At $2.87 a gallon, the average price of milk is down 27 percent from a year ago. That means cheaper groceries for recession-weary consumers and more bang for the taxpayer's buck in food stamps and other federal nutrition programs. What's not to like? Well, dairy farmers hate it: They are facing a $12 billion decline in sales this year, according to the National Milk Producers Federation. Many could shut down; some farmers are slaughtering their cows for beef. Rushing to their rescue, Congress has approved a $350 million dairy bailout - on top of more than $1 billion in regular price-support and direct-payment programs.
If you find this hard to understand, we agree with you. Just two years ago, the price of milk was approaching $5 a gallon, thanks to strong U.S. and foreign demand; dairy farmers were making money hand over fist. But no one passed a law telling them to share the windfall with grocery shoppers. Yes, this recession has been unusually harsh, for the dairy industry and everyone else; but U.S. dairy farming has been shrinking for decades, with large-scale producers replacing smaller ones. Between 1970 and 2006, the number of farms fell from 648,000 to 75,000; the average herd size rose from 19 to 120, according to the Agriculture Department. Some farms threatened with bankruptcy today would have gone out of business within a few years anyway.
Congress has left it up to President Obama's agriculture secretary, Tom Vilsack, to distribute most of the $350 million bailout. On a recent visit to South Dakota, Vilsack told an assembly of farmers that it was time for a longer-term discussion about ... structural changes in the way the dairy industry is currently operated so we no longer have these rather stark contrasts between boom and bust. Yes, it is. There are already relevant proposals on the table: Reps. Ron Kind, D-Wis. and Jeff Flake, R-Ariz. proposed a bill last year to encourage tax-free savings accounts that farmers could build up in good years and draw down in bad ones. It didn't pass. If Vilsack is serious about avoiding a repeat of this year's fiasco, he'll encourage a truly radical policy rethinking.
- Washington Post
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