May 23, 2009
Legislator backs effort for better milk pricing
High production costs, low prices impacting dairies as farmers lobby for support of federal bill
Cortland County dairy farmers are suffering from low prices and high production costs.
According to the state Department of Agriculture, the price farmers received per hundrdedweight (11.6 gallons) of milk dropped by about $6.97 from January 2008 to January 2009. This means that farmers went from making $20.36 per hundredweight to $13.39 for the same amount of milk in that time period.
This was a result of the recession weakening the demand for dairy products and restaraunt sales going down, driving the pricing of milk down, states a Department of Agriculture news release dated Feb. 23.
Since then, the amount farmers in the Cortland County area are being paid has dropped down to between $11.25 and $11.85, says Oneida County farmer Gretchen Maine who wants to change the pricing mechanism. Prices have declined 40 percent in the last six months.
Maine said at the same time this market price has dropped, the average cost of production ranges from $17.50 to $26 per hundredweight.
Maine and county Legislator Kathie Arnold (D-Cuyler, Solon and Truxton) want to change that.
Arnold introduced a resolution urging a revision on milk pricing at Thursday’s county Agriculture/Planning/Environmental committee meeting after Maine contacted her with her concerns about the volatility in the milk industry. The county Legislature will vote on the measure Thursday.
Maine has been pressing various Legislatures throughout the Central New York area to encourage Congress to adopt a bill that would change the pricing of milk.
The Specter-Casey Dairy Bill has been introduced into the Senate and Maine hopes with the support of local counties it will be introduced in the House of Representatives as well.
The bill would allow dairy farmers to receive $22.46 per hundredweight of milk they produce.
“If we can get all the counties to say to the state representatives this bill is good, if we have that support they can’t say no,” Maine said.
Maine said it is a desperate time for dairy farmers.
“It is planting season now and we have to start all over and we’ve still got bills from last year,” Maine said.
Instead of promoting that specific bill, Arnold said she made her resolution more general.
“Since we hadn’t heard directly from Cortland County farmers whether they wanted that specific piece of legislation ... I didn’t feel we should be promoting that. But I totally believe the way milk is priced currently is broken and needs to be fixed,” Arnold said.
Spokesman for the New York Farm Bureau Peter Gregg, said this type of dialogue is crucial to ultimately revising the pricing mechanism.
“It is an immediate crisis and there is an immediate need so the solution has to be rapid,” Gregg said.
Gregg said milk prices are determined by a branch of the U.S. Department of Agriculture, the federal milk marketing order administrator, which sets the minimum milk price farmers can make.
The system has been in place since the 1930s, said Gregg, as a way to ensure farmers have bargaining power with the large milk processors who pay them.
“Milk is perishable so a farmer couldn’t hold onto the milk . . . The market order system ensures a minimum milk price processors must pay dairy farmers,” Gregg said.
Peter Fredericks, an economist at the northeast markets administator’s office, said if the system is changed to ensure the farmers make more money then there must be controls placed on the production levels that are allowed.
“You can put a higher price level but there has to be a provision that puts the brakes on production because farmers tend to respond to high milk prices,” Fredericks said.
Gregg said milk is a unique commodity in that a minimum price is assured but the problem is that different factors, namely low demand, have driven that minimum price very low now.
A federal reimbursment plan, called the Milk Income Loss Contract, is a program Gregg wants to receive more funding. The program funds farmers who qualify for the reimbursement once the price they receive drops below $16.94.
“This is the worst it’s been,” Gregg said of the loss farmers are seeing. “We’ve gone through many cycles like this but this one is more dramatic because the cost of production is higher than it has ever been in history.”
Karen Dove, who owns Dove Tales farm in Truxton, is among the dairy farmers who are being adversely impacted by the current pricing of milk.
Dove said she and her husband, Dan, battle the expenses of maintaining their machinery on the price paid for their milk.
“Milk that is sold today, we won’t see payment for that until two weeks later,” Dove said.
A farmer’s financial standing dictates how well he can cope with the volatile market, said Dove. Some bank lenders will work with farmers who are positioned well financially.
For instance, if a farmer took out a loan to purchase a piece of machinery, the bank may allow the farmer to make monthly payments only on the cost of the interest of the loan. Payment on the principal will be forgiven temporarily to help the farmer free up cash flow.
“It is not the ideal situation because you are still behind, but you can still pay some other bills that have to be paid,” Dove said.
Dove’s farm consists of about 150 cows which produce about 73 pounds of milk per day. The herd is rotationally milked twice a day, in between grazings and milk is shipped out every other day.
Arnold hopes the measure she and Maine are promoting will address the immediate need for stability and restructure the long-standing market order pricing system.
“We are asking our representatives to work to improve the pricing system to cover the cost of production and to not be so terribly volatile,” Arnold said.
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