January 06. 2013 1:05AM

'Fiscal cliff' deal helps NH dairy farms

New Hampshire Sunday News

New Hampshire Agriculture Commissioner Lorraine Merrill poses with a trio of dairy cows at her family's Stuart Farm in Stratham. (Susan Lirakis)
After Congress tucked a temporary extension of the nation's farm bill into its "fiscal cliff'' deal, the head of the National Milk Producers Federation called it "a devastating blow" to the nation's dairy farmers.

Not for New Hampshire farmers, says Lorraine Merrill, the state commissioner of agriculture and a Stratham dairy farmer.

Merrill said the fiscal cliff deal merely extended until September some dairy subsidy programs that have been in place since 2008.

The nation's farm bill expired last October, and Congress has not passed a new one. And as a result, several price-support programs were set to expire on Jan. 1, leading some to predict skyrocketing milk prices. Instead, Congress included a nine-month extension of some federal programs in its fiscal cliff deal.

One of the key elements preserved is the MILC (Milk Income Loss Contract) program, which Merrill said "does provide some measure of protection" for dairy farmers here.

Farmers are not receiving MILC payments currently, "but it could very well be in these coming months if the price of milk comes down at all, which it may, and if the price of feed continues to rise, we may need that MILC program," she said.

Small surpluses or shortages can cause big price swings when it comes to milk, she said.

John C. Porter, a University of New Hampshire extension professor/specialist, agreed that what Congress did "bought some time" for dairy farmers here.

If it hadn't acted, a price-support program that dates back to Harry Truman's era would have kicked in, potentially raising the price of milk as high as $8 a gallon, he said.

And while that may have created a temporary "windfall" for producers of milk, Porter said, "If nobody bought it, it would swing the other way, and we'd be back to low prices and surpluses."

Merrill said some of the nation's larger dairy farmers oppose MILC because the subsidies, which are triggered by price drops and increased feed costs, are limited to cover milk production from up to 150 cows. But it helps dairy farmers here, where the average herd size is 120 cows, she said.

"They're payments to the farmers ... for the short price in relation to the costs of producing that milk," Merrill explained. "It is a safety net program."

New Hampshire has about 120 dairy farms, Merrill said. Milk recently surpassed ornamental horticulture, which includes landscaping and plant nurseries, as the state's top agricultural commodity.

Milk is different from other commodities, in part because of its perishable nature, the commissioner said. "And you just can't turn cows on and off like faucets."

"If you have 150 cows milking and the price of milk goes down, you can't say, 'I'm not going to sell this milk at that price; I'm going to wait and send it later to market.' You can't do that.

"So farmers have really been at the mercy, literally, of the buyers of the milk." And in other regions, those buyers tend to be large national corporations, Merrill said.

Most dairy farmers here sell their milk to cooperatives; many are member-owners.

The proposed farm bill Congress failed to pass last year would have replaced the MILC program with an insurance program for farmers; that's the plan the National Milk Producers Federation wanted, Merrill said.

One proposal would require farmers to reduce production or pay a penalty if prices fell too low, she said.

Porter would like to see a blue-ribbon commission of dairy experts come up with a new milk-pricing formula that Congress could include in the next farm bill. "We haven't been really keeping up with what farmers really need to get paid for their milk," he said.

Farmers would have to get $25 per hundred-weight of milk to cover their true costs, including feed, depreciation and return on investment, Porter said. Lately, they've been getting $20, but that price has been as low as $11 in the past five years, he said.

Porter would like to see "disincentives" that would keep big Midwestern farms from increasing production by adding to their already enormous herds whenever the price of milk rose. That's something the smaller dairy farms here cannot compete with, he said.

"It makes it difficult for New England farmers who don't have the land base to add on a lot of cows," he said.

Why not let the free market dictate the cost of milk? Porter said the government has had a historic interest in stabilizing milk prices to keep farmers in business and avoid big price swings for consumers.

Meanwhile, Porter said it's crucial to support local dairy farmers. Those farms have a lot to do with the complexion of New Hampshire that people enjoy, he said.

"It's keeping a lot of land open. If we lose our farms, our state is going to look like New Jersey. And that's what people don't realize,'' he said.

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Shawne Wickham may be reached at swickham@unionleader.com.