ST. ALBANS/NEW HAVEN — Farmers had plenty of suggestions for Rep. Peter Welch, D-Vt., as he solicited feedback about a proposed federal dairy reform bill in St. Albans last Wednesday and at Addison County Fair and Field Days in New Haven on Friday.
The bill in question is a draft proposal by Minnesota Rep. Colin Peterson. The plan would replace the Milk Income Loss Contract (MILC) and the Dairy Product Price Supports programs and change the federal milk order system that sets the wholesale price conventional milk producers get for their product.
The discussion is a crucial one. Although milk wholesale prices are strong now, they are expected to decline precipitously in 2012 as part of a traditional three-year cycle.
In addition, the current political climate in Washington means there are likely to be cuts to the MILC program, which is already scheduled to see smaller payments and a lower cap on the amount of milk covered under the program.
“The limitations of MILC will get more severe,” Welch said in St. Albans.
The new plan provides an income support program based not on the price of milk, but on the margin between the price of milk and the price of feed needed to produce that milk. The second is a supply management program.
The milk marketing changes include eliminating Classes III and IV and reducing the number of milk classes to one for fluid milk for drinking and one for milk to be processed. Currently, milk being processed into butter is priced differently than milk being processed into cheese or ice cream.
Sweeping federal dairy reform is something Vermont farmers have been pushing for for a long time, especially following plummeting dairy prices in 2009.
On Thursday, Welch said it’s imperative to address concerns of Vermont dairy farmers and make sure that the supply management system that the bill would put in place does not disproportionately affect smaller producers.
“With these so-called caps that get triggered when there’s going to be a supply management implementation, smaller farms would be required to reduce their production as well,” he said.
Last Wednesday, Ralph McNall, president of the St. Albans Cooperative Creamery, was one of several farmers who expressed concern about the ability of large farmers in the West to ignore the price signal and not reduce production in response to the reduction in payments. Another farmer suggested the government should track which regions the excess production is coming from. Presumably, that would allow for regional adjustments in production rather than national adjustments.
“There’s got to be an enforcement mechanism to ensure that everyone’s playing by the same rules,” said Welch.
Another imperative Welch cited in an interview with the Independent on Wednesday was the ability to reform dairy programs without going through the Congress. This, he said, is especially important in an industry that fluctuates regularly.
“We need built-in flexibility so that changes can be made when they need to be made,” said Welch.
Kylie Quesnel of Perry Brook Dairy in Whiting attended the New Haven roundtable. She said the general attitude toward the proposed dairy reforms was positive.
“The volatility in the industry has been difficult for farmers,” said Quesnel. “People are definitely embracing it. It gives us (better) tools to deal with fluctuations in our marketplace that we don’t already have.”
Quesnel said many farmers are worried that the bill will be held off until next year and rolled into the 2012 Farm Bill, which is facing the possibility of funding cuts.
Welch said this is a major concern for the House Agriculture Committee as well.
“We believe that our best prospect for doing the bill is this year, not next year,” he said. “(This year) we have a higher bottom line to work with. Next year we’ll be deep into the rewrite of the entire Farm Bill.”
MARGIN PROTECTION
Quesnel said margins between milk prices and feed prices are on every dairy farmer’s mind right now, as they are what determine a farm’s profit. Milk prices are high right now, but so is the price of feed.
“We used to talk about milk prices, but now we talk about margins,” she said. “If the price of milk falls and our inputs don’t fall, that will put us in a real volatile position.”
The proposed margin protection program seeks to address this concern. Rather than offering farmers protection based solely on the price of milk, it takes into account the difference between milk prices and feed prices based on the cost of corn and alfalfa, as calculated by the National Agricultural Statistics Service.
Under the current MILC program, milk producers can receive payments on a set amount of their production per fiscal year. The margin program would not have such a limit. However, most farmers would receive payments based on only 75 percent of their production base. The production base would be the largest amount the farm had produced in the previous three years.
Farmers would have the option of purchasing additional protection.
“A safety net that is below the level of the floor isn’t much of a safety net,” said St. Albans area farmer John Gorton.
PRODUCTION SHIFT
Amanda St. Pierre, a Richford farmer and president of Dairy Farmers Working Together, said her organization has been fighting for a national program because that is the only way to change dairy markets, but suggested the proposal should be looked at with an eye to its regional impacts.
“We’re scared of our production being shifted to another region of the country,” said St. Pierre.
For reasons of food safety and security, the bill needs to be examined in terms of what it does for regional food production. “Is this going to shift production to any one particular region?” she asked.
St. Pierre also raised the issue of flexibility.
“Farmers know that things can change on a dime,” said St. Pierre, who suggested the programs need to contain a mechanism for change and not be set for five or 10 years with no ability to change them.
There is, however, momentum for change that is rooted in fear of the status quo, she said. While milk wholesale prices are currently on an upswing, the price of milk tends to have a three-year cycle and dairy economists have predicted 2012 will be the next decline in milk prices. The 2009 price decline saw farmers selling milk at significantly less than the cost of production, losing money with every hundredweight of milk they sold.
“We’re willing to sit down at a table and get it done,” said St. Pierre.
Congressman Peterson, Welch explained, chose to put out a draft of the bill in order to invite precisely this kind of discussion and allow for changes to the bill.
“We’re not going to get everything we want, but we can get better than we have,” Welch said.