The Cayman Islands has briefly dodged a bullet, but the reprieve may be short and the ultimate consequences dire for consumers, who later this year could see milk prices rise by as much as $2 per gallon.
Unless the United States Congress legislates a new Farm Bill, addressing support prices for thousands of American dairy farmers, the stop-gap extension of current regulations will run out toward the end of 2013, forcing a spike in dairy prices.
The spike will affect not just milk, but all milk-related products, including cheese, sour cream, butter, yogurt and ice cream. Local supermarkets, conceding that consumers would not tolerate such increases, may be forced to diversify their suppliers, looking regionally for dairy producers, but facing problems of shipping, expiration dates and labelling.
Chris Galen, senior vice president of marketing for the National Milk Producers Federation outside Washington, DC, told the Caymanian Compass that while price rises for milk were “hard to extrapolate because they are [determined] at the farm level” and subject to a welter of variables, “it would be at least a couple of dollars per gallon”.
Woody Foster, managing director of Foster’s Food Fair in Grand Cayman, said the public would not accept such steep increases.
“No, we could not sell it for another $2. People wouldn’t stand for it,” he said. “The only thing we could really do is diversify our suppliers, but you have to be careful because we already have a dating problem. We only have about 12 days to deal with it as it is, and now we’d have even fewer days, so [the supplier] can’t be too far away. You have to keep it fresh.”
Air freight is too expensive for the bulky commodity, meaning alternate sources for dairy products need to be in the immediate region.
“Jamaica does UHT milk, but I don’t know about fresh,” Mr. Foster said. “Cuba, I would hesitate because I don’t know their situation. We may try Panama, but we have to think about labelling, whether it would come in Spanish or bilingual.
“Over the next few months, we will start to look at this if it isn’t resolved,” Mr. Foster said.
Adrian Estwick, director of the Cayman Islands Department of Agriculture, indicated the prospects for replacing milk supplies from overseas with local product were slim. While Cayman had as many as three dairy cattle owners, he said, none produced milk, and the cost of replacing local cattle, numbering between 130 head and 150 head, was prohibitive.
“In my opinion,” he said, “it’s not practical. Whoever is interested should work the numbers and be guided accordingly. One cannot simply ‘convert’ if you do not possess adequate dairy breeds, equipment, training, land.
“Acquiring the cattle could take approximately nine months; acquiring and installing the equipment, approximately one year; and the training varies,” Mr. Estwick said.
Mr. Foster suggested such conversions would also involve government regulation and food safety, buildings, fresh facilities and even pasteurising machinery.
While India, the US and China are the world’s top milk producers, the only notable regional dairy industries are No. 7-ranked Brazil and No. 16-ranked Mexico.
Mr. Galen explained that last-minute “fiscal-cliff “ talks in Washington had produced a stop-gap Farm Bill, essentially renewing expiring previous legislation, some parts until September and others until December. None of the sections, however, addressed what Mr. Galen said the industry needed to be sustainable.
“If they hadn’t extended that, we would have reverted to 1949 laws, and the US Department of Agriculture would have been required to support a milk price to dairy farmers that is much higher than it is now,” forcing government, among other things, to nearly quadruple the price it pays for cheese.
“What we want, but Congress did not pass, would eliminate price support levels of any kind”, instead creating an insurance programme that would make up the difference between milk prices and farmers’ cost of production, most of which is spent in feed for cattle.
“When the feed price rises, the insurance programme would pay a premium,” he said.
Meanwhile, Mr. Foster said he expected the quandary would ultimately be resolved, if only because, like consumers in the Cayman Islands, American consumers “won’t stand for it either”.
No timetable for legislation has been set.