May is shaping up to be a crucial month for California's dairy farmers. After numerous delays, committees on both sides of Capitol Hill are planning to reconsider a multiyear farm bill that could determine if dairy farmers in our area survive or fail.
The nation's consumers also have a stake in this effort. If Washington doesn't pass a farm bill this year, consumers could again face the possibility of government-induced high milk prices in 2013. This so-called dairy cliff was delayed, but not done away with, at the start of this year.
Of course, the farm bill is important to all California farmers. But, after a disastrous milk price collapse in 2009 and another tough year in 2012, Central Valley dairy farmers are really struggling.
Their best chance for survival is a series of reforms to today's dysfunctional federal dairy program reforms drafted by the farmers themselves and known as the Dairy Security Act.
DSA reorients government dairy programs from an emphasis on price to a focus on maintaining adequate margins, the crucial gap between what farmers receive for their milk and what it costs them to produce it.
It was a crushing cost-price squeeze caused by record-high feed costs and weak demand that forced many California dairy farmers out of business at the height of the recession in 2009. And it was high feed costs that squeezed dairy farmers again last year, even with better mailbox milk prices.
DSA starts by scrapping the current failing dairy safety net, made up of price supports, direct payments and export assistance. No longer will the government buy and store dairy products to support market prices.
Instead, the bill establishes what amounts to an insurance program jointly funded by government and the farmers themselves to help protect farm income when margins shrink. To prevent steep price declines, or prolonged periods of low margins, a standby program will encourage farmers to cut their milk production.
Best of all, these programs are voluntary. Dairy farmers can choose between a basic federal safety net or no program at all. But if they accept help, they must agree to adjust the amount of milk they produce when cuts are needed to balance supplies with demand.
These reforms protect producers, allow dairy markets to grow and assure an abundant supply of milk for consumers. They are the only comprehensive set of dairy reforms on the table as Congress settles down to revisit the farm bill.
Still, DSA is not without its critics. Some call it a heavy-handed government intrusion in the marketplace. Nothing could be further from the truth. In addition to being completely voluntary, DSA would probably be the most fiscally responsible of all federal farm programs. Those who choose to participate in it are required to help keep federal spending under control by agreeing to reduce their milk output when government costs start rising.
By contrast, an alternative approach, defeated in the House Agriculture Committee last year but likely to resurface this month, is totally irresponsible. It makes farmers free riders. It offers them federal help with no limit on insurance payouts if milk prices collapse.
Milk is California's No. 1 farm commodity. In 2011 it added nearly $8 billion to our state's struggling economy. We need a safety net that works for California and Central Valley dairy farmers while avoiding catastrophic milk price increases for consumers.
The Dairy Security Act is that safety net. It deserves support from the six members of Congress from California who serve on the Agriculture Committee, and especially 10th District Rep. Jeff Denham.
Carvalho operates Carvalho Farms in Crows Landing.