Daily American Staff Writer
3:53 PM PST, December 29, 2012
The predictions are dire: milk prices doubling, dairy markets collapsing, family farms folding.
These are the potential results of congressional inaction on a new federal farm bill and the impending "fiscal cliff." But according to Milford Township dairy farmer Harold Shaulis, there is no way politicians will allow these things to occur.
"The odds of that happening are extremely low," said Shaulis, chairman of the Pennsylvania Dairy Promotion Program. The program is an affiliate of the national Dairy Management Inc.
"The odds of that happening are pretty close to the (odds of) the Mayan apocalypse."
Farmers across the United States have been awaiting a new farm bill since the 2008 version expired in September. Without new legislation to support agriculture programs, the price of milk is projected to skyrocket.
The reason is that, under law, America would be forced to revert to the provisions of the original 1949 farm bill. This would mean a new pricing formula for a gallon of milk that is based on "parity" — valuing the product at 1949 levels and adjusting for inflation and cost-of-living expenses.
The U.S. Department of Agriculture is pledged to purchase between $12-15 billion of milk. This would drive prices from the current rate of $22 per 100 pounds to approximately $53 per 100 pounds — a price that is paid by processors like Galliker's in Johnstown. Experts have estimated that the store cost for consumers would be $6 to $8 for a single gallon.
These forecasts have had legislators calling for a quick resolution. U.S. Sen. Bob Casey held a conference call Friday urging the House to pass the Senate's version of the farm bill.
"Failure to act will require a terrible waste of taxpayer dollars which will likely result in major price spikes for consumers," Casey said in a subsequent press release. "Without action on a farm bill, the U.S. will be forced back to outdated, depression-era laws that will require the government to waste taxpayer dollars, increase prices on consumers, and likely throw milk away."
Local farmers, however, seem to doubt that this will occur. According to Shaulis, the looming "cow-mageddon" is an artificial crisis being manufactured by lawmakers for political gain.
"Congress is being stupid," he said. "There's just a lot of hype."
"There's nothing to worry about," he added. "You don't have to start hoarding milk."
Shaulis said lawmakers know that consumers will never pay double or triple the current price. He estimated that U.S. milk exports — which amount to approximately 13 percent of all sales — would halt practically overnight as foreign buyers would look elsewhere for dairy.
"Supply and demand would kick back into effect," he said. "It would fall apart at the seams."
"It's not going to happen," he added. "(Congress) can't let it happen."
Brothersvalley Township farmer Tom Croner shared Shaulis' confidence that a deal will be done by the end of next month.
"(Increasing prices) really makes it unpalatable and unrealistic for the consumer," he said.
Croner works on a crop farm with his son, T. Richard. He said a shock to the dairy industry would impact his farm and other markets across the country.
"I think they're playing a very dangerous game of chicken, the president and the Congress," he said. "Some eleventh hour deal will be made at the last minute until they can figure something else out."
According to Croner, lawmakers already know that America can't afford many more economic setbacks.
"Wall Street is watching very closely — the world's probably watching very closely," he said. "There's a lot at stake."
And a new farm bill isn't the only political problem for agriculture. Somerset County Farm Bureau President Larry Cogan said that the so-called fiscal cliff could impact thousands of family owned dairy operations in Pennsylvania via the estate tax.
According to Cogan, inheritance of up to $5 million is exempt from tax under current law. All assets beyond that $5 million are taxed at a 35 percent rate.
Without a deal to prevent the fiscal cliff, he said, only $1 million would be exempt from tax. Additional assets would be subject to a 55 percent tax rate.
"In my opinion 55 percent isn't a tax — it's government seizure," he said, noting that this penalty could prompt the sale of longtime family farms. Like Shaulis and Croner, however, he is hopeful that legislators will come to an agreement.
"I suspect they will put a Band-Aid on it," he said.
Cogan said lawmakers have no other choice because the alternative would be too devastating.
"It's a bizarre situation, it really is," the Friedens area farmer said. "Once people stop drinking milk are they going to resume it?"
"It's an unfortunate thing that affects hard-working families in Somerset County."