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Bob Andrews feeds the heifers in his barn in Fowler. Photo: David Sommerstein.
Bob Andrews feeds the heifers in his barn in Fowler. Photo: David Sommerstein.

Dairy farmers fear own "fiscal cliff"

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One big item caught up in gridlock created by the current budget debate, with its "fiscal cliff" threat, is the federal farm bill.

Most farmers are still covered by crop insurance and other programs until next planting season, but that's not true of dairy.

Dairy farmers now have no safety net if milk prices fall. And with feed prices soaring, many feel they're falling off a cliff of their own.

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Reported by

David Sommerstein
Reporter/ Producer

Two cliffs, really. The first is the financial cliff many small dairy farmers feel they’re clinging to just to survive.

The government subsidy is enough to keep the wolf away from the door. But it's not enough to put money in your pocket and make money or make a living.
In a cramped barn his grandfather used near Gouverneur, Bob Andrews is lugging hay to his heifers.

"We just got ‘em into the barn yesterday," he says. "They been outdoors eating round bales."

Andrews is a big man with a trim, white beard and Carhartt overalls. He stops, looks right at me with wide eyes, and says the dairy business is on its head. "Do you realize that feed is more valuable right now than it is puttin’ it through a cow?"

In other words, his raw materials—this hay, and the corn and soy he feeds his 70 milkers— are worth more than his final product, the milk.

Dairy farmers are price takers, not price makers. 

Clark Putman of the Farm Service Agency keeps ears of corn on his desk as a reminder of farmers' high feed costs. Photo: David Sommerstein.
Clark Putman of the Farm Service Agency keeps ears of corn on his desk as a reminder of farmers' high feed costs. Photo: David Sommerstein.
The federal government sets a monthly milk price using a complex—most say arcane—formula, and that’s what the farmer gets. A farmer can’t factor feed or energy or repairs costs into the price of the product. So Andrews says you have to work harder, become more efficient: "used to be the harder you worked, the better you were off, financially. Today, the harder you work, the further behind you get in this business."

A program called the Milk Income Loss Contract (MILC) used to help with the bottom line. It paid farmers when the milk price went too low or feed prices went too high. But it expired as a part of the farm bill in October. It was particularly important to small dairy farmers like Bob Andrews.

MILC handed out almost $2 million last year to farmers in St. Lawrence County alone.

Clark Putman directs the county’s Farm Service Agency, a part of the USDA, and says had MILC not expired, "we would have still been making payments in this county to approximately 200 dairy producers."

He says that $1,000 to $4,000 dollar check, depending on the farm, would have made a big difference. Instead, he says farmers have to turn to other options: "they either borrow more money, discontinue paying vendors, cull beef heavier than normal, anything to generate income to try to continue to operate."

And if that doesn’t work, more farms will go out of business, like thousands of others since the 1980s.

A heifer in Bob Andrews' barn. Photo: David Sommerstein.
A heifer in Bob Andrews' barn. Photo: David Sommerstein.
Peggy Murray is a farm business educator for Cornell Cooperative Extension in Lewis County. She says it’s the waiting for MILC or its replacement that’s making farmers nervous as they budget for next year. She says they've depended on the payment for the last two years, since the last farm bill, "and now it’s gone and they don’t know what’s going to replace it."

Now let’s get to that second cliff, what insiders are calling "the dairy cliff".

Chris Galen is spokesman for the National Milk Producers Federation, the largest trade group representing dairy farmers and their milk cooperatives. He says he coined the "dairy cliff" term.

If the lame duck Congress fails to pass a new farm bill, or extend the old one, an old 1949 law would take effect in January that would almost double the milk price. That’s driving predictions like one in a recent newscast that have milk prices going up to between six and ten dollars for a gallon of milk.

Galey says there "would be a rather dramatic, or even dire, change in the price support levels."

Galen says that’s the "dairy cliff". You’d think that would be good for farmers, but factories might not even buy the milk at that price. 

Galen says Congress can avoid the "dairy cliff" by passing the new farm bill, which includes a voluntary insurance program that would replace MILC. He says that would be better for small and big dairy farms.

"If you were enrolled in it, you would know that you had that as a backstop, so that you wouldn’t just hemorrhage money in the absence of having some type of safety net."

North Country Congressman Bill Owens supports that insurance program, too. And he voted for the House version of the new farm bill as a member of the House Agriculture Committee. He says it was designed for times like right now.

"Even if milk prices are high, their expenses are going up at a higher rate than their income is, so their margin is getting squeezed and this is exactly why I and many others were supporting the margins insurance program. The farmer is going to be able to buy this insurance, with at least a partial government subsidy, that keeps that profit spread in place."

It’s that government subsidy that bothers many critics of the farm bill, on both the left and the right. Some farmers, like Sam Dyer of West Chazy in Clinton County, are uncomfortable with it, too.

Dyer and his son milk just 65 cows, tiny by today’s standards. He says he doesn't want to sound like he's " crying on somebody’s shoulder", but although he’d like to compete on the free market, without government subsidies, the federal milk price system won’t let him.

"The government subsidy is enough to keep the wolf away from the door. But it’s not enough to put money in your pocket and make money or make a living."

So he’s hoping Congress acts soon, before that wolf pushes him over the cliff.

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