Federal milk subsidies are in line to not only be renewed but enhanced in the new farm bill under consideration in Washington.
The change would come at a time when dairy farmers are seeing a surge in gross revenue from high milk prices and a surge in expenses from high feed, fertilizer and fuel costs. It’s a situation that is proving very difficult for some farmers.
Johnstown farmer Jim Skiff says it doesn’t pay to be in the dairy business anymore.
“We’re dealing with more money but the margin has completely slipped away again,” he explained. Skiff’s Dairy has 170 cows; 560 tillable acres, 400 of them rented by other farmers; a milk distribution business; and an ice cream store — for now. Skiff said rising input costs have him strongly thinking about selling his cows.
“We’re slowly diversifying away from milking cows … because when you look at the overall profit margin over 10 years, it was so minimal, and the hours spent, it just doesn’t pay to do it,” he said.
The federally mandated basement price for class 1 drinking milk in the Northeast hit $21.86 per hundredweight in April, up from $19.95 in March. The price has hovered above $20 since June 2007, with a record high of $25.01 in August 2007.
A hundredweight of milk, the industry’s standard unit of measurement, is 11.63 gallons.
Skiff said the input costs for growing the corn he uses to feed his cows has also gone up dramatically. He said his fertilizer costs are $728 per ton, diesel fuel for his equipment is $4 a gallon and his electricity bill has spiked 37 percent.
“With the inputs that we have to put into this, it’s simply not worth it,” he said.
New York Farm Bureau spokesman Peter Gregg said farmers throughout New York continue to live on a economic razor’s edge because of skyrocketing fuel, feed and fertilizer prices. He said higher prices have helped some but the federal government should continue to provide a subsidy for dairy farmers in case the price drops again.
“Right now the milk price is pretty favorable but two years from now it could be back down to very low levels. Milk prices are about as volatile as oil prices,” Gregg said.
Record high milk prices have made renewal of the federal Milk Income Loss Contract, known as the MILC program, more difficult, according to congressional leaders.
In 2007, MILC granted local dairy farmers a subsidy when price of milk fell below $16.94 per hundredweight, which it did from January to March. The subsidy equaled 34 percent of the difference in price and only applied to the first 2.4 million pounds of milk a farmer produces.
A beefed-up MILC program has been proposed for the mammoth $300 billion 2008 Farm Bill, which House and Senate negotiators agreed to Thursday and President Bush has threatened to veto. The bill would renew the MILC program and raise its subsidy to 45 percent and the production cap to 4.15 million pounds.
Skiff said the basement price to trigger the MILC subsidy should be raised from $16.94 to at least $20 per hundredweight, the price he said he breaks even at.
“We would all be bankrupt before it got to [$16.94 per hundredweight] if it got to it right now,” he said.
Staff members for U.S. Rep. Kirsten Gillibrand, D-Greenport, said the version of the farm bill agreed to by the House and Senate conference committee Thursday has a new provision for MILC that would use the composite monthly price of feed made from corn, soybeans and alfalfa hay to raise the basement price that triggers the MILC subsidy.
“The corn ethanol boom has not only caused the price of food to go up, but the cost to feed animals, including dairy cows, has also gone up causing even higher prices for milk,” Gillibrand stated in a news release Friday. “By helping our local dairy farmers pay for their feed costs, we hope that this will help lower milk prices for consumers in the end.”
Gov. David Paterson endorsed the renewal of MILC Friday.
“I hope it will enable farm families to sustain their business even when the price they receive for milk fails to keep pace with the cost of producing it,” Paterson said.
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