Milk Money

No one can dispute the difficulties many family farms face today, problems farmers have struggled with this entire century. For many, farming is more than just earning a living, it's a way of life and a connection with the land. The nation, too, has a stake in preserving farms.

But at what price? It's a mistake to argue that agriculture can be insulated from shifting market forces forever. Government can help farmers adjust but not always survive.

This week saw Congress swing backward in its own mandate to update a federal system of setting milk prices that currently props up many dairy farms. It's not a minor issue: Dairy sales make up roughly 10 percent of American farm income.

The House voted Wednesday to block the Agriculture Department (USDA) from modernizing the 1937 pricing system in which dairy farmers get higher prices for raw milk the farther they live from Eau Claire, Wis. (then considered the "center" of dairy farming). The idea back then was to ensure fresh milk supplies nationwide. But with modern refrigeration and transportation, it's obsolete.

A 1996 law handed USDA the job of devising and implementing a new system since Congress, representing competing interests, couldn't get it done. The 1937 system expires Oct. 1.

While the USDA plan is more market-friendly, it's only a first step. It simplifies pricing and narrows disparities between efficient Midwestern farmers and less-efficient ones elsewhere that can get up to $3 more per 100 pounds of milk. But in doing so, it would remove a $200 million, consumer-paid subsidy, potentially driving many Northeastern and Southern dairy farmers out of business.

The House scrapped the Eau Claire system, but left in place pricing that hurts consumers, who pay artificially high prices for milk. The Senate shouldn't follow suit; if it does, the President should veto the bill.

Meanwhile, Vermont's senators are spearheading an effort to renew the federally authorized Northeast Dairy Compact, which is expiring. Separate from the USDA pricing system, the compact allows regional officials to set higher prices for milk. Some Southern senators want a similar cartel.

Yet all this price-fixing has failed to halt the decline of inefficient dairy farms. Between 1992 and 1998, the number of dairy farms fell about 5 percent a year to 91,508.

Price-fixing only drags out the difficult process at consumer expense.

(c) Copyright 1999. The Christian Science Publishing Society

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