MILWAUKEE — When milk prices plummeted in 2009, wiping out years of savings and causing hundreds of dairy farms to go under, struggling farmers pleaded for the government to do something to help stabilize prices and inspire growth.
They may soon get their wish.
Lawmakers are beginning to discuss changes to the safety net for the nation’s dairy farmers in an effort to make the milk industry more profitable and less reliant on federal subsidies. One plan would replace several outdated programs with reforms meant to keep supply and demand in balance.
Many dairy producers are grateful for the proposal, saying it would help eliminate the roller-coaster price swings that have done so much damage. Others, however, say the real answer is less government interference, not more.
The crisis started when milk prices, driven up by overseas demand, plummeted from a high of $18 per hundred pounds in 2008 to about $12 amid the recession in 2009. Farmers began slaughtering their cows to try to cut production. At one point, an average of 50,000 cows a week were being killed in an effort to reduce the milk glut.
Hundreds of dairy farmers were forced out of the business. Those who survived saw their savings largely wiped out, and they fear another prolonged downturn could devastate what’s left of the industry.
U.S. Rep. Collin Peterson, D-Minn., the ranking member on the House Agriculture Committee, has floated a proposal to strengthen their safety net.
His plan has three main components. First, it would eliminate a pair of rarely used federal programs designed to help dairy farmers in lean times. Second, it would strengthen an insurance-like program in which the government pays farmers when milk profits become too slim. Third, when profit margins shrink to a certain level, the government would limit how much milk is produced.
The last measure is the most contentious. The so-called dairy market stabilization program would provide incentives for farmers to produce less milk, thereby cutting the supply and helping restore prices. But some dairy producers say the incentives represent unwelcome government intrusion.
Here’s how it would work: When the difference between milk prices and the cost of producing milk, as determined by feed prices, fell to a certain level, farmers would be limited in how much milk they could produce. For the most part, income from any additional sales would go to the government, which would use it to buy up the excess.
“The idea is to tweak production so supply and demand can quickly adjust,” said Chris Galen, a spokesman for the National Milk Producers Federation based in Arlington, Va.
Cornell Kasbergen loves the idea. A dairy farmer with 3,000 cows in Tulare, Calif., and another 1,500 in Brodhead, Wis., he estimates he lost more than $4 million in the 2009 downturn. He said Peterson’s proposal could help prevent a recurrence of that crisis.
“When we’re on a downward spiral we need a mechanism to put a little brake on the throttle,” the 53-year-old said. “This is the mechanism that we as an industry have come up with.”
But other dairy farmers are asking Congress not to interfere. They object to the idea that they as small-business owners could told how much milk they can sell.
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