy operations.
"I think it's a positive first step," says Allbee, who met with Vilsack briefly Monday. "The system is broken and it needs to be fixed, and Secretary Vilsack indicated that he's committed to looking at the pricing system."
Low milk prices have exacted an alarming toll on Vermont's dairy farmers: Since the beginning of the year, Vermont has lost 32 dairy operations. The 1,046 farms that remain are left to contend with milk prices insufficient to cover even the cost of production.
"When it drops down to where we are now, I don't think there's a farmer in the state that can pay all his bills," says Johnson farmer Paul Mclure.
Vilsack said Monday he wants to increase federal aid to dairy farmers via the Milk Income Loss Contract. He proposed additional relief by forgiving portions of, or deferring payments on, USDA loans. The federal government already has sought to revive milk prices by unloading surplus dairy reserves into export and nutrition programs.
Many Vermont farmers say they appreciate those attempts to bring short-term relief. But fixing the 1930s-era pricing system that promulgates supply-demand inequities, Mclure says, is the only way to ensure the future financial stability of rural farms.
"All that other stuff is Band-Aids," Mclure said. "It's what they do every time bad prices come around, just to kind of keep us going. But they've never fixed the real problem."
A global drop in demand saw milk prices – set by the U.S. Department of Agriculture – drop to as low as $10 per hundredweight earlier this year. The price has since rebounded to $12, however conventional dairy farmers are still hemorrhaging cash.
Amanda St. Pierre is a Berkshire farmer and member of Dairy Farmers Working Together, a Vermont-based organization formed in 2006 to address the milk-pricing system. She said supply management will play a key role in any long-term solution to milk-pricing problems. Her organization is on the verge of introducing a bill that would limit supply.
"The first step and most immediate step that could have the best effect for dairies is to get a supply-management program in place," St. Pierre says.
Dairy Farmers Working Together advocates a system whereby farmers would pay a penalty for producing milk in excess of projected demand. The plan, she says, wouldn't prevent dairy farmers from increasing herd size or growing their operation. Rather it allows dairy operations across the United States to maintain a supply-demand equilibrium that would ensure farmers a fair price for their product.
"We definitely are going to need a government role in passing this legislation to make the program mandatory nationwide," St. Pierre says.
St. Pierre says the existing system produces 36-month cyclical downturns that impose an increasingly severe toll on dairy farms. Only when enough farms go under, and production comes closer in line with demand, do prices return to levels necessary to ensure profitability.
With each passing cycle, she says, Vermont loses more farms. Allbee says the dairy industry could eventually go the way of the pork or chicken sectors, which are dominated by "very few producers in very few sections of the country.
"That's definitely something we don't want to happen," Allbee said.