Federal rules for pricing dairy products are about to change, leaving Utah dairy farmers like Harry Papageorge to wonder what it all means for his future.
Papageorge, a Weber County farmer since 1960, said prices paid to milk producers have stayed flat for years."The 1996 Farm Bill takes away almost all price supports for dairy products, so right now it's volatile," Papageorge said. "The thing that has made it so bad is your costs have gone up so much."
The 1996 bill requires that the current 31 federal milk marketing areas, or orders, be consolidated into 10 or 14 areas.
William A. Wise, acting market administrator for the U.S. Department of Agriculture, said during a recent Utah Dairy Convention in Ogden that the government hopes the new rules and pricing formulas, due out later this year, will level out some of the market's recent volatility.
"The last few months the prices have been better, but there's a lot of volatility in the marketplace," said Weber County dairy farmer John Degiorgio. "It makes it hard to run a business, because you don't know day-to-day what you're going to get. You have to dispose of your product, and you're at someone else's mercy."
Groups like the Dairy Farmers of America cooperative, based in Kansas City, Mo., which has about 22,000 members in 42 states, are trying to help farmers by pushing for a proposal that would set a minimum price for milk.
The USDA held hearings last month on a petition by the group to set the floor price at $13.50 per hundred pounds of milk sold for drinking and for such products as ice cream and yogurt. At the time of the hearings, the market-driven milk price was about $13.25 per hundred pounds, but it was as low as $10.70 earlier in the year.
Co-op officials have said the floor price is crucial to slowing a trend that has seen more than 32,000 U.S. farmers quit the dairy business since 1992.
Gary E. Hanman, the co-op's chief executive officer, said the relatively low milk price of the past few years, compared to production costs, means many farmers have been living off their equity.
"We're going to lose the price support program in 1999, and we've had one since 1948," Hanman said at the Ogden dairy convention. "You as dairymen make a long-term investment to produce milk, . . . and that volatility really bothers you and your banker."
Hanman said the new federal rules also will mean an end to almost all of the industry's import protection.
"If we have to deal with an open market, . . . you'll see that our prices could get driven down to the world price," he said.
Papageorge said that could be tough on Utah farmers. Farms in Europe and New Zealand tend to have lower production prices and more price supports to help them compete.
"We have a shot at $13.50," Hanman said. "We were the ones that requested the hearing, . . . and we will get something out of that hearing.
"Consumers are not asking for cheaper milk."