Wednesday, March 18, 2009

EDITORIAL >> Save dairy farmers

It is the season of monumental bailouts, so why not a little government subsidy for a few struggling Arkansas farmers? These business subsidies are always distasteful, but we find ourselves a trifle sympathetic to the dairy farmers, the few who remain in Arkansas and who stand to get a small bailout, this time from the state government, not the feds.

Dairy farming has been in a decline for a score of years, and all but a handful of farmers have gone out of business as sharply fluctuating prices, declining exports, energy costs and other expenses make it increasingly unprofitable. From 520 dairy farms only 10 years ago, the industry has shrunk to no more than 140. Most of those may not survive this year because milk prices have been plummeting, though you may not see the evidence on the grocery shelf.

A board created by Governor Beebe two years ago to find a way to save the industry has suggested a formula similar to one in Wisconsin, the dairy capital of the country. It is a fee added to the dairy products at the wholesale level. They call it a fee; let’s be honest and call it a tax. They hope it would not be passed along to customers in the form of a higher grocery bill, but you know that if there is a way to pass along operating costs to the ultimate customer, it will be done.

The “milk stabilization fee,” as it is called, was levied in a bill that passed the state House of Representatives last week. It may have rougher sledding in the Senate but it ought to pass. The fee/tax would be 30 cents per hundredweight on all dairy products sold at wholesale in Arkansas, and the fund would subsidize Arkansas milk producers when milk prices fall below 70 percent of their production cost. If you consume 600 pounds of dairy products in a year, which is supposed to be the average, you would pay another $1.80 a year, presuming the dairy companies pass the little tax along to you.

Arkansas retail merchants and grocers oppose the little tax, and so do a number of conservative legislators. It’s a tough world out there, they say, and the weak are going to fail. It’s not the government’s job nor consumers’ to prop them up. We can’t save every struggling industry that the market turns against.

No, but there is some argument from the consumers’ standpoint. A business study at the University of Arkansas concluded that if the state had no native producers and all the milk was imported, the cost of a gallon of milk would over time rise by 36 cents. The cost also would be reflected in other products processed from milk. We have no idea if the university’s scholars are right, but we would rather not take the chance. We will pay the extra half-penny a day and save a hundred or so farm families rather than pay 36 cents a gallon more. Let’s pass the milk-stabilization bill. It feels better than bailing out General Motors, Citibank and AIG.