Should U.S. subsidize dairy farmers when we don’t need the milk?

Jon DeJong feeds cattle on Eaglemill Farms, his family's 1,300-head dairy farm east of Lynden, Wash.
Jon DeJong feeds cattle on Eaglemill Farms, his family's 1,300-head dairy farm east of Lynden, Wash. Bellingham Herald

Congress came up with a novel way to reduce the nation’s milk supply in 1985, paying farmers $1.5 billion to slaughter their cows.

Milk production dropped slightly, but the glut remained: Last week, the U.S. Department of Agriculture moved to help dairy farmers once again by spending $20 million to get 11 million pounds of excess cheese off the market, sending it to food banks.

“Honestly, I think it’s a good gesture – how much effect it’s going to have I don’t know,” said Jon DeJong, 41, who milks 1,300 cows with his father and two brothers on their farm near Lynden, Washington. “It’s not likely to save the milk price or anything.”

With milk prices down 40 percent since 2014, Congress will be under pressure to do more to prop up the ailing industry when lawmakers return from their summer break Tuesday.

It will be an uphill fight, and it promises to spark a debate over how far the government should go to aid an industry plagued with oversupply, particularly with Americans consuming far less fluid milk than they did 50 years ago.

Gene Baur, the president of Farm Sanctuary, an animal protection organization, said the federal government had erred by spending $20 million to buy “fat-laden, artery-clogging cheese” and that Congress should end the subsidies and force more farmers to exit the business.

“People are struggling to make it. It’s kind of a losing battle,” he said. “And it doesn’t make sense to feed consumers food that makes them sick. . . . The fact is that people are consuming fewer dairy products, and dairy farmers should be supported in transitioning to different kinds of food production.”

For dairy producers, those are fighting words.

“As someone involved in the dairy industry, you take some offense to comments like that,” said DeJong.

He said dairy products were “packed with good nutrition” and that diet fads came and went: “Ten years from now, it’s going to be this next thing is what’s killing off the people, and a couple years later it’s like, ‘Oh, you need more of that in your diet.’ ”

When U.S. Agriculture Secretary Tom Vilsack announced the decision to buy the cheese on Aug. 23, he said the cheese surplus had reached a 30-year high while dairy producers’ revenue had declined by 35 percent in the last two years. Vilsack said the purchase was part of the government’s “robust comprehensive safety net.”

In Washington state, farmers are looking to sell more milk in foreign countries. In recent years, China and Mexico have emerged as particularly strong markets for the U.S., with China alone gobbling up $693 million worth of U.S. dairy products in 2014, 18 times as much as in 2003, according to the Agriculture Department.

“We export a lot of product. That’s a big thing for us,” said DeJong. He said Congress needed to make sure that international trade agreements didn’t end up hurting the dairy industry. “The main thing is to keep a level playing field for domestic producers like us, because we’re in a global market.”

But foreign markets have hurt milk prices, too. Like the U.S., Europe has a huge milk surplus, triggered by the end of quotas and Russia’s ban on European food imports.

On Capitol Hill, there’s plenty of sympathy for the dairy industry. On July 28, 61 members of Congress – including Democratic Sens. Maria Cantwell of Washington state, Barbara Boxer of California and Claire McCaskill of Missouri – wrote a letter to Vilsack, complaining of the “troubling economic challenges facing U.S. dairy farmers” and vowing to work closely with the Obama administration to manage the industry’s “financial crisis.”

But getting the Republican-led Congress to dole out any additional money for the industry this year will be a tough sell.

“I share the frustration of farmers that market forces largely outside the U.S. have resulted in this year’s low milk prices,” said Idaho Republican Rep. Mike Simpson, a veteran member of the House Appropriations Committee and the Congressional Dairy Caucus. He said Congress would take this year’s price plunge into account when members examined dairy policy in a new farm bill.

For many, that’s far too long to wait: Congress traditionally passes farm bills every five years, a schedule that would set the next one for 2019.

When Congress reconvenes next week, farmers and activists will be ready to push a list of options. They include getting the government to purchase more surplus milk and cheese, allowing farmers to invest their savings in tax-free savings accounts and creating production quotas.

The dairy industry has been pushing its case for months.

At a House subcommittee hearing in May, Missouri farmer Randy Mooney, the chairman of the National Milk Producers Federation, said the downturn in milk prices was the worst since 2009. He’s among the many farmers who say that Congress’ latest dairy program, approved in 2014, is not providing enough help. Under the voluntary Dairy Margin Protection Program, farmers pay premiums for catastrophic coverage and can receive cash payments once the gap between their expenses and income hits a certain level.

Mooney said a 40 percent decline in milk prices since 2014 had equated to a loss of $200,000 for a farm with 100 cows.

“Over the last 10 years, I’ve seen more than 600 of my home-state dairy farmers quit the business,” Mooney told the House Subcommittee on Livestock and Foreign Agriculture.

That’s exactly as it should be, said Baur, the head of Farm Sanctuary.

“I respect farmers, but when it is clear that a particular industry needs to be changed, we need to look at that and start making the changes,” Baur said. “It is also disconcerting that agribusinesses have so much influence in Washington, D.C., and that’s how they’re able to acquire billions of dollars in tax money every year.”

DeJong, meanwhile, said his production costs just kept rising, with another financial hit coming from new state regulations aimed at protecting water quality.

But he said he was “not a real big fan of too much government involvement” and was conflicted over what Congress should do.

“Honestly, I really don’t know know for sure what the right policies would be,” DeJong said. “In my opinion, you’re always going to have – like any other industry – the ones that are less efficient, and they’re going to eventually retire or move on. The government can’t support the far ends of an industry to keep everybody in business. That’s just not realistic.”

Rob Hotakainen: 202-383-6154, @HotakainenRob