California is known as the land of fruits and nuts, but it also happens to be the country's largest milk-producing state. So it's no surprise that its dairy farmers are front and center in the debate over reforming the milk marketing system, which hasn't really changed much in 30 years.
Congress is debating a multibillion-dollar farm bill, the massive spending bill that comes up every five years. A section in the Senate bill passed today would overhaul the way the government buys milk from dairy farmers during tough times. Dairy farmers say the government's current price is way below what it costs to produce a gallon of milk.
Over the past few years, feed costs have skyrocketed, and many farmers have taken out multiple loans just to stay afloat. Take dairyman Case van Steyn, who runs a 1,000-cow dairy in Galt, Calif. His family has been in the dairy business for 50 years.
"If you listen to the experts, a lot of people say things will improve fall or by early next year — but those kind of comments have been made before," van Steyn says.
He says that of California's 1,600 dairies, more than 40 have gone bankrupt in the past few months.
"Now we're burning up equity trying to stay in business, because you know, you've got to feed the cows and you've got to take care of them, you've got to milk 'em no matter what the economics. You can't just lock the door and say, 'I'll be back in six months.' "
That's why van Steyn and his group, Dairy Farmers of America, made up of farmers all across the country, are backing the proposed dairy supports in the Senate version of the farm bill.
It would basically create an insurance program. When the cost of feed gets really high in relation to the price of milk — farmers would get a payment. Signing up for the program would be voluntary, yet to get the money, farmers would have to agree to cut back milk production when prices get low.
But the program doesn't work for all dairymen, says Michael Marsh, the president of Western United Dairymen. He says the problem is that the insurance margin is based on the average feed cost. For California dairymen, feed is more expensive than elsewhere because it has to be trucked in from Iowa or Illinois.
"Unfortunately, the proposal that is in the dairy title in the Senate farm bill severely discriminates against dairy farmers, actually in most parts of country, because most parts of the country rely on imports of feedstuffs coming from the Midwest," says Marsh.
"I don't believe [this program] is going to work," says dairy owner Antoinette Duarte. She runs a 500-cow dairy with her son, just south of Sacramento. Duarte says she doesn't want to pay for a program where the supports wouldn't kick in frequently enough to keep dairies on an even keel.
"It's another cost to the dairymen," she says.
But an agricultural economist has another concern with the proposed bill. Formerly with the U.S. Department of Agriculture, University of California, Davis economist Dan Sumner says that because the plan requires farmers to cut back milk production in tough times, it will punish those trying to grow.
"The long-term health of the industry is comprised for protecting producers against short-term harm when it occurs. And that may be a perfectly reasonable trade-off for ... some producers in the industry," he says.
Still, it's not the trade-off that Duarte is looking for. Like many dairy farmers, she says her dream was to pass on the dairy to the next generation. Her grandfather had a dairy in the 1920s, which her father and brothers ran until recently.
"They don't see a future. They were having a difficult time, and they felt that instead of hanging on and eating away their equity, they just recently sold their cows, and the dairy that my dad worked so very hard for, with no fault of their own. It was the economy," she says.
While the Senate passed its version of the bill today, the House won't likely start debating it's version of the farm bill until next month. It has slightly different dairy supports. The key difference is in the way the average feed cost is calculated, says Marsh of Western United Dairymen: It would allow the supports to kick in more frequently. However, the House version could get scrapped entirely if the House decides to take up the Senate version of the bill.
Duarte says whatever dairy supports end up in the final version of the farm bill, it's too late for some. And it certainly won't help everyone who's still trying to stay in the business of making milk.
Copyright 2012 CapRadio News
