Drink Your Milk NOW … Eggnog Too

Well, the U.S. House of Representatives certainly treated us to an egregious display of dysfunction, didn’t it?

One of the less reported aspects was its failure to pass a Farm Bill, i.e., a piece of legislation to renew, with revisions, a host of food and agriculture programs.

So what we have now is the last permanent version of the Farm Act, signed into law in 1949.

Anti-hunger advocates aren’t worried about this — yet. SNAP (the food stamp program) won’t expire because Congress put a temporary extension into the continuing resolution that will keep federal programs funded until March.

Advocates are worried because both the draft House Farm bill and the Farm Bill the Senate passed would cut benefits for about half a million households.

Perhaps I should say remaining households, since the House version would toss at least 1.8 million — maybe as many as 3 million — people out of the program.

Many farmers are unhappy because the various programs that protect them from losses depend on the Farm Act, as do other programs that benefit them, e.g., funding for their efforts to conserve natural resources.

Still, most of these were also extended until March — about the time crop farmers start planting.

But what about dairy farmers? They, of course, produce and sell milk year round.

One of the programs that supports milk prices has altogether expired because it was created after 1949 and not extended in the CR. The other program — the Dairy Price Support Program — has reverted to its 1949 form.

Under this program, the U.S. Department of Agriculture purchases milk — or more recently, certain products made with milk — when prices fall below specified levels. The latest Farm Act set these as fixed dollar values.

But back in 1949 and for some time thereafter, the target level was set as a ratio between milk prices and farm costs, including family living costs.

Failure to pass a new Farm Bill means that the Agriculture Department will have to use the 1949 formula, with adjustments for inflation and some other technical factors.

It will thus have to buy milk to support a price that’s roughly double the current market price.

So it’s reasonable to expect that dairy farmers will initially choose to sell to the government rather than to commercial sources. The old law of supply and demand will kick in, driving up retail milk and milk product costs.

The New York Times estimates costs as high as $6.00 — or even $8.00 — per gallon of milk. At the high end, this is nearly twice the average daily SNAP benefit.

But SNAP benefits will be lower before the new year ends — even if Congress decides not to make further cuts. Which, at this point, seems unlikely.

And WIC (the Special Supplemental Nutrition Program for Women, Infants and Children) will be cut by 8.2% if Congress doesn’t put the brakes on sequestration, i.e., the impending across-the-board cuts to programs that depend on annual appropriations.

More than 900,000 mothers and young children will be dropped from the rolls, according to Democrats on the House Appropriations Committee.

This figure, their letter indicates, was based in part on food prices projected last fall — presumably prices for foods that participating mothers can buy with WIC coupons.

Milk and cheese account for about a third of WIC food spending. Double the costs of these and we should expect to see many more low-income families denied the specially-tailored nutrition assistance and other services that help give children a healthy start in life.

Similar results, of course, if Congress replaces sequestration with a bill that shifts all the mandated savings to non-defense programs that are already subject to sequestration and/or to safety net programs the current law protects.

The latest House-passed bill does both. The SNAP cuts are even worse than what we’d seen before. And the radically-low cap on non-defense appropriations puts WIC at risk of a bigger cut than sequestration itself.

These — or some compromised version — seem to me a greater danger than a long-term lapse back to the 1949 Farm Act.

On the other hand, it’s hard to predict what this Congress will do — or more precisely, fail to do.

So we can only hope that members heeded the President’s advice and drank their eggnog because the price could skyrocket.

Suggest we all do the same to get our minds off these troubles for a bit.

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4 Responses to Drink Your Milk NOW … Eggnog Too

  1. John says:

    Kathryn, great post – thanks for the update. I’m curious about the price supports for milk. Is there any research on this that identifies whether these price supports limit competition and therefore technological advancement? In other words, how effective are the price supports for dairy (as opposed to the other 20 or so commodities on the list which are distorting local and global markets due to competition and technological advancement)? Sending deep presence and a sacred bow your way in recognition of the service-work you are doing. Look forward to reading more.

  2. Kathryn Baer says:

    Wow, John. This is a really good question. The best source for answers I know of (and I’m no expert here) is a report jointly produced by the University of Wisconsin and the Food and Agriculture Research Institute at the University of Missouri, http://www.fapri.missouri.edu/outreach/publications/2010/Dairy_Policy_Issues_April2010.pdf

    Two brief points. First, the report says that dairy price supports have distorted domestic markets and inhibited product innovation. There’s also some evidence (from WTO) that they distort global trade.

    Second, the price supports that are in the Farm Bill are only part of the story. There are also milk marketing orders that limit competition. The Cato Institute has a brief explanation of how they work, http://www.cato.org/sites/cato.org/files/pubs/pdf/tbb_0707_47.pdf. There’s a longer explanation of these very complex price-fixing mechanisms in the first report.

    Neither of these reports speaks specifically to the issue of technological advancement. However, they clearly indicate that at least some of the price supports inhibit improvements in efficiency. I would suppose that new (or new applications) of technology could be part of that.

    If you decide to pursue these issues, I hope you’ll let me know what you find out. I’ve already learned from trying to compose some sort of answer your question.

  3. […] on top of a $110 million cut Congress made in January — this to offset the costs of averting a milk price spike that would otherwise have resulted from its failure to pass a Farm Bill last […]

  4. […] Others will revert to the law that originally created them. Remember last year’s milk price scare? […]

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