Milk board working on solutions to plight of struggling dairies
Posted on Friday, May 9, 2008
The state’s Milk Stabilization Board considered a direct-payment program Thursday to help Arkansas dairies, though it’s unclear how many producers will survive to see it.
Record-high fertilizer and feed costs continue to push dairies out of business. Board members at the monthly meeting conceded that a solution, which will be vetted by the Legislature next year, may come too late.
The number of dairies in the state fell from 158 in February to 150 this month. Arkansas had 178 operating dairies in early 2007 and 193 a year before that, state numbers show.
“I’ve been at this a long time, but I’m really not sure I’m smart enough to get through what we are going through right now,” said Woody Bryant, the chairman of the milk board and a dairy farmer 35 miles northeast of Little Rock in Lonoke County.
On the table at the meeting was a three-part proposal to encourage dairies to increase their herds.
The board modeled one solution after a farm program in Kentucky. Under the incentive plan farmers would qualify for a direct payment of 50 cents or $ 1 per 100 pounds of milk to increase production above a running two-year farm average. The level of payment would depend on milk quality.
Jodie Pennington, a dairy expert at the University of Arkansas Cooperative Extension Service in Little Rock, said participation levels would likely reach only 30 percent, which could mean $ 9, 000 to $ 11, 000 for each farm. The draft proposal has the program capped at $ 1 million, or $ 50, 000 per farm.
The board also looked at direct payments to dairies when milk prices don’t cover operating costs.
Under the payment plan, if the average payment to Arkansas dairies falls below 70 percent of the average cost of milk production in Missouri, Kentucky and Tennessee, each Arkansas dairy would receive a check for the difference. The U. S. Department of Agriculture doesn’t track dairy-operation costs for Arkansas.
Mike Fisher, a Beebe dairy farmer who sits on the board, said the increase in fertilizer prices will drive down the amount of hay available later this year. A smaller hay supply would force farmers to switch to grain-based feed, which is at a premium because of the rapid rise in corn prices.
“If we don’t get something done, I don’t think the majority of dairymen are going to stay in,” Fisher said at the board meeting.
The stabilization payments, as they were termed in the proposal documents, would be capped at $ 50, 000 per producer. A sustained milk price move below the cost of production would quickly drain the $ 2 million program cap, several board members worried.
The third proposal is to offer tax credits equal to 10 percent of money spent by farmers to modernize their dairies. The amount would be capped at $ 50, 000 a year per farm.
To fund the program, the board is considering a per-gallon assessment on milk products — including drinking milk, cheese and ice cream — consumed in the state.
Jeffery Hall, a governmental affairs specialist with the Arkansas Farm Bureau, said the assessment should be levied on processors selling products in the state.
Others said it could be levied at the wholesale level, though most agreed it could not be done at the retail level or it would seem to be a new tax.
“I was encouraged today,” Arkansas Agriculture Secretary Richard Bell said after the meeting.
“We have all these competing interests, but we were able to come together.” Arkansas dairies likely will experience more trouble this summer.
As the price of crude oil surges, deliveries of feed, fertilizer and other farm materials often carry fuel surcharges, board chairman Bryant said.
But the milk prices paid to producers are also flagging. Class I milk came to $ 19. 80 per 100 pounds in March. That’s down from a 12-month high of $ 25. 01 in September.
Milk futures contracts for delivery this month settled Thursday on the Chicago Mercantile Exchange at $ 18. 04 per 100 pounds of milk. Futures contracts for the rest of the year top out at $ 20. 35 for September delivery and then tail off through December 2009.
To contact this reporter: dirvin@arkansasonline. com
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