Farmers warn of high milk prices without farm bill

By M.L. JOHNSON
Associated Press

MILWAUKEE (AP) -- Dairy farmers expressed frustration this week with Congress' failure to pass a farm bill, saying the uncertainty made it hard to do business and some could go under without changes to the federal milk program.

Farmers also worried that if a current nine-month extension of the 2008 farm bill expires with no action, a 64-year-old law will kick in, sending milk prices spiraling. While that might provide short-term profits, they say, it'd hurt them in the long run because no one wants to buy milk at $6 a gallon.

The U.S. House voted down a farm bill June 20, about a week after the Senate approved a different version. It was the second year in a row that the House failed to pass the every-five-years bill that sets funding for agriculture and food programs. Last year, it didn't even vote, prompting the passage in January of a slimmed-down extension of the 2008 law -- largely to avoid milk prices sharply increasing.

The Agricultural Act of 1949 sets a much higher price for government purchases of cheese, butter and other dairy products than the U.S. has seen in decades. The government cut the price in recent decades because if it didn't, more companies would sell to the government than to retailers, unless consumer prices rose to match.

Farmers fear if the higher prices kick in on Jan. 1, milk and other dairy prices will rise until consumers just stop buying their products.

"I don't think that's good for anybody because we would destroy demand," said Pete Kappelman, a Wisconsin dairy farmer and board chairman of Land O'Lakes, a farmer-owned company that markets milk, eggs, butter and many other products.

The farm bill failed in the House mainly because of disagreement over food-stamp funding and dairy program reforms farmers say are needed to keep them in business.

The government currently pays dairy farmers when milk prices get too low. But the problem in recent years has been the high cost of feed due to the ethanol industry's demand for corn as well as the drought. Farmers say milk costs almost as much to produce as they can sell it for -- and sometimes more.

Kappelman, who has a 450-cow farm in Manitowoc, Wis., worked on a national dairy industry committee that proposed a margin protection program that pays farmers when the price difference between milk and feed shrinks to a certain point.

He also supports a market stabilization program that would require farmers to either reduce the amount of milk produced when prices drop too low or give up a portion of their margin protection payments. The U.S. Department of Agriculture would then use that money to buy and donate dairy products to food banks and help low-income families.

The margin protection and market stabilization programs would be voluntary, but farmers couldn't participate in one without the other.

The Senate passed a farm bill last week that included both the margin protection and market stabilization programs, but House Republicans voted to remove the market stabilization program. Minnesota Rep. Collin Peterson, the senior Democrat on the House Agriculture Committee, said a number of Democrats changed their vote to no at that point.

Randy Roecker, 40, was among those desperately hoping the complete package would pass. He and his wife farm with his parents in Loganville, Wis.

They were doing well in 2008, when they renovated to expand from 50 to 300 cows. The next year, milk prices plummeted and feed prices rose. At one point, they were losing $100,000 a month -- Roecker lost his savings, his parents lost their retirement and the farm went into debt.

They and many of their neighbors are still struggling, even though milk prices have risen.

"Just last Friday, another one of my friends got rid of his cows," Roecker said. "... It's just getting to the point where you can't afford to keep going anymore."

Wisconsin farmers grow more of their own feed than those in states like California, the nation's top milk producer. Dean Strauss, 41, who milks 1,900 cows in Sheboygan Falls, said growing 3,000 acres of feed provides some protection from high feed prices but doesn't reduce the need for a new farm bill, which would likely have better crop insurance programs.

Strauss, who described himself as a "free-market" person, was among the farmers who opposed the market stabilization program, fearing that any reduction in milk production would stifle growth in the Wisconsin cheese industry, which buys most of his milk.

Jamie Bledsoe, who has 1,300 cows in Riverdale, Calif., had similar concerns about the effect on his state's growing, international dairy exports.

"My personal view is, the government does not effectively manage anything, let alone the supply of milk," Bledsoe said.

But Kappelman said that without a way to control supply when milk prices fall too low, farmers would keep producing, the margins would stay low and the government would have to keep shelling out.

Even with disagreement over the stabilization program, farmers were united on the message they wanted to send to Congress. Failure to pass a farm bill, Bledsoe said, "leaves us in a big cloud of uncertainty."

Associated Press writer Gosia Wozniacka in Fresno, Calif., contributed to this report.