By Alfred Wanner Jr.
It’s hard to overstate how important dairy cows are to Lancaster County’s economy. According to one authoritative estimate, dairy farming here generates more than $400 million in revenue annually. Eighty-five percent of that stays in the community, changing hands 2½ times and generating $1.5 billion in total economic activity. Put another way, Lancaster’s economic fortunes rise and fall largely with those of its dairyfarmers.
And right now dairy farmers are worried that 2012 could be another 2009, when milk prices plummeted just as feed costs soared, wiping out profit margins virtually overnight. Many of us lost money on every gallon of milk we produced for a year. Others simply didn’t survive.
Lancaster’s dairy farmers can’t afford another 2009. And we won’t have to if Congress endorses sweeping changes in the federal dairy program now before the Senate as part of the 2012 farm bill, which authorizes most government farm and food programs.
The changes are based on recommendations from dairy farmers nationwide. They realized as 2009 unfolded that the federal dairy program - complete with direct payments and Depression-era, milk-price supports -simply didn’t work anymore. It was no help in the recession-fueled crisis of 2009, and it hadn’t been much help for the decade before then.
Why? Because it’s focused on milk prices, when, increasingly, our problem is margins: the difference between the milk price, and the cost of producing it. Milk prices can be sky-high and we still lose money if feed costs - pushed up by growing demand for corn - are also spiking.
So, in place of the current program, dairy farmers are backing an insurance-based, risk-management approach based on margins. Benefits would be paid not when prices fall, but when margins shrink.
Payments will be funded jointly by government and the farmers themselves. As a result, this approach will require millions less in tax dollars than current programs. Steep price declines and prolonged periods of low margins will be avoided by encouraging farmers to limit their milk output when margins shrink to dangerous levels.
Of course, most farmers don’t want government telling them how much milk they can produce. For that reason, the new plan is voluntary. Nobody is forced to participate. But those who do must agree to cut production when conditions warrant a reduction in milk supplies.
This plan was introduced in the House last fall by former Agriculture Committee Chairman Collin Peterson (D-Minn.) and Appropriations and Budget Committee member Mike Simpson (R-Idaho). With some changes to make it more acceptable to all regions, it was added to the Senate’s farm bill in April.
Independent economists say this program offers better protection for farmers when help is needed the most. At the same time, they say, replacing today’s price supports and direct payments won’t hurt milk prices or milk production.
Lancaster County is the most productive milk-producing county in the Eastern time zone. It is home to thousands of dairyfarms of all sizes. Some have been here more than 100 years.
But Lancaster County farmers, and by extension Lancaster itself, need a dairy safety net that works under today’s conditions. The dairy reform plan pending before the Senate does that and more. It deserves our support.
Alfred Wanner Jr. and his wife, Carolynne, operate Wanner’s Pride-N-Joy Farm in Narvon. Their sons, John Wanner and Matthew Wanner, are also partners in the family business.
