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While milk prices continue to rise and
exports to Asian markets have expanded, many dairy farmers are
still struggling with the aftermath of several disastrous years and
hoping the federal government will do something to help stabilize
the industry.


      After milk prices plunged and farms began going under,
Agriculture Secretary Tom Vilsack said a year and a half ago that
the industry needed restructuring and his department would look at
its programs to see what changes could be made to help create more
stability.


      A committee the U.S. Department of Agriculture formed in 2009 in
response to the crisis issued its recommendations this month, but
no legislation has been written yet. Agriculture officials say it's
forthcoming.


      That's not a lot of comfort for farmers like Jamie Bledsoe of
Riverdale, who saw his income drop by $2 million in 2009 and had to
sell off about 300 cows to pay his bills. Many dairy farmers used
up savings and sold property they had accumulated over 15 or 20
years, he said.


      Now, they're being squeezed by high corn prices and an inability
to get loans to buy feed for their cows. The situation is
particularly bad in California, where most dairy farmers don't grow
their own hay and corn.


      Nearly 250 dairies in California have gone under in the past
three years, and more are expected to close this year, said Michael
Marsh, chief executive of Western United Dairymen. California is
the nation's No. 1 milk producer, followed by Wisconsin and Idaho.


      The crisis started when milk prices that had been driven up by
demand in developing nations plummeted from a high of $18 per
hundred pounds in 2008 to about $12 amid the recession in 2009.

Farmers began slaughtering their cows to try to cut production. At
one point, an average of 50,000 cows a week were being killed in an
effort to reduce the milk glut.

      This year, milk is expected to average about $17 per hundred
pounds. But farmers aren't doing much better than before because
federal subsidies for ethanol have created a big demand for corn
among biofuel producers and prices have skyrocketed, said Ray
Souza, a California farmer who serves on the USDA's Dairy Industry
Advisory Committee. 


About a third of the U.S. corn crop now feeds
car engines, not cows, and Souza said feed accounts for about half
of dairy farmers' expenses.

      Tom Barcellos, who runs an 800-cow dairy in Tipton, said farmers
used to be able to borrow against their herds to get money to buy
feed, but the value of cows has slipped, making it hard to get
credit. Many dairy farmers now have barely a truckload of feed
left, he said.


      "It's hand to mouth," he said. "They have no feed, they have
used up equity, and they have to buy a load of feed at a time to
try to hang on."


      Dairy farmers are usually optimistic about bouncing back, he
said. "But we never expected it would take this long to recover."

      The dairy industry has been working on a plan to reform the
nation's dairy policy, and many of its proposals were mirrored in
the federal panel's recommendations.


      Most significantly, the Dairy Industry Advisory Committee
recommended replacing or improving the federal government's two
traditional safety nets: the price support and Milk Income Loss
Contract programs.


      The price support program buys surplus dairy products to try to
prevent a glut, but industry experts say its prices are too low to
help farmers. The MILC program pays farmers directly but it doesn't
cover all their losses, and it pays only on up to 3 million pounds
of milk per year. That means it's of little help to large dairies
such as those in California.


      Instead, the committee has recommended helping farmers with feed
costs by doing away with ethanol subsidies and creating an
insurance program that would pay farmers when the difference
between milk and feed prices becomes too small.


      It also recommended creation of a growth-management program that
would provide financial penalties for farmers who don't reduce
production when demand drops; increasing incentive payments for
good environmental practices; adopting measures to ensure dairies
have access to a stable, legal immigrant labor force; and enhancing
the nutritional value of the nation's milk to boost demand.


      Differences in how policies affect the large dairies in the West
and smaller ones in Wisconsin and New England have made it hard for
farmers to agree on reforms.


      But Bill Bruins, a dairyman and president of the Wisconsin Farm
Bureau Federation, said he thinks farmers are focused now on
"proposing a policy that benefits everyone and allows us to become
players on the world market, where most growth is."

      The U.S. shipped $3.7 billion of dairy products overseas last
year, 63 percent more than the previous year and almost as much as
the $3.8 billion worth in 2008, according to the U.S. Dairy Export
Council. Moving away from the traditional price support program and
selling surplus to the government, which stifles innovation, would
benefit everyone, Bruins said.

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While milk prices continue to rise and
exports to Asian markets have expanded, many dairy farmers are still struggling with the aftermath of several disastrous years and
hoping the federal government will do something to help stabilize the industry.

Higher milk prices don't help dairy farmers much

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