My one-word reaction to the dairy provisions of the new farm bill as they have been outlined in the press.
“What were they thinking?” would be a longer one.
Bear in mind, these provisions have yet to get through the Senate and be signed into law by President Bush.
Essentially, small- to medium-sized producers will benefit the most from the currently outlined provision that will pay 45 percent of the difference between $16.94 and the Class One price out of the Boston Market.
The provision is retroactive to December 2001′s production and would remain in effect until September 2005.
Sounds OK since more than 75 percent of Ohio’s milk comes from farms milking less than 200 cows and many farms would potentially benefit. But what are the long-term implications?
The milk pricing system is already obscure and convoluted. (The 25 students who dedicated 10 weeks to the study of that system in Dr. Cam Thraen’s Milk Policy and Pricing class at OSU-ATI winter quarter would heartily agree. Another 10 weeks and we might really have gotten the hang of it.)
This provision adds yet another murky layer. Murky as in “…the difference between $16.94 and…” Who thought up $16.94? Why not just make it an even $17?
According to the milk price forecasters, the long-term impact will likely be more milk and lower prices.
Additional milk might come from two sources. First may be smaller farms increasing production per cow or adding cows until they hit the 2.4 million pounds per year production payment limitation.
Since that is about 12 percent of the milk shipped by a 1,000-cow dairy selling 20,000 pounds of milk per cow, larger herds will also be trying to increase milk per cow or adding cows just to stay “even” when overall milk prices drop.
A thinking person has to wonder what the real, long-term potential benefit is here.
Plan for the money. If and when this program is in place, most farms can find a home for the additional income. If this happens and checks start showing up in the mail, what would be the best long-term investment in your dairy operation?
Two weeks ago, Ernie Oelker talked about finding the biggest “dent” in the pipe. Not dent as in what was the last thing someone hit with the skid loader, but what is the biggest problem restricting milk flow, or big picture, net farm income?
Stepping up the manure/wastewater handling system also comes to mind. Few farms were left unchallenged this winter when weather conditions offered few opportunities to haul manure.
The Ohio Department of Agriculture’s Livestock Environmental Permitting Program is in the final stages of review of the regulations that will define our industry’s manure nutrient management practices into the next decade. Each and every operation, required or not, should be able to comply with these regulations. With continued attention to animal waste and odor, a thoughtful, planned investment in that area can’t go wrong.
Farm bills come and farm bills go. Some short-term help buffering of the low end of the price cycle may or may not cause longer term price problems.
A little extra income here or there certainly never hurt, but let’s face the facts. A well-run dairy business should plan to thrive on its sound business practices. If a program payment is the difference between success or failure in a broad sense, or a family income near poverty level or somewhere above it, there are some bigger issues that must be addressed.
Don’t just wait for the check.
(The author is the northeast Ohio district dairy specialist with OSU Extension. Send comments or questions in care of Farm and Dairy, P.O. Box 38, Salem, OH 44460.)