Milk prices at stake in farm bill fight

A dairy provision in new agriculture legislation designed to aid providers is being compared to 'Soviet-style' communism.

By Jason Notte Jun 17, 2013 3:39PM
Image: Bowl of Spilled Milk and Cereal (© David Arky/Corbis)Remember during the last Bush administration when the Department of Homeland Security would trot out its color-coded Advisory System threat meter and get folks all riled up no matter how grave or trivial the justification?

Well, we're back to that again, only perceived threats to national security have been replaced by perceived threats to the cost of milk. Consider the nation's milk price threat level somewhere above "skim" and below "2%."

After averting a dairy cliff earlier this year that could have doubled milk prices if lawmakers didn't extend the agriculture bill that expired last summer, Congress is caught up in milk controversy yet again as it considers a new farm bill. The legislation includes a dairy provision that would nix current price supports and allow farmers to buy insurance that pays when their milk profits fall.

The program is voluntary, but farmers who participate would have to agree to a stabilization program that could dictate production cuts when oversupply drives down prices. The dairy plan, written by Democratic Rep. Collin Peterson of Minnesota, is designed to break the cycle in which milk prices drop and farmers produce more to pay their bills, flooding the market and forcing prices down further.

Peterson says the stabilization program would prevent a recurrence of what happened in 2009, when many dairy producers went out of business after they were hit hard by a combination of low milk prices and high feed costs. Republican House Majority Leader John Boehner, however, compared that fix to "Soviet-style" communism and is backing an amendment to scale it back by keeping the insurance but dropping the stabilization requirement.

That doesn't sit well with the National Milk Producers Federation, the largest U.S. dairy producer organization, which worked with Peterson on the amendment and has lobbied members to back it. However, Boehner is joined in his disdain for the measure by the International Dairy Foods Association, which represents the milk, cheese and ice cream industries and other food processors and manufacturers that use dairy products. Those dairy processors say that the stabilization program would drive up the prices they pay for dairy products and that those costs would be passed on to consumers.

Politicians in dairy states note that if Boehner gets his way it'll unnecessarily anger representatives from those states and sway them against future farm legislation, upsetting the delicate balance of regional interest that has previously ushered farm bills through. The Senate, however, sided with Peterson and passed its version of the farm bill with the new dairy program intact.

The danger to both sides is the hundreds of House members in urban and suburban districts with just about no knowledge of the dairy industry other than milk prices. Not surprisingly, each side has preyed upon that relative ignorance by using milk prices as a wedge. Hence the dairy cliff and a complicated agriculture bill boiled down to a milky reduction.

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Jun 17, 2013 5:02PM

This is just another example of government fiddling with the market to suit special groups and to help politicians in certain states get re-elected. The government needs to get out of the business of business and let market forces determine prices and production.

Jun 17, 2013 5:07PM
Of the two, Boehner is less wrong.  He's still wrong, in my opinion, but less so.  I don't believe the government should provide insurance programs to stabilize milk prices, that's what commodities markets are for - and being private enterprise, much better at it than the US govt.  Although, that may just be me - I tend to be a small government liberterian who believes the govt. should directly subsidize industries.  Paying dairy farmers to not produce, as per the stabilization plan, just sounds like nonsense - which means that'll be the one congress passes.
Jun 17, 2013 6:38PM
Milk subsidies are complicated and 99% of people do not know how it works. Milk products are classified differently. Currently the price of the milk you and I drink is higher then what the free market would have. This helps subsidize the low cost of milk products that many manufactures use. This is called Price Pooling. Most farmers and manufactures have become dependent on this price pooling and the issue occurs when any change is announced. Never trust a politician who talks about our food supply as they are surely paid by one group or another. I saw lets introduce the free market to milk which will drive up the price for manufacturers and decrease the price for consumers. This would get rid of the dead weight loss associated with any government regulation
Jun 17, 2013 6:40PM
Where are all the idiots on these boards that says we have a free market ? LMFAO < You idiots are 180 degrees out ! I told you so ... FOOLS....The useless congress of the USA lead by you republicans as always <<<< They have no clue...
Jun 18, 2013 7:47AM
If milk goes too high people can always drop it from their grocery list.  What money I have will only go so far.  When something gets too expensive I do without, I have passed up several things when they are too high.  Be meds, food whatever.  I am a on a fixed income, really don't have much of a choice.
Jun 17, 2013 11:50PM
More of that inflation we, and our dwindling savings, are just imagining according to DC.  Higher milk prices, Comrades....It's for the CHILDREN! 
Jun 17, 2013 11:10PM

I remember when they bought my Uncle and his Milk herd out maybe 20 years ago or so...

It was a good time for him to retire and get some walking money to boot...

The Herd had to go to slaughter for cutters and canners or utility beef, (bottom grade.)


The younger kid up the road a few miles, just brought more young heifers on line, to make up for the shortfall in a matter of a few months.


Yup, Once again,  "Mission Accomplished" by our unknowing, all-knowing Government.


When milk prices go up, you don't have the number in farmers waiting on the sidelines to produce more milk.  A cow is limited and it takes a while to get the Springers on line.   Prices most likely stay up for the consumers for a long time.   Farmers lose out waiting for cows to come on line which can be too late for their benefit depending where on the curve they are.   The early bird gets the increase. 


When the prices go down, the same type situation occurs with only a couple of options, one is to kill cows to reduce the amount of milk but also the farmer's paycheck.  The other is to produce as if the price is up and bring more cows online when available to get a bigger pay check, which will further flood the market and reduce the prices.  


Farmers are normally stuck due to the nature of the business.  That is why the Feds normally have bought dairy products to store for emergencies.  With all the Trillions in money that is being thrown about, one would think there would be some for the people that feed most of us. 


Jun 17, 2013 11:00PM
I'll be hanging out at the back of our Kroger's asking for day old milk and bread. I want more please sir!! This is getting ridiculous that the only time some thing gets done is when it is in crisis mode. This goes to prove that Obama knew nothing about how to run a country except into doom!!! People need to start stocking up on stuff if you have a little bit of money. The worst I'm afraid is to come. I try to stay positive but when all of this is going on everyday it's a little hard to do!!! It amazes me how people could really have voted on him when he couldn't even take care of the district that he ran when he was in Congress in IL. It's a sad state of affairs of where he is leading this country....
Jun 17, 2013 4:39PM
Everything is manipulated and almost everyone has benefited from Welfare of some type, even if they don't know it. That's the reality of a Fiat Based Money System.
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