The 2008 farm bill expired Sept. 30, taking with it federal price supports for dairy farmers.
“Of the ag parts of the farm bill — not counting food stamps — the dairy provisions and the conservation provisions are the two areas most important to Vermont,” said Clark Hinsdale, president of the Vermont Farm Bureau. “Dairy is 72 percent of our agriculture in this state.”
A version of a new five-year bill — the Agriculture Reform, Food and Jobs Act of 2012 — passed the U.S. Senate in late June. But late last month, the U.S. House adjourned until November without passing a version of the bill, which determines spending on conservation, agriculture and nutrition within the United States Department of Agriculture (USDA).
A continuing resolution will fund most programs administered under the bill through March, but certain programs, among them the Milk Income Loss Contract (MILC), expired at the end of the federal fiscal year on Sept. 30.
While the Senate passed a version of the bill in July with strong bipartisan support, House leaders stalled the bill on the floor, ultimately pushing back any vote on the bill until Congress reconvenes after the November elections.
Chris Adamo, staff director for the Senate Agriculture Committee, said House leaders were unwilling to bring the omnibus bill to the floor for fear that it would split the Republican caucus so close to elections. The Senate was divided over funding for nutrition spending and an overhaul of existing dairy support systems.
Vermont Secretary of Agriculture Chuck Ross expressed disappointment with Congress’ decision to allow the farm bill to expire.
“Without a new bill, or an extension of the current bill, … our farmers, particularly in the dairy sector, are left in a precarious position,” he said in a statement.
The MILC program is designed to activate when bulk milk falls below a certain minimum price. Each month that dairy prices remain below that minimum, farmers receive a monthly check for a percentage of the difference, multiplied by the amount of milk they produced.
Early this year milk prices took a dip toward the catastrophic prices of 2009, and farmers began receiving MILC payments in February. According to the Vermont Agency of Agriculture, dairy farmers received $7 million in MILC payments between February and July.
Rising grain prices from this summer’s drought across much of the South and Midwest have pushed dairy farmers across the nation to decrease production, said Hinsdale, a Charlotte dairy farmer himself. Decreased milk supply has in turn propped prices back up — Hinsdale said October MILC checks would have been very small had the program continued.
“The date that the milk prices started getting manageable, from a farming point of view, was October 1,” said Hinsdale. “We’re very fortunate that the price of milk has gone up just when the government program has gone away.”
The price of bulk milk continues on its upward trend, and in Vermont has sloped upward every month since its low of $17.10 per hundredweight (one hundred pounds) in June. September finished off at an average price of $19.80 for Vermont dairy farmers, and prices have continued to rise in October.
With so much flux in the milk market, long-term price forecasts are extremely unstable right now, said Hinsdale. Despite that, forecasts for the fourth quarter of fiscal year 2012 and the first of 2013 are strong.
“The number one impact right now for Vermont dairy farmers is in business planning,” said Hinsdale. Among other things, he said, “uncertainty makes it hard to work with lenders.”
Part of this is uncertainty over what sorts of price supports will be in place when a farm bill does pass. Vermont’s congressional delegation is supporting an extension of MILC in the interim, but a new dairy support program passed in both the House Agriculture Committee’s version and the Senate version of the farm bill.
The new program would discourage overproduction during times when dairy prices are low. The program would tie crop insurance onto a dairy supply management program. This would set a base milk yield for each farm based on past production. When dairy prices fall below a certain mark, farmers would receive a notification to draw back on production by a small percentage. Anything over that percentage that a dairy farmer produced would have to be sold for a much lower price.
Advocates of the new price support program say it would draw back milk supply on a national scale, bolstering dairy prices and halting the spiral of continual overproduction that led to the 2009 dairy crisis.
Major milk processors have come out against the plan, but Hinsdale said Vermont dairy farmers generally support the proposed overhaul.
For now, said Hinsdale, dairy farmers are watching and waiting, and hoping milk prices stay high until a new program is put in place. In the meantime, he said it’s heartening to have a congressional delegation committed to keeping the bill moving.
“They’re working very hard to be part of the solution, not part of the problem,” said Hinsdale.
Adamo said he hopes to see a bill passed in the House during the House’s lame duck session, after the elections, not only for the sake of farmers but also for the conservation programs that the bill administers. Several of the smaller conservation programs received congressional authorization to continue through 2014, but the Conservation Reserve Program (CRP), the largest conservation program administered under the USDA, ended Sept. 30. The CRP offers landowners incentives to take environmentally sensitive cropland out of production, can no longer accept new applicants.
Vermont has been a minor beneficiary of the CRP, but many Vermont farmers benefit from the Environmental Quality Incentives Program (EQIP), a voluntary program that offers training and resources to implement conservation practices on farmland. The program, established in the 2008 farm bill, continues to operate but has lost 60 percent of its current funding for livestock projects, according to the American Farmland Trust.
The Senate version of the farm bill funds EQIP and other conservation programs, and adds a requirement that farmers that benefit from crop insurance programs must also comply with conservation rules established by the farm bill.
Adamo noted that the Senate version starts a move away from direct commodity payments to farmers and increases conservation funding. If this trend continues through House approval and reconciliation of the two bills, it will mean a significant change in the balance of funding administered by the USDA.
“The farm bill is the largest single investment in conservation and the environment in the federal government,” said Adamo. “For the first time, our conservation budget will be higher than our direct payment budget.”