With falling milk prices, Connecticut dairy farmers look to Washington for help
Washington — The good news for consumers is that milk prices are dropping.
But that’s bad news for Connecticut’s $1 billion-a-year dairy industry, which is already struggling with high feed and fuel prices.
Farmers are looking to Washington for help, but it’s a tossup whether that help is coming.
“We’re kind of the same as any other citizen of the United States, we’d like Congress to act,” said Ben Freund, who milks about 250 cows on a farm in East Canaan, in the northwestern part of the state.
Freund’s is one of about 150 wholesale dairies — located on a total of about 70,000 acres — in the state.
Congress has been struggling for more than a year to pass a new farm bill. Farmers like Freund, hope the farm bill will replace what they consider to be an antiquated federal dairy program with one that would provide more security.
Right now, there are two U.S. Department of Agriculture programs that try to provide a safety net for the nation’s dairy farmers.
One is the Dairy Price Support Program, which ensures a minimal price for dairy products through the government’s purchase of excess milk and milk products.
The other is the Milk Income Loss Contract program, known as MILC, that gives dairy farmers subsidy payments when milk prices are low.
Rep. Joe Courtney, D-2nd District, supports legislation that would scrap the current dairy program in favor of a “margin protection program.”
Under the legislation, farmers would receive a new subsidy when prices are low and cost of production — including feed, fuel, labor and shipping — is high.
Farmers could increase their financial protection by buying new federally subsidized insurance coverage that would pay out when profit margins dip.
Unique in the U.S., Connecticut already has a margin protection program for its dairy farmers. No other state has a program in which the state adds funds to the federal money its dairy farms already receive.
It was first implemented in 2009, when the price of milk dropped precipitously, plunging the dairy industry into crisis. The program was then extended indefinitely.
Financed through some of the money the state receives in land filing fees, the state program gives grants to dairy farmers every quarter that profit margins are bad. The smaller the profit margins, the higher the “Dairy Sustainability Grant.”
The average grant to Connecticut dairy farmers was $12,000 in the last quarter of 2011, when milk prices started to slip, said Wayne Kasacek, manager of the dairy program at the Connecticut Department of Agriculture.
Critics say insuring or subsidizing farmers with poor profit margins provides incentives to overproduce and depress farm prices even further.
But Courtney, who sits on the House Agriculture Committee, said that approach has the most support from the nation’s dairy farmers, who usually split along regional lines when it comes to USDA programs.
Courtney also said there’s an urgency for Congress to approve a farm bill this year because “2009 was traumatic, and (dairy farmers) are nervous things are trending down again.”
“The warning flags are up,” he said.
Steven K. Reviczky, commissioner of the Connecticut Department of Agriculture, said the proposed changes to the federal dairy program “would head us in the right direction.”
“Right now, the federal government does not recognize the cost of production,” he said.
But there’s no guarantee that Congress, mired in partisan fights and election-year politics, can agree on a farm bill or include in it the changes to the dairy program Courtney wants.
“I think it’s going to be a long slog on the farm bill,” Reviczky said.
There was an attempt to move the legislation forward when a “Super Committee” of Democratic and Republican lawmakers tried last year to reshape the federal budget to save more than $1 trillion. Partisanship killed that effort.
To make matters worse for farmers, the Super Committee’s failure has put added pressure on Congress to trim the federal budget by slashing farm subsidies.
Dave Bahler’s family farm in Ellington — the largest farm in Connecticut — received nearly $1.2 million in federal subsidies from 1995 to 2010. It received subsidies for the corn it grows to help feed 1,600 cows from a conservation program and from the current dairy program.
Yet Bahler said last week that he’s not too worried about possible cuts to those subsidies. What he wants Congress to do is get rid of what he calls the “old, old relic” of the current dairy program and replace it with help to farmers like him who are paying record prices for feed grain — much of it shipped in at great expense from the Midwest.
“If we buy a load, half of the cost is shipping,” he said.
According to an Environmental Working Group study, Connecticut ranked 45th out of 50 states in the amount of USDA subsidies it receives — about $127 million from 1995 to 2010. That pales before the $24 billion farmers in Texas received and the $22 billion that went to farmers in Iowa.
But Freund, the East Canaan farmer, said any type of subsidy cut will add to the pain that dropping milk prices will inflict this year.
Freund says that Americans who complain about the billions of dollars the federal government spends on farm subsidies every year don’t understand that they bring down the cost of food.
“Part of the low cost of food is this safety net,” Freund said.
His farm received a little more than $1 million in federal subsidies from 1995 to 2010.
But Freund said much of that money was spent on environmental safeguards.
“People say subsidies are welfare for farmers, but they’re not,” he said.
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