America's Dairy Farmers Victims of Price Squeeze

Many going out of business while Congress and Cabinet seek remedy

TIMES are getting tougher for the nation's 202,000 dairy farmers as costs climb while milk income shrinks. There is little relief in sight as Congress and the Bush administration seem unable to on emergency measures to aid distressed dairies.

In Vermont, farm families feeling the pinch are signing up for food stamps and lining up at emergency food pantries. Last weekend farmers blockaded the cheese plant of Kraft General Foods in Troy, complaining the company is keeping retail prices high while bargaining down the prices paid farmers.

In Wisconsin, cattle sales are increasing as heirs to family farms turn away from the shaky industry.

``Dairy farmers are in a real crunch situation,'' says Michael Hutjens, a dairy specialist with the University of Illinois at Urbana-Champaign. ``We've seen a 30 to 40 percent decline in the price of milk they are receiving, from as high as $15 per hundredweight [100 pounds] to as low as $8.88 per hundredweight now in Idaho. In the past year, we have gone from record highs to record lows.''

Farmers are paid on a 100-pound basis, the equivalent of 11.6 gallons. In Vermont, consumers pay $2.50 for a gallon of milk; the farmer gets 97 cents, or 38 percent of that, according to Tim Atwater of Rural Vermont, a farm advocacy group.

While prices fall, costs of production rise (for fuel, machinery, labor, interest rates), pushing farmers' accounting sheets into the red-ink zone.

In the Midwest, it costs farmers more than $12 to produce 100 pounds of milk; in Vermont, it costs $14. Yet nationwide, dairy farmers receive roughly $10.50 per hundredweight - the same prices they earned in the early 1960s and only slightly above the federal support price of $10.10 (the guaranteed ``minimum wage'' for milk).

Says Hutjens: ``How can a farmer produce milk for $10 [per hundredweight] when the expense is $12? Maybe he can for a few months, but in the long term, he can't.''

Those who can't make it are packing up and moving off the farm. In Minnesota, more than 10 farmers per week have left their farm since the beginning of 1991, according to the National Farmers Union in Denver. The Wisconsin Bankers Association estimates that 75 percent of farmers who have borrowed from the Farmers Home Administration will soon be in serious financial trouble. From 1,000 to 4,000 farmers could be affected, sources say.

Mary Judd, a dairy farmer milking 120 cows in Troy, Vt., says things are getting rough. ``Two weeks ago we got our milk check, and after we paid our mortgage, for grain, a load of sawdust, the telephone bill, and two weeks' wages for our son, I had $31 left to go for two weeks. I just couldn't pay the rest of the bills.''

The situation seems unlikely to improve soon. In Congress, emergency aid proposed by Sens. Patrick Leahy (D) and James Jeffords (R) was passed last month by the Senate, 60 to 40. But the Bush administration threatened a veto, says a Senate source, and the provision - attached to a Gulf war relief measure - was not reported out by a House of Representatives committee.

Under the 1990 farm bill, the USDA was directed to look into ``inventory management'' of dairy farming to determine how several types of pricing systems would affect the dairy industry. Because of the immediacy of the dairy problem, the USDA will report its findings to Congress two months ahead of schedule, on June 15.

More than 100 price systems have been submitted for consideration by the USDA; the one given the most favorable marks by dairy farmers is a ``three-tier'' system introduced by Senators Leahy and Jeffords. Under this system the farmer would agree to produce a certain amount of milk and get paid more for that amount than is being paid today. Anything above this ``base'' amount would bring a lower price; anything less than this base amount would fetch a higher premium per hundredweight.

Dairywoman Judd favors this system, because she says it would give her the security to plan ahead, to buy a piece of equipment when she needs it.

But James Bovard, a free-market advocate and author of the book ``Farm Fiasco,'' dislikes the idea. ``It would cause much more government inspection, supervision, and there would be no way to prevent massive fraud.''

What does all this mean for consumer? ``Not much,'' says University of Illinois specialist Hutjens. ``The prices on the shelves are not changing appreciably at all. The farmer is getting one-third less. The consumer is spending as much as he or she did before. But where is the rest going?''

Hutjens says two things need to happen to end the slump: consumers need to buy more dairy products and farmers need to produce less milk. And milk processers and cheese makers need to lower their prices.

``There is no light at the end of the tunnel right now,'' he says, ``because there is no incentive for consumers to buy more dairy products,'' he says.