The milk price wars are just beginning

2011 is a huge year politically for agriculture. The federal Farm Bill will be passed in 2012, and every conceivable interest group is jockeying to get a better deal than the last time around.

It’s an especially important year for dairy.  It’s widely considered necessary to reform the way farmers are paid for their milk, following the 2009 crisis when dairy hemorrhaged billions of dollars in income and equity.

But if you think there’s broad agreement on how to reform the system, read this article published last week in AgWeek.

Two titans of the dairy industry, the International Dairy Foods Association (big processors/milk buyers) and the National Milk Producers Federation (big coops/milk sellers) basically lock antlers on how to change the system.

The big debate is over “supply management” – in other words, making sure farmers don’t produce too much milk and drive down the price.  The Big Coops (NMPF) want it; the Big Manufacturers (IDFA) don’t.

IDFA goes on the offensive, with a new study it funded, which concludes traditional dairy farming areas in the upper Midwest and Northeast would actually lose millions under supply management.  Check this back and forth in the article, with Connie Tipton representing Big Manufacturers and Jerry Kozak representing Big Coops:

“This report shows that (National Milk’s) growth management plan will take money out of dairy farmers’ pockets when they need it most,” Tipton said in a release accompanying the report. “Margin insurance and other proposals where processors and producers agree should be part of that plan. Programs to limit milk supply or impose penalties on producers should not even be on the table in our industry discussion.”

Kozak said in a statement the proposal “has been carefully designed to offer protection for their hard-earned equity.” In his statement, Kozak added, “Dairy farmers in every state saw their collective milk income drop more than ten billion dollars in 2009, which doesn’t even include billions more in lost equity. This catastrophe was the result of current dairy policy that doesn’t offer farmers of any size, in any state, the protections they need against catastrophic financial losses.

Doesn’t sound like they’re too close to compromise, does it?

On Vermont Public Radio, Congressman Peter Welch said he believed Congress would take up dairy reform before other aspects of the Farm Bill. “There’s some hope here,” Welch told VPR:

That we want to take up the dairy issue this year and the Farm Bill is going to be done in 2012. So they’re separating this out, seeing it as a significant but separate challenge for us.

Vermont and New York have solid influences on the Agriculture committees in Washington.  Welch, fellow Democrat Bill Owens, and Republican Chris Gibson bring bipartisan representation in the House.  And Democrats Patrick Leahy and Kirsten Gillibrand offer senior and emerging power in the Senate.

But they’re far outnumbered by lawmakers from the Midwest, South, and Southwest/California, regions that have significantly different issues from ours.

The past is littered with attempts at reform: the Northeast Dairy Compact, the current Milk Income Loss Contract (MILC) payments.  Finding a new system that garners broad support, and actually works, is a tall order.

Tags: agriculture, economy