FOR IMMEDIATE RELEASE: December 12, 2012
SCHUMER: FULL IMPACT OF FARM BILL EXPIRATION IS FAST APPROACHING & HOUSE MUST PASS BIPARTISAN SENATE BILL TO AVOID “DAIRY CLIFF” – IF NOT, PRICE OF MILK IN STORES COULD DOUBLE, AND NY DAIRY FARMERS WOULD LOSE MARKET STABILITY & ASSISTANCE FROM FEDS
House of Representative’s Failure to Pass Senate’s Bipartisan Farm Bill Means 1940s Era Dairy Law Kicks In on January 1st – Calls on House to Renew Bill Before Year’s End So that Fluid Milk Prices Don’t Double
Schumer Also Highlighted That Upstate Dairy Farmers Have Lost Their Primary Safety Net, Due to the Expiration of MILC Program; Farm Bill Would Bring Back Fed Assistance That Compensates Dairy Producers When Milk Prices Fluctuate & Cow Feed Costs Jump
Schumer: The Dairy Cliff Would Hurt Consumers & Producers Alike
Today, on a conference call, U.S. Senator Charles E. Schumer warned that the deadline is fast-approaching for the House of Representatives to take action and pass the bipartisan Senate Farm Bill, in order to avoid the “dairy cliff”, which would have a devastating impact on dairy consumers and producers alike. Specifically, Schumer called on the House to take action before year’s end, in order to avoid the real potential for consumers’ milk prices to double across New York, and to temporarily bring back the Milk Income Loss Contract (MILC) program for over 5,400 dairy farms in Upstate New York, to bridge the gap before a new margin protection program can be rolled out. MILC, which provided over $41 million to New York dairy farmers in 2012 before it expired on September 30th, was the primary safety net that compensated dairy producers when milk prices fluctuated and cow feed costs jumped, as they have due to this year’s drought.
The 2008 Farm Bill expired on September 30th, and on January 1st the nation will begin to revert to 1940s era agriculture policy. As it relates to New York dairy, that 1940s era policy requires the government to purchase nonfat dry milk, cheese and butter at prices significantly above current market rates. The massive government purchases of dairy products under this outdated law could cause milk prices to rise above $6 per gallon, according to the National Milk Producers Federation (NMPF).
“The ‘dairy cliff’ is fast approaching, and without a House Farm Bill before year’s end, it will be consumers and dairy producers alike that go over the edge,” said Schumer. “On January 1st, families across Upstate New York could start to see over a hundred-percent increase in the price of milk at the supermarket, all while dairy farmers would lose important assistance from the feds that helps combat an unstable market and devastatingly high feed prices. What’s worse, is that this is an entirely avoidable and unnecessary burden on families, schools and farmers alike, and it could be easily addressed. All the leaders of the House of Representatives must do is put the bipartisan Senate Farm Bill on the floor for a vote, and I’m sure that it will pass.”
Schumer continued, “It is unacceptable to have allowed the Farm Bill to expire in September. Now, time is ticking and the House must pass the Senate Farm bill so we can all avoid crying over spilled milk.”
“As we approach the final days to get the 2012 Farm Bill passed, the anxiety is growing for farmers who have already had the safety net pulled out from under them with the loss of the MILC program,” said New York Farm Bureau President Dean Norton. “Now, they’re facing the bottom falling out of the dairy market with prices expected to double if farm policy reverts back to the 1940s. It’s a price few consumers would be willing or capable of paying, potentially upsetting the delicate supply and demand of milk. We urge other lawmakers to follow Senator Schumer’s lead and get a Farm Bill passed, not only for the hard working farm families of New York, but for all families who depend on putting healthy food on their dinner tables,”
“Schools are in an incredibly fragile fiscal condition right now and they cannot afford either higher dairy prices or further injury to their rural tax base,” said Timothy G. Kremer, executive director of the New York State School Boards Association. “Our students need accessible dairy products for good nutrition, and our schools need a stable local tax base to provide adequate funding for educational programs and services.”
Schumer said that the easy way out of this problem is for the House of Representatives to pass the Farm Bill that was passed by a large bipartisan majority in the Senate. He revealed the county-by-county impact on New York dairies due to the expired MILC program, and provided most recent average milk prices for consumers that could double after January 1st. The Farm Bill is enacted every five to seven years and provides farm and food policy for America. The 2012 Farm Bill passed the Senate on June 21, 2012 by a bipartisan vote of 64 to 35. The Farm Bill has since expired, and aside from passing a bill out of the agriculture committee, the House has refused to bring the Farm Bill to the floor.
