Time is Running Out to Pass a Farm Bill in 2012

In the US, we have something called a Farm Bill, which is the main agricultural and food policy for the federal government. The bill is renewed every 5 years by Congress, and manages agricultural activities under the periphery of the Department of Agriculture.

The farm bill can actually be a contentious issue, and can affect international trade, environmental conservation, food safety and rural communities. The most current farm bill, which was passed in 2007, expired this September; however, no new legislation has been passed by Congress since then. Many decisions involved in a new farm bill are directly related, and affected by, our recession and the fiscal package.

The White House and Congress are at a political standoff, which is further worrying farmers. It is farmers’ hope that a new bill will be included in the fiscal package before year’s end — if legislation isn’t renewed, then milk and cheese prices will soar, affecting farmers and consumers alike. Extension of current law would be a relief for now, but would only be a band-aid for the existing problem. However, if neither current law is renewed nor new legislation passed, milk pricing would regress to the old system — the Agricultural Act of 1949 — where milk was set at $6 a gallon. The old system of milk pricing is out-of-date and unaligned with our current economy and market conditions.

The Agricultural Act of 1949 delineates how to set milk prices; the act is overridden when a new farm bill is passed, but will be effective if no new bill or extension is passed. The act includes a component that assures that minimum milk prices will cover producers’ costs. The government also assures producers that it will buy milk products at that price point; however, producers typically profit more through the consumer market. Given the existing market conditions, the government-set price could double, which could persuade farmers to sell their products to the government rather than through the private market. Because of this, store prices for consumers could skyrocket. If the government keeps accumulating milk, then it will subsequently have an excess of dairy products in storage. Eventually, prices could decline as the government sells its dairy stockpiles.

Increased milk prices could put American dairy farmers and cheese-makers out of line with the international market; instead of buying American-made dairy products, consumers could be looking at alternatives, such as foreign-made cheeses, and soy and almond milk.

What stands between the White House and Congress passing new legislation in 2012 are disputes over the food stamps program — three quarters of the farm bill goes into funding food stamps. The Senate bill, spearheaded by conservative lawmakers, would cut food stamps by $4 billion.
At this point, farm lobbyists are pushing to have any legislation passed before the new year so that dairy farmers will not have to revert to old legislation. This is an obscure issue that isn’t given much limelight, and many Americans don’t even know of this bill’s existence; yet, deep cuts into the farm bill could greatly affect everyone.
Like most issues facing our country today, the public expects lawmakers and lobbyists to work together and let the country move froward to a market-based system. We think that this is very reasonable expectation; however, it isn’t as reasonable as we think.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

December 19, 2012

Fluid Management Systems

Copyright 2012   All rights Reserved by Fluid Management Systems, Inc.

www.fluidmanagementsystem.com     subodh@fluidmanagementsystem.com

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“Milk Price Fight Boils Over” — Wall Street Journal, 13 November 2012

With the drought and soaring feed costs, farmers have had a tough break this year. California’s dairy farmers, however, are experiencing more bad fortune: separate from the federal laws that regulate milk pricing, California has also implemented its own system of pricing. The state sets minimum milk pricing for buyers every month.

California has one of the biggest dairy industries in the US; but growing feed prices and slow economic growth has produced smaller milk production, which has ultimately increased milk prices.

While federal law sets milk prices at $2.50 per 100 pounds of milk, California has lowered its prices in order to benefit cheese-makers. As seen in the chart, California’s prices have never exceeded $2.00; and though prices are slowly increasing, they aren’t increasing quickly enough to save dairy farmers’ businesses.

This year, at least 100 California dairy farmers are closing down; and much of the state’s 1,600 dairy farmers are experiencing financial woes. Though there isn’t a maximum-set milk price, many dairy farmers stay close to the minimum so as to remain competitive. Cheese-makers contest raising the minimum price, since that would persuade cheese-makers to move out of state.

Many think that changing state pricing wouldn’t be enough to prevent dairy farmers from going out of business — most California dairy farmers face additional costs, such as paying higher prices for animal feed since they don’t grow it. This, in turn affects milk production, where milk per cow is decreasing because feed costs have sharply increased.

Some dairy farmers and cheese-makers propose that the market should decide pricing; however, because it takes several years for a cow to develop to full production, it’s difficult for dairy farms to match production to the marketplace.

This situation presents a Catch 22: if California keeps its current milk pricing, then dairy farms go out of business and cheese-makers stay in business; if the state increases milk pricing, then more dairy farms will likely stay open and cheese-makers will leave the state.

How can California save dairies, but also keep cheese-makers in state? Can, or should, the “market” decide the winner and loser, or — based on tax revenue, job creation and retention criteria – is it the state’s decision?

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

November 30, 2012

Fluid Management Systems

Copyright 2012   All rights Reserved by Fluid Management Systems, Inc.

www.fluidmanagementsystem.com     subodh@fluidmanagementsystem.com

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