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December 22, 2012

20121221_CowMilk
Gordon Chibroski / Staff Photographer

David Knight prepares to start milking at Smiling Hill Farm in Westbrook on Friday. Knight said he is less worried about price fluctuations because the farm processes its own milk.

Milk prices could double due to Congress' inaction

By Eric Russell
erussell@pressherald.com
Staff Writer

With a federal farm bill expired and nothing to take its place, the price of milk and other dairy products could jump on Jan. 1 if Congress fails to act.

Milk prices – those paid to farmers and those paid by consumers – are set by the U.S. Department of Agriculture. A new minimum price is announced every month. Some states, including Maine, can adjust prices to a degree.

Two safety nets prevent steep fluctuations in milk prices here. The first is the 2003 Maine Dairy Stabilization Act, which collects handling fees from processors. The money is paid back to farmers when their economic conditions worsen.

The second is the Milk Income Loss Contract, a federal program that offsets the high cost of feed in certain areas, including Maine.

The federal farm bill, a budget that funds a variety of agriculture programs across the country, includes the Milk Income Loss Contract. Without that subsidy, Maine farmers fear that prices will rise.

Some have speculated that the price of milk for consumers could double. U.S. Sen. Charles Schumer, D-New York, has dubbed the situation the "dairy cliff" – a nod to the larger "fiscal cliff" debate in Washington, D.C.

The situation has Maine milk producers worried.

Beth Johnson, a dairy farmer in Kittery, said farmers won't benefit from a significant price increase. "It just means people are going to pay more."

Tim Drake, executive director of the Maine Milk Commission, said the industry has never faced a potential crisis like this so no one really knows what to expect.

"We're always striving for stability for the farmers, processors and distributors," he said. "What we have now is uncertainty."

The federal farm bill is typically renewed every five years, and includes subsidies for farmers, foresters and others.

A new farm bill has passed in the Senate but not in the House. On Jan. 1, federal agriculture policy will revert to a 1949 version that says the government must buy milk at higher prices to keep dairy farms afloat.

The minimum wholesale price of a gallon of whole milk is now $3.35. The minimum retail price is $3.71.

Maine's congressional delegation, led by outgoing U.S. Sen. Olympia Snowe and U.S. Rep. Chellie Pingree, a member of the House Agriculture Committee, has fought for action, but it appears that nothing will happen until the next Congress is seated, in January.

Snowe will retire next month after 34 years in Congress, largely because of her frustration with partisan gridlock that has slowed or halted work on major issues in recent years. On Friday, she said Congress' failure to pass a farm bill is another example of its dysfunction.

"It's horrific. It's another indication of how we've fallen legislatively here, when we cannot even engineer solutions to the farm bill that have, I thought, strong support," Snowe said in an interview. "And somehow we're now in a position where it just may not pass. That again is another sign of our failure and irresponsibility, because lives depend on it and it has huge implications and consequences on the dairy industry."

Pingree said the lack of an adopted bill has far-reaching implications.

"The dairy program is a critical issue and seeing milk prices double would be very tough on families. But the farm bill also includes a lot of important programs that directly benefit Maine, like Value Added Producer grants that help farmers get more for their products," she said in a prepared statement. "There are a lot of reasons why we need a new farm bill and I hope congressional leaders will get out of the way and let us pass one."

Pingree is married to S. Donald Sussman, majority share owner of the Portland Press Herald.

Maine dairy farmers said they always want higher prices, but not for consumers.

Teresa Hardy of Farmington said that, as an organic farmer, she gets a locked-in base price. She's lucky. Others' prices rise and fall with the market.

"Some could be close to going out of business," she said.

Warren Knight of Smiling Hill Farm in Westbrook said he will be affected by inaction in Congress, but not as much as others because his farm processes its own milk so it maintains more pricing control.

Maine has more than 300 dairy farms, ranging from small herds to farms with hundreds of milk-producing cows. Collectively, they employ about 1,400 people. Another 2,600 work in processing plants and other dairy businesses.

Drake, of the Maine Milk Commission, said part of the problem is that the federal minimum price is determined largely by speculators on the floor of the Chicago Mercantile Exchange, where global commodity traders and speculators buy and sell cheese and butter futures. Farmers and others have long complained about the system.

The Maine Milk Commission can add to the federal minimum price, but if the price goes too high, it could lead processors in Maine to buy out-of-state milk.

Johnson, the Kittery dairy farmer, said fluctuations are bad for the industry.

It's like working all week and not knowing what your paycheck will look like at the end, she said.

 

-- Washington Bureau Chief Kevin Miller contributed to this report.

 

Staff Writer Eric Russell can be contacted at 791-6344 or at:

erussell@pressherald.com

Twitter: @PPHEricRussell





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