Iowa Public Television


Milk Price Increase Looms

posted on July 5, 2013

<p><strong>Note:</strong> If this video does not play, you may need to download the free <a href="">Flash</a> video plugin for your web browser.</p> <p><a href="" target="_blank"><img alt="Get Adobe Flash Player" src="graphics/plugins/get_flash_player.gif" border="0" height="31" width="88"></a></p>

American businesses went on a hiring spree last month, making it more likely that the Federal Reserve will slow its bond purchases before the end of the year.

The Labor Department reported Friday that employers added a respectable 195,000 positions to their payrolls in June. The national unemployment rate held steady at 7.6 percent as more people started looking for jobs.

Average hourly pay rose 10 cents last month to just over $24 per hour. Over the past year, wages have risen 2.2 percent, while consumer prices have only risen about half that amount.

Despite the solid pace of hiring in June, the economy continues to grow sluggishly. It expanded at a 1.8 percent annual clip in the first quarter and most analysts expect roughly the same performance this summer.

Even less certain are prospects for federal farm programs. While large and complex, Farm Bills, typically, enjoy bipartisan support. But not this time…

The Democratically-controlled Senate approved a five-year, $500 billion Farm Bill in June with broad support from both sides of the aisle. But the Republican-controlled House rejected its version of the bill.

And as the clock winds down to yet another self-imposed deadline, some are concerned that Washington’s failure to enact a Farm Bill could push milk prices above $6 per gallon.

Unless Congress acts before September 30th U.S. agricultural policy will revert to the Agricultural Act of 1949.  Why 1949? Because that was the last time Congress authorized federal farm programs on a PERMANENT basis.

If the policy is allowed to fall back 64 years, farmers will watch most of their heavily negotiated “safety net” slip away while America’s dairy producers would see a marked INCREASE in profits. If Congress fails to pass a new Farm Bill by September 30 -- or extend key aspects of existing law – provisions kick-in that would double milk prices to over $6 per gallon.

Most dairy producers only see trouble if the six-decade old law is allowed to take effect.  Some farmers are already selling their milk at -- or below -- the cost of production and are concerned consumers will stop buying dairy products due to inflated prices.

Both House and Senate Agriculture Committees proposed changes to the dairy safety net.  There were two in the Senate version of the 2013 Farm Bill that passed last month.  The first was a margin protection program to pay farmers when the price difference between milk and feed shrinks to a certain point. And the second was a market stabilization program that would require farmers to either reduce the amount of milk produced when prices drop too low or give up a portion of their margin protection payments. USDA would divert the money to purchase and donate dairy products to food banks.

Both provisions were originally part of the House version of the bill but Republicans on the House Agriculture Committee voted to remove the market stabilization program. Ranking member Congressman Colin Peterson, a Democrat from Minnesota, said the change soured several Democrats on the omnibus bill and the measure failed to pass.

Despite any political wrangling that will inevitably take place, the clock is ticking and Congress has less than 90-days to come up with a solution.

Tags: dairy dairy farmers dairy industry Farm Bill milk milk prices