Farm bill drafts don't help dairies
As Congress reconvenes, the most important issue they will debate for dairy farmers is the proposed 2012 Farm Bill because of the serious financial crisis experienced by most dairy farmers.
While we support the need for Congress to pass a new farm bill, we wish to point out the extensive inequities in the dairy provision of the draft bills, including the controversial taxpayer-funded "margin insurance" proposal. Neither draft contains the proper remedy for the economic problems devastating dairy farmers.
The current provision forcing taxpayers to fund the "margin insurance" program must be replaced by a milk pricing formula that uses the dairy farmers' cost of production to determine the federal minimum price for raw milk. This formula is contained in the "Federal Milk Marketing Improvement Act," Senate Bill 1640. Additionally, we recommend the inclusion of a standby milk supply management program included in the farm bill dairy provision, similar to the one included in SB1640.
It is essential that Congress comprehends that the cost of production and stand-by supply management provisions are designed to cost the taxpayers no money. This contrasts sharply with the irresponsible margin insurance program that will be funded by taxpayers.
According to the Economic Research Service, the national average cost of producing milk for September is $28.50 per hundred pounds. The latest national average all-milk price reported by USDA for September 2012 was $19.60 per hundredweight, leaving a shortfall of $8.90 per hundredweight, or $0.90 per gallon.
According to press reports, more than 100 California dairy farmers have recently gone bankrupt, and many more are facing that route due to rising business costs. Feed costs have risen, thanks to the diversion of significant quantities of corn into the ethanol market and the 2012 drought. Current federal dairy policy excludes cost of production from the minimum farm milk pricing formula, and the inability of dairy farmers to recoup their high feed costs impeded them from securing the grain and forage they needed to feed their cattle.
Federal dairy policies have been hammering dairy farmers for more than 30 years. There were 600,000 U.S. dairy farms in 1976, dropping to 131,509 by 1992, and to 51,481 by 2012. It is unthinkable that Congress continues to formulate policies that will likely be responsible for a continued decline in the number of U.S. dairy farms.
This crisis is not just affecting farmers and their families, but also the entire rural economy. The result of inadequate raw milk prices is the continued loss of a large number of feed mills, implement dealers, repair shops and even some financial institutions. This is unacceptable.
While dairy farmers have been needlessly experiencing financial losses, it is interesting that two of the companies heavily involved with the dairy farmers' milk and dairy products are posting profits. Per their third quarter 2012 reports, Kraft Foods posted a net income of approximately $470 million, while Dean Foods' reported a third quarter 2012 net income of $36 million.
No one begrudges companies' making a profit -- it's good to have profitable companies. However, policies and proposals in the current farm bill drafts prevent dairy farmers from covering basic inputs, let alone making the profits afforded to Kraft and Dean.
On behalf of family dairy farmers who are trying to survive in our rural communities, we urge you to implement equitable federal dairy policies based on cost of production in the 2012 Farm Bill.
Understanding the issues outlined in this letter, particularly the direct effect unjust low raw milk prices have on their own bottom line, the undersigned organizations strongly recommend that Congress adopt our proposal for a new pricing formula for dairy farmers and the accompanying stand-by milk supply management program.
Forty organizations and nearly 150 agri-businesses representing the National Family Farm Coalition have signed this letter.
Progressive Agriculture Organization