USDA temporarily increases dairy support prices

SALEM, Ohio — A bleeding U.S. dairy sector received a small bandage July 31 as the USDA announced plans to increase dairy price support levels, but the reactivated Congressional dairy caucus is still pushing for a long-term solution to historically low milk prices that are driving many milk producers out of business.

Dairy price support

From August through October, the USDA will increase the amount paid for dairy products through the Dairy Product Price Support Program. (link opens .pdf explaining the program)

It previously had projected the milk price to decline later this year to its lowest annual average in 20 years.

USDA will raise the price paid for nonfat dry milk from 80 cents per pound to 92 cents per pound; the price paid for cheddar blocks from $1.13 per pound to $1.31 per pound, and the price of cheddar barrels from $1.10 per pound to $1.28 per pound.

The administration’s economists estimate these increases will boost dairy farmers’ revenue by $243 million.

The announcement will result in the government purchase of an additional 150 million pounds of non-fat dry milk (NDM) and an additional 75 million pounds of cheese.

U.S. Agriculture Secretary Tom Vilsack said the move should provide “immediate relief to dairy farmers” by increasing the all-milk price producers receive.

Under the Dairy Product Price Support Program, the USDA serves as a buyer of last resort to help clear commodity dairy markets during periods of exceptionally low farm-level prices.

Bigger problem

Although lawmakers quickly declared their gratitude to the administration for the move, members of the newly reconvened dairy caucus said more needs to be done.

“We still have to seriously consider additional measures if we are going to provide dairy farmers with the help they need right now,” said Rep. Rosa DeLauro of Connecticut.

Earlier in July, dairy caucus leader Rep. Peter Welch of Vermont introduced the Dairy Fairness Act of 2009, H.R. 3166, which would index to inflation payments to farmers under the Milk Income Loss Contract, or MILC. Other legislators are pushing for a revised trigger for MILC payments.

The efforts may be too late for some. California farmer Joaquin Contente testified July 28 before a House ag subcommittee that in his county alone, “25 dairies have either filed or are in the process of filing for bankruptcy and many more are closer to bankruptcy each day.”

National Family Farm Coalition representative and Wisconsin dairyman Paul Rozwadowski said the increase falls short of a real remedy.

“We need at least an $18 emergency floor price on all manufactured milk to be able to stay in business and survive.”

On the table

As lawmakers continue to wrestle with the dairy industry’s problems, several plans are being promoted.

The National Farmers Union is calling for four things: updated price support to reflect cost of production; tariffs on unregulated imported dairy solids; greater market transparency; and a milk inventory management program.

On the Senate side, Chuck Schumer, D-N.Y., has introduced legislation, S. 1542, to address one of the group’s concerns. The bill would create tariff-rate quotas on foreign dairy proteins that currently come into the U.S. in unlimited quantities.

Need herd reduction

Iowa dairyman Craig Lang, testifying before the ag subcommittee on livestock, dairy and poultry, said voluntary herd retirements like those coordinated through the Cooperatives Working Together, or CWT, program are working, but may be too little.

“The latest removal of 100,000 cows, unfortunately, only represents about 1 percent of the U.S. herd,” said Lang, who was representing the American Farm Bureau Federation on the Hill.

Farm Bureau’s economists believe another 3 percent reduction in cow herd numbers for an extended period of time is needed before dairy prices will significantly rebound, he added.

While fewer dairy cows would be useful in increasing dairy prices to farmers, Lang said Farm Bureau is “adamantly opposed” to a federal dairy herd buyout program similar to those used in the past.

Such programs have had negative impacts on the beef industry and Farm Bureau does not support programs to benefit one sector to the detriment of another, he explained.

USDA is forecasting the all-milk price to average $11.60 per hundredweight in the third quarter and $13.10 per hundredweight in the fourth quarter.

For all of 2010, USDA is projecting an all-milk price of $15.30 per hundredweight.

About the Author

Farm and Dairy Editor Susan Crowell has been with the paper since 1985, serving as its editor since 1989. Raised on a farm in Holmes County, she is a graduate of Kent State University. You can follow her on Twitter at http://twitter.com/scrowell and follow Farm and Dairy at http://twitter.com/farmanddairy. You can also find her on Google+ and Facebook. More Stories by Susan Crowell

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