Dairy subsidy, profits eyed

Friday, February 25, 2011
Dairy Consultant Calvin Covington of Clemmons, N.C., explains federal farm policy changes to local dairy farmers.

A time-honored milk price support program is the target of some proposed changes to U.S. farm policy with alternatives including insurance to protect the profit margin between what a dairy is paid for milk and its cost of feeding cows.

That's not enough, Marshall County dairy farmer Tony White explained after a meeting of the Tennessee Dairy Producers Association in Lewisburg on Tuesday afternoon. White is president of the Association that met at the headquarters of the Tennessee Walking Horse Breeders and Exhibitors Association.

Furthermore, the cost of feeding dairy cows is only part of what dairymen must pay before calculating net income per 100 pounds of milk sold, White said Wednesday on Lewisburg's public square where he clarified remarks by his association's speaker on dairy policies and proposed changes.

That one margin insurance proposal will fail, White said, offering his personal view that's separate from the association's which is being discussed.

Why? The Farm Bill is so complicated that it's not reopened by Congress but once every five years, he said. And with so many new members of the House and Senate, more time will be needed to explain it.

Dairy Consultant Calvin Covington of Clemmons, N.C., explained several proposals forwarded on how to change farm policy.

"These plans are not designed to increase revenue to dairy farmers," Covington said. "They're designed to decrease the volatility of milk prices" through insurance policies to assure at least some profit margin.

The federal milk price support program started in 1949, Covington said. If prices drop too low, the government buys the product.

That, White said, led to surplus cheese distributions.

In the mid 1990s, Covington said, there was an attempt to end the program that still exists, but the government drastically reduced its purchase of dairy products.

Then, exports of American dairy products such as dry milk, cheese and other non-liquid products faced international prices and when they were low, the government bought the products, Covington said.

A renewed attempt to end price supports is through insurance with coverage that starts with payments equaling half the cost of feed, Covington said.

There's also a mandatory milk supply management program that Covington called "very controversial" elsewhere.

And there's a proposal to exempt Tennessee because milk is sent here, White and Covington said. Tennessee produces less milk than what's consumed.

Dairymen are examining federal farm policy now because the price of feed went up and the federal Farm Bill is up for renewal in Washington. It's due for completion in 2012. White says it might be enacted in 2013.

"The dairy industry was in a crisis last year," Farm Bureau Regional Field Service Director Melissa Bryant said at the dairy association meeting here this week. "It's gotten better, but feed prices are still high.

"Furthermore, milk prices in the grocery are higher than ever before, but dairy producers are not getting any of that dollar," Bryant said.