Farmers not hoping for surge in milk subsidies

Mitzie Krivach buys milk at a market in Johnstown, Pa. Inaction on a U.S. bill would increase prices.
Mitzie Krivach buys milk at a market in Johnstown, Pa. Inaction on a U.S. bill would increase prices. (JOHN RUCOSKY / AP)
Posted: January 01, 2013

Alfred Wanner Jr., a dairy farmer in Narvon in Lancaster County, would love to see higher milk prices, but he knows a surge to $6 to $8 a gallon - expected if Congress failed to prevent 1940s milk-subsidy rules from taking effect - would do more harm than good.

"Consumers will back off on their purchases. It'll just disrupt the whole market. It would not be a good situation," Wanner, whose family milks more than 600 cows on his farm, said in an interview Monday.

It appeared late Monday that lawmakers in Washington were on track to approve an extension of the expired 2008 farm bill. That would block the adoption of a late-1940s formula for calculating the price paid for dairy products - a sort of "living wage" that subsidizes dairy farmers.

Even if outdated rules somehow took effect Tuesday, it is not clear how soon the U.S. Department of Agriculture could start paying dramatically higher prices for dairy products under a 1949 program.

The price-support level calculated by 1940s standards would account for inflation but not productivity gains, such as robotic milking parlors. The result could be a support price of roughly $40 for every hundred pounds of milk, the National Milk Producers Federation estimated.

The current average farm price in eastern Pennsylvania is $19.65 for a hundred pounds of milk, or hundredweight, in industry parlance, according to Hoard's Dairyman, a national trade journal.

The current federal support price under the USDA's expiring Dairy Product Price Support Program is just $9.90 per hundredweight. The market price has almost always been above that level since the late 1980s.

The USDA program does not pay farmers directly. Rather, it buys butter, cheddar cheese, and nonfat dry milk from processors to support the prices paid to farmers. Between October 2008 and September 2011, the USDA bought nearly 270 million pounds of nonfat dry milk for $227 million to support prices.

The outcome of the dairy policy debate is significant for Pennsylvania, the nation's fifth-biggest dairy state, with 541,000 dairy cows at the end of 2011. California is the leader, with 1.77 million cows. The other big states are Wisconsin, New York, and Idaho, which surpassed Pennsylvania in 2008.

For dairy farmers, the spotlight on dairy policy comes as the most severe drought in at least 25 years has driven up feed costs, making significant profits scarce. "Right now, most farmers are able to cash flow," Wanner said. "How long we don't know."


Contact Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.

comments powered by Disqus
|
|
|
|
|