American dairy farmers oppose giving up subsidies

United States agriculture secretary Mike Johanns has drawn some unexpected results from a series of meetings with American agricultural leaders to gauge grass-root levels of support for farm policy change, says a former New Zealand academic.

"What the secretary heard did not fit with either the President's or the secretary's farm bill agenda," said Professor Bill Bailey, who chairs the agriculture department at Western Illinois University. Until recently, he was professor of agribusiness at Massey University.

Prof Bailey said farmers had voiced very strong opposition to any changes in the current dairy programme, particularly those that might lower support prices.

"Budget pressures will force President (George W) Bush to seek lower dairy price support levels," he said today during a commodities commentary for the ASB Bank.

However, Mr Johanns -- who is due to visit New Zealand next week -- told an audience of Minnesota farmers last week that the amount of federal subsidies in the next "farm bill" will depend on the success in breaking down global trade barriers.

The US Farm Bill -- which determines the money available for government payments to farmers -- is due to be renewed in 2007, but Mr Johanns said it would be smaller than its 2002 version which poured a total of US$274 billion ($393.79 billion) into the country's farm economy.

"The American farmer and rancher can compete with any producer in the world, given a level playing field," Mr Johanns said. "But right now it's not level everywhere."

Mr Johanns' counterpart in New Zealand, Agriculture Minister Jim Sutton, said last night that the United States was a world leader in agriculture, and played a hugely significant role in the World Trade Organisation negotiations.

"I will be interested to hear from Mr Johanns what the United States' perspective is on the current state of those negotiations and thoughts on a way forward," he said.

Other commentators have said whether the World Trade Organisation's Doha round could be salvaged largely depended on the extent to which Mr Bush -- and the European Union -- made cuts to farm subsidies.

However, an American farmer, Randy Olson, from a dairy farm at Willmar in west-central Minnesota, said the federal government should be more concerned about ensuring success for US farmers as opposed to taking steps to create a more global trade market.

"When the US is importing milk and beef and grain to feed our citizens, something is dead wrong," Mr Olson told Associated Press.

Separately, American families farming dairy cows are growing increasingly anxious about their business future as a key American government subsidy in the industry comes to an end, The Ithaca Journal in New York state reports.

The Milk Income Loss Contract (MILC) has propped up traditional smaller American dairy farms with more than US$2 billion to dairy farmers over the past three years.

It is set to expire on October 1, raising concerns among supporters of the small family-owned farms supplying fresh, local milk in every region.

Critics of the subsidy say it props up inefficient farmers and is unfair to big, successful farms in America's western states that could sell milk in the eastern cities if the smaller farmers were not being kept alive with taxpayer money.

Politicians from western and mid-western dairy states -- Idaho, New Mexico and California -- oppose MILC, because it discriminates against big corporate farmers. The benefits are capped so that a small farm in Vermont of about 120 cows or less receives payments on its entire milk production, but a Californian farm with 2000 cows would only be subsidised for the milk produced by about 120 of its cows.

Most American farmers favour a price support programme where the government has pledged to buy unlimited quantities of cheese, butter and non-fat dried milk powder to support a base price of US$9.90/hundredweight (50.8kg) for milk.

The taxpayer subsidy only kicks in when market prices in Boston drop below US$16.94 per hundredweight for fluid milk. After record lows in 2002 and 2003, prices have averaged between US$17 and US$18 per hundredweight since May 2004.

Economists say, however, they expect prices to fall by US$1 to US$2 later this year or early next.

- NZPA