Op-Ed: Helping Struggling Dairy Farms
Dairy farmers are facing difficult times with the price of milk running almost half of what it was last year.
Last week, I met with more than 500 dairy farmers in Upper Leacock Township. They came from across the district because they are concerned about the affect of low prices on their livelihood.
We all know that the U.S. and worldwide economies have faced a severe recession in the past year. There are, however, more reasons for the plummet in dairy prices than just the recession.
In addition to decreased worldwide and U.S. demand, the previously weak dollar has significantly strengthened over the past year. A strengthened dollar has increased the price of exports, reducing demand for U.S. products across the board.
Also, feed and energy costs remain at historic highs. While most consumers have seen their energy costs somewhat decrease after gas pulled back from the high levels of last summer, purchasing feed and processing milk remain costly.
Finally, a factor in low prices has been decreased export demand. Last year, large milk-producing countries like Australia and New Zealand were still in the midst of a multi-year drought. With weather patterns returning to normal, dairy farmers in these nations rapidly increased production.
With prices low, the federal government acted to help American dairy farmers. Agriculture Secretary Vilsack increased the buyout price for milk and has also increased the amount of finished dairy products purchased by the government. The Department of Agriculture has also revived the Dairy Export Incentive Program to help lagging overseas sales.
These are only short term solutions that dairy farmers can take advantage of right now, but what we really need are long term, market-based solutions that change the government's relationship to the milk market.
First, we need a comprehensive review of the Federal Milk Marketing Order. This program was established in the 1930s and it must be revised to handle 21st century practices. In particular, the federal government should take a close look at the mechanism used to set milk prices and bring more accountability and transparency to this process.
Secretary Vilsack is forming a commission to review the Order and I am working to ensure that a representative from Pennsylvania will sit on the commission and speak on behalf of our dairy farmers.
Also, we need to open up new markets for American farmers. While there is a great demand for the high-quality milk and dairy products produced by our farmers, even some of our closest trading partners have barriers and price supports that keep American products from being competitive.
Compared to the United States, European Union nations have significantly greater support for dairy exports. We need to negotiate through the World Trade Organization and other forums to reduce these price supports so that dairy farmers on both sides of the Atlantic are on a level playing field.
We need to pass the three free trade agreements currently stopped up in Congress: Panama, Colombia, and South Korea. These markets alone count for more than 100 million potential customers for American products.
In the case of South Korea, American dairy products could be imported duty-free for the first time. The current 3 percent share of the market for American products would rapidly increase as prices become competitive with European and Australian products that currently enjoy favorable tariffs.
Unfortunately, President Obama has not made foreign trade a priority and has talked of reopening the agreements which could lead to years of further negotiations.
Finally, risk management programs should be improved. We need to ensure that more Pennsylvania dairy farmers become involved in these programs that can help farmers manage through swings of the market. Properly setting aside money when prices are high will ensure that low prices will not shut down farms.
Clearly, there are a number of actions we can take to improve the situation for dairy farmers and I will be working in Washington to push sensible policies. I am in close contact with farmers, the Pennsylvania Secretary of Agriculture, the Center for Dairy Excellence, the Pennsylvania Milk Marketing Board, and local officials. Working together, we will continue to find solutions that can be brought to Secretary Vilsack and Congress.