Prior to the global recession, growing demand in developing nations drove up milk prices, and prompted dairy producers to expand their herds. But now, the export market has all but gone dry, and prices paid to producers, in many cases, are well below the cost of production.
Last week President Obama signed a $350 million emergency funding bill for dairy producers, but this week, industry representatives called on Congress to do more.
Business leaders and farmers converged on Washington this week to discuss the current status and potential solutions for a withering dairy industry. Panel members representing dairies from New York to California testified to a Senate Agriculture Subcommittee – all professing tough times on the farm.
Sen. Amy Klobuchar, D-Minn: "We have alot of Co-ops and processors in Minnesota. Can you talk at all about the affect on those that are not dairy farmers?"
Paul Toft, Rice Lake, Wisconsin: "In our county, we've been told a dollar coming in on a milk check will turn seven times before it leaves the county. So that is a lot of money. Whether it's a furniture store, a grocery store, it keeps all these businesses going."
Ray Souza, Mel-Delin Dairy, Turlock, CA: "We're in the middle of the San Joaquin valley in California. We have towns with 25 and 30 percent unemployment. You take $3 Billion of farm-gate value right out of the San Joaquin economy its going to have an impact but the biggest impact is on the poor. If you lose your job in agriculture there are not a lot of places to go."
Job losses were just a portion of the concerns expressed by dairy farmers that have seen prices dip below the cost of production. According to some panelists, concerns in the national economy appear to have reverberated in Rural America.
Kirsten Gillibrand, D-New York: "I'm curious if you've had any problems getting access to capital in these tough economic times?"
Doug Nuttelman, Stromsburg, Nebraska: "This is the first year in five that I've had to increase my working capital at the bank. It took me testifying before my loan officers to get that and I was fortunate. Borrowing in agriculture with all these high inputs is getting tougher and tougher all the time."
Paul Toft, Rice Lake, Wisconsin: "I was at our local feedmill and bought some feed and I told the lady behind the counter 'I've got to stop writing these checks out pretty soon.' And she said 'at least you're not calling in and telling us to use a different credit card.' So there are people out there putting feed costs on credit cards and that is going to be an awful disaster when those come due."
Nebraska Senator and former Bush Administration Ag Secretary Mike Johanns pressured fellow lawmakers to open new markets for U.S. dairy products. Johanns claims new trade-promotion authority for the Obama Administration could provide the necessary jumpstart. The congressionally-enabled powers were given to the Bush Administration to further streamline trade negotiations and give the President more negotiating power. But one Wisconsin farmer insisted the dairy trade picture is cloudier than most understand.
Sen. Mike Johanns, R-Nebraska: "What trade challenges do you see in the dairy industry?"
Paul Toft, Rice Lake, Wisconsin: "In order to be an exporter of non-fat dry milk, which is the biggest one, we would have to produce it at world prices or less. And the last six to eight months have shown we can't survive at $9 milk. Unless we can raise the prices for export then non-fat is not something we can do at a profit."
Sen. Kirsten Gillibrand, D-New York: "You've basically said the safety nets need improving, you would like to see a new pricing mechanism."
New York Senator Kirsten Gillibrand argued much of the panel's data wouldn't change federal policy until the 2012 farm bill. Doug Nuttelman, a Nebraska dairyman, remained hopeful his industry could one day handle business without government support.
Doug Nuttelman, Stromsburg, Nebraska: "I believe in having the program and safety nets but I would love to be a farmer that gets all my money from the markets. Let me market my product and let me be a steward in that marketing and not rely on you guys to keep me in business. We need to find a way to strengthen the price sooner rather than later."