Even if youíre a visitor, or you just moved into the area, it doesnít take much detective work to see that Stephenvilleís economy and that of Erath County as a whole are extremely dependent on agribusiness. Right here is where the rubber meets the road on local farms and ranches every day. Consequently, the lack of passage of a new farm bill in Congress impacts everyone in agribusiness and eventually all consumers.
We recently sat down with someone who knows that life first hand, both as a dairy owner and now as executive director of the Texas Association of Dairymen, Darren Turley.
Q: Congress has left without passing a new farm bill in 2013. Can you give our readers an idea of what that means in practical terms in agribusiness, and more specifically, in the dairy industry?
A: What theyíre telling us is that theyíll do an extension that would carry us forward for say, six months to a year. But thereís a lot of pressure to get this farm bill done because you donít want the extension to be too long. A long extension just buys time where nothing gets done.
Also, the further out the extension, you run into the election year cycle and that whole fiscal cliff thing again. That really hurt us this year; we were in pretty good shape coming into early fall. But then the fiscal cliff discussion just stopped everything else.
Essentially, if you have the extension, you wouldnít see anything change much; it would just be continuing the status quo. But thatís not whatís needed; we need some things done that would be very beneficial to producers going forward.
For instance, we want to see an insurance program on production for protection when you see a huge swing in production like we saw in 2008 and 2009 when we had the financial crisis. We lost a huge part of our export market due to that.
What we have now is really a series of pieces of legislation that are usually updated and passed every few years; theyíre more or less stacked up on one another. If the legislation runs out, you fall all the way back to whatever the original rule is in law. In the case of dairy, thatís 1949, and thatís a long way back.
Q: Would that have anything to do with what we keep hearing in the media about eight-dollar-a-gallon milk? Is there anything to that in reality?
A: As I said, if we donít get a farm bill or an extension of the current bill, for dairy, it goes back to the 1949 rule. Itís a little complicated, but yes, bringing that forward to todayís prices, in theory that could make milk go to roughly $8 per gallon.
Q: At first glance, that sounds great for producers. But whatís the overview for all of us if that were to happen?
A: The dairy industry isnít a fan of having that kind of huge price-per-gallon increase any more than consumers are. Even though it might sound good for producers on the short run, before long youíd have excess milk everywhere that wouldnít be being used because of the high prices.
People would stop buying milk products like they do now, and thatís not good for anybody.
Q: Just for arguments sake, what would happen to individual producers on a practical, day-to-day level if prices skyrocketed as weíre discussing?
A: It would be a big problem. We have a perishable product that has to move every day. Seven days a week you milk them, and every day that milk leaves and goes to the market. It has to either be processed into the milk you drink, or the cheese or ice cream you eat. If you canít do that, the last resort is to put it into a powder form where you dry the fluid out of it and then it can go into say, supplements as one of the ingredients.
But thatís not a producerís ideal choice; itís just much better if it can be sold as milk in a jug at the supermarket. If you extrapolate out, itís easy to see that you can only take that powder process so far. Eventually that market too would be oversupplied and youíve got the same problem all over again; milk and milk products in big excess.
Q: To sum it up, do you think the lack of passage of a new farm bill has directly impacted your industry negatively?
A: Yes, but itís subtle because the drought here in Texas has affected us so dramatically. We lost 20 percent of our producers in the last two years. Thatís more drought-related than the lack of a farm bill. However uncertainty about the bill is definitely not helping people make decisions stay in the dairy business, letís put it that way.