Imagine a business where the price of the product you sell drops precipitously at the same time your cost of making that product soars. Sound absurd? Say “hello” to modern dairy farming.
Those are the exact conditions Washington state dairy farmers faced in 2009, at the peak of the Great Recession. A combination of very low milk prices and rapidly rising feed costs forced some of us out of business, while many others barely survived.
And we’ll face those conditions again unless something is done about federal dairy policies, some of which were designed more than 60 years ago.
Fortunately, there is an alternative on the table that could re-orient dairy policy to address today’s conditions. It is based on a program drafted by farmers themselves, through the National Milk Producers Federation, and put forward by a bipartisan group of members in the U.S. House of Representatives, led by the top Democrat on the Agriculture Committee, Minnesota’s Collin Peterson, and senior Republican Mike Simpson of Idaho.
The Dairy Security Act of 2011 focuses not on prices, but margins, which were the problem two years ago. It would scrap current federal dairy programs and set up what amounts to an insurance plan to protect farm income when margins shrink. To prevent extreme price swings or prolonged low-margin situations, a standby program could limit milk production for short periods.
These programs would be voluntary, so those who do not want to participate can opt out. This gives farmers a choice between a free-market approach, and one in which the government provides a basic safety net, but also requires producers to regulate their milk output when necessary.
The plan would also simplify the federal system that sets minimum milk prices nationwide. It would order the Agriculture Department to eliminate cumbersome price formulas for milk used in cheese-making and create a new, more market-oriented means of establishing farm-level prices. A majority vote of producers would be needed to put these changes into effect.
The Dairy Security Act has been picking cosponsors since it was introduce-d Sept. 23. Co-sponsors aside, however, nothing will get through Congress this year that increases costs.
And here, again, this plan works. According to the nonpartisan Congressional Budget Office, it saves more than $160 million over five years, at a time when all federal spending is under intense scrutiny.
Today’s dairy policies have failed farmers miserably. We need new policies that provide a more effective safety net. The Dairy Security Act protects producers, allows for growth, assures an abundant supply of milk for consumers and saves tax dollars. It is also the only comprehensive reform proposal on the table as Congress starts to write a new, multiyear farm bill.
U.S. dairy farmers are the best in the world. But we need a safety net that works and that keeps pace with the challenges facing our industry. The Dairy Security Act does just that. It deserves the support of the Washington state dairy community and quick adoption by the House and Senate.
Bruce Anderson, a dairy farmer from Onalaska, is a member of Northwest Dairy Association, a Seattle-based cooperative with more than 540 members in Washington and five other the western states.