Commentary: Will we go over the dairy cliff?

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Fiscal cliff, dairy cliff….. I am tired of hearing about impending doom.

Why in the world would voters decide to keep the same people in office, as they did on Nov. 6, when those people have taken us to this point?

Every day, there are dire warnings of milk prices in the grocery store going to $6 per gallon because of the “dairy cliff.” Read this story from The (Syracuse) Post-Standard.

I have resisted the temptation to run a new story every day. We first mentioned the possibility of higher milk prices in September, with these comments by U.S. Rep. Collin Peterson (D-Minn.), ranking member of the House Agriculture Committee. Nothing much has changed since that time ― a new farm bill that would avert the dairy cliff is still stalled in Congress.  

Some of the people who commented on the story in September were excited about the possibility of $38 milk for farmers. At first blush, a $38 price does seem very attractive. And, it could happen. In the absence of a new farm bill, dairy policy will revert to a 1949 law which would essentially quadruple federal price supports for cheese, butter and powder. That, in turn, would bring milk prices up to the $38 to $40 per hundredweight level.

But do we really want that to happen? Many consumers would balk at paying $6 for a gallon of milk, and consumption would go down. It’s really the last thing the dairy industry needs at a time when fluid milk consumption is dropping like it is. See “Milk consumption about to fall below an important threshold.”

So, what could happen?

First, Congress could pass a new farm bill by Dec. 31, which would get things back on track. I believe the version of the farm bill passed this summer by the U.S. Senate and House Agriculture Committee contains key reform measures that would help dairy farms, but those measures can’t be implemented until a final version is passed by the full House. Unfortunately, the possibility of that happening by Dec. 31 is growing more and more unlikely.

A more likely scenario is that Congress will link the pending farm bill with some kind of resolution to the fiscal cliff dilemma that it is currently facing, as well. It makes a certain amount of sense, since the farm bill has already been targeted for spending cuts. It would be a hybrid approach, possibly buying some time and taking us far enough into 2013 to allow Congress to pass a free-standing farm bill without going over the “dairy cliff.”

We shall see. Frankly, I am losing confidence in the White House and Congress with each passing day.

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MO  |  December, 14, 2012 at 08:17 AM

It is truly fascinating how some of you can understand that if milk gets to $6 in the store demand would drop and that would then leave us with an oversupply and prices would fall like a rock. But you can't seem to get it through your heads that subsidies increase supply or better stated, stop supply from decreasing to come in line with demand and therefore creates an oversupply which lowers the pay price. It is the exact same thing.

mi  |  December, 14, 2012 at 09:29 AM

well some thing has to give!we are going broke paying for high priced input wile reciveing prices that dont cover cost of production,let alone a liveing , been dairying for 38 years and this is the worse I have ever seen next to the 60s...$20 milk dosnt cut it any moreour break evan with these cost is $25.30

Texas  |  December, 14, 2012 at 09:28 AM

Most other commodities are already very close to 75% parity. Why not milk?

CT  |  December, 14, 2012 at 09:49 AM

I agree why dont we cut subsidys and let the milk go to parity some education to the consumers of our true costs of production should help them understand our situation.

ILLINOIS  |  December, 14, 2012 at 09:53 AM

We always worry about our markets at the same time while most are losing their shirts. It would be far better to produce for a reduced market and make money than to produce at break even or below

Wi  |  December, 14, 2012 at 11:21 AM

I don't know about you fellows but I would relish the chance to live like my corn farmer neighbors who have an obscene amount of cash. If I hear one more saying he bought a new pickup because otherwise the $ would go to Obama I will be sick. A couple of months of $38 would go a long way to getting dairy back on track. As for the new farm bill-- who can make it with $4 over feed costs? DFA is living in lala land thinking that this will help us.So to be part of the program you will need to cut back hoping-- yes hoping-- that the supply will come in line. If it doesn't you will be caught in limbo land-- unable to increase production to pay for rising fuel, electric, labor, insurance etc. costs. In the meantime you will compromise lactations or dry cows early trying to meet your quota, both of which drive up costs. Ask your banker if they will change your payment schedule and what happens if you carry a lower cow number. Maybe instead of asking for a price support program we should ask for a dairy product mandate for the healthy life initiative, after all the secretary of corn (oops agriculture) secured a renewable fuel mandate for Iowa farmers and gave ethanol millions in grants, which many wasted when they went into bankruptcy. Wisconsin now looks like Nebraska- corn everywhere as dairy farmers get smart and send their kids to college telling them to get a "good" job so they don't have live as second class citizens. The small family farms are going the way of the railroads only because they cannot tell the next generation that this a worthy and profitable profession. Perhaps if we had a secretary of agriculture that was balancing the needs of ALL of agriculture and all consumers things would be different.

December, 14, 2012 at 12:29 PM

Very well put!

NY  |  December, 14, 2012 at 01:55 PM

Why should the store shelf price of milk double when conventional dairy farmers only get around 50% of the retail price of fluid milk and organic dairy farmers get considerably less percentage?

Texas  |  December, 15, 2012 at 01:17 PM

I do believe we need to let the Farm Bill expire, let milk go to $ 38 and $40 for a few months and naturally see where the market goes from there....I will bet you that the drop is not as significant and we can at least get closer to parity. I don't believe that Coops in this country are here to help dairymen anymore....I think they're here just to satisfy the greedy processors and retailers that have been holding milk hostage for quite sometime now. It is ingrained in the Coop culture and dairymen are deceived by the Coops' management that there is no choice but to surrender to processors pricing demands. They can't even approach processors about the possibility to pay the transport cost instead of us paying for it, and coops sell their boards and their members the bs that transportation cost are already built in the price they get.

VT  |  December, 16, 2012 at 02:13 PM

The coops are doing us a favor..... They get a market for our milk and we should be lucky to have a market... Oh my. DFA controls over as third of our milk in this country. Their directors are a bunch of bobble heads going along with the status quo, whatever management wants, don't rock the boat. With that much production under one heading you would think they could get meaningful management on our production. One thing about milk is that it is perishable and we should not over produce our markets. We are exporting 14% of our production to the world market and they can only afford so much. But. yes I am looking forward to 38 dollar milk if even only for a month or two. :)

Marion va  |  December, 29, 2012 at 11:48 AM

Linda...tell me if I am wrong. I have been reading about Collin Patterson legislation, two new types of milk fees that will be imposed on dairy farmers. 1. farmers will be required to pay new administrative fees in order to get basic, catastrophic insurance from USDA. These fees could range from $100.00-$2,500 annually, depending on the size of your farm. NO other farmers are required to pay these administration fees for similar insurance. These fees are estimated to collect $8 million annually. 2. A Milk Supply Management Program...that would require milk processors to withhold commercial payments to farmers and send these funds to USDA. Sounds to me like Collin Patterson wants limit milk production for us...Am I right or wrong? Anyway these fees are unfair.

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