The dairy industry has already felt a serious negative impact from the lack of a final Farm Bill, since many provisions expired on September 30th . The dairy industry will be impacted on January 1st when the country reverts back to post-Depression era agriculture policy. At that point, the U.S. Department of Agriculture (USDA) must carry out the letter of the law, which means that milk prices across Upstate New York could rise significantly, according to agriculture experts. Additionally, dairy farmers who have seen an increase in exports in recent years could lose significant market share abroad if prices were let to soar. On the producer side of the coin, the MILC program expired on September 30th, and dairy farmers are already missing out on payments from this program during a time of extremely high feed prices due to the drought. Feed costs are traditionally the most variable component of dairy production operating margins. In both cases, House passage of the Senate Farm Bill is the only resolution.
IMPACT ON CONSUMERS:
Under the now expired 2008 Farm Bill, the federal government will revert back to depression era policy that by law will require the purchase of a specified amount of dairy products, such as cheese and butter, in order to maintain a certain minimum price of milk, and a certain level of demand for the nation's dairy farmers. The government determined the price it paid for these products by considering how much milk goes into each product. For example, if a pound of cheese requires five quarts of milk, the federal government would determine how much it would pay for that cheese based on the cost of those five quarts. Assuming that the price of fluid milk is $2 per quart, the federal government would factor $10 worth of milk in their calculations on how much to pay for the cheese.
When the nation reverts back to permanent law of the 1940s on January 1st, the government would be required to purchase certain types of dairy products, such as cheese, butter, and dry milk and act as if the price of the milk that goes into that product has increased three-fold. In the example from the previous paragraph, the federal government would have determined the price for this cheese based on $10 worth of milk. Butstarting on January 1st, the government will have to purchase cheese based not on $10 worth of milk per pound, but on $30 worth of milk.
The effect of this policy change would be dramatic, and will kick in on January 1st if no action is taken. It would mean that the government could be essentially required to purchase dairy products at what translates todouble the market rate for consumers. The demand for processed dairy products could be so high that demand for fluid milk would dramatically increase, perhaps as much as double its price as well.
Below is a list of the most recent milk prices, according to New York State Agriculture and Markets:
In Albany, the price for a gallon of milk costs as much as $3.09
In Schenectady, the price for a gallon of milk costs as much as $3.99
In Troy, the price for a gallon of milk costs as much as $3.09
Central New York
In Syracuse, the price for a gallon of milk costs as much as $3.99
In Utica, the price for a gallon of milk costs as much as $2.99
In Watertown, the price for a gallon of milk costs as much as $3.92
In Rochester, the price for a gallon of milk costs as much as $2.39
In Binghamton, the price for a gallon of costs as much as $2.22
In Elmira, the price for a gallon of milk costs as much as $2.99
In Ithaca, the price for a gallon of milk costs as much as $3.69
Western New York
In Buffalo, the price for a gallon of milk costs as much as $3.39
In Niagara, the price for a gallon of milk costs as much as $3.59
In Jamestown, the price for a gallon of milk costs as much as $2.09
In Plattsburgh, the price for a gallon of milk costs as much as $3.63
In Kingston, the price for a gallon of milk costs as much as $3.01
In Newburgh, the price for a gallon of milk costs as much as $3.61
In Poughkeepsie, the price for a gallon of milk costs as much as $2.99
IMPACT ON PRODUCERS:
The Milk Income Loss Contract (MILC) is a critical program that provided supplemental funding to dairy farmers whenever the minimum monthly market price for farm milk fell below a certain level. Under this program, a producer could have received federal payment that compensated up to 45 percent of the difference between the target price and market price. This program provided as much as ten percent of annual income to Upstate New York dairy farmers when the price of milk dropped.
Specifically, MILC provided farm income support through government payments to participating dairy farmers, whenever the farm price of milk used for fluid consumption fell below the target price of $16.94 per cwt. Since 2008, an adjustment factor was added to the MILC target of $16.94/cwt. whenever a weighted formula of dairy feed costs exceeded an established threshold of $7.35/cwt. In other words, MILC payments rise with the rise of feed costs. Given the droughts across New York starting this year, restoring MILC is especially critical for dairy farmers.
MILC has been instrumental in shielding vulnerable farms from market conditions when they take a turn for the worse, particularly for smaller farms to help them cover operating expenses until prices returned to higher levels. Schumer highlighted that while the MILC program is not perfect, mainly due to production limitations, this safety net cannot be eliminated altogether. In fact, Schumer highlighted that the Senate Farm Bill would extend the MILC program for nine months, and then incorporate a Dairy Production Margin Protection Program (DPMPP). The newly proposed DPMPP would provide milk producers with protection from low operating margins in place of the DPPSP and MILC programs. However, until the House passes a Farm Bill, dairy farmers will be left without MILC or DPMPP in the face of unstable dairy markets.
The dairy industry is New York’s largest contributor to the agricultural economy and in 2009, generated $1.7 billion. According to the New York State Department of Agriculture and Markets Dairy statistics, there are 5,400 dairy farms in New York and New York ranks first in cottage cheese production and third in mozzarella and cheddar cheese production. One-third of New York’s milk production is for drinking and two-thirds is for processed dairy products such as Greek yogurt and ice cream.