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Breaking news: USDA boosts price paid to dairy farmers

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By KATHRYN FLAGG
WASHINGTON, D.C. — After weeks of pleading their case for struggling dairymen in Washington, D.C., Vermont’s Congressional delegation finally made a breakthrough Friday, when the U.S. Department of Agriculture announced that the Obama administration is taking immediate action to boost prices paid to dairy farmers.

That means that the price the federal government pays for milk and dairy products in the marketplace is set to go up for August, September and October, a price hike that the USDA estimates will increase dairy farmers’ revenue nationally by $243 million.

That’s estimated to mean a roughly $1.25 increase per hundredweight (cwt) in the price paid to farmers. Farmers are currently earning between $11 and $12 per cwt, though the price of production is typically around $18 per cwt, which means even with the temporary price boost farmers will be producing milk at a loss.

That’s been the case in Vermont since early this winter, when milk prices first crashed. In Vermont, farmers are losing roughly $100 per cow per month, and the state Department of Agriculture estimates that these low milk prices have cost the state $200 million in lost economic activity this year.

The decision to boost the “support price” the government pays for milk came two days after Vermont’s senators and a coalition of more than two dozen senators from other dairy states met with U.S. Agriculture Secretary Tom Vilsack. The USDA decision also followed last Wednesday’s first meeting of the Congressional Dairy Farmers Caucus, a bipartisan group of more than 50 members of the House, launched in part by Rep. Peter Welch, D-Vt.
Welch on Friday said that the USDA’s announcement was exciting news for Vermont’s delegation, but that the increase in support prices was only “Step one.”

“(Farmers) just can’t survive with these prices,” Welch said. “Our immediate objective was to get some short-term, emergency relief to our farmers. We’re glad we’re successful, but we know this is not a long-term solution.”

Now, he said, it’s time for lawmakers to begin focusing on fixing the dairy pricing system, which is prone to volatile swings between high and low milk prices.

He said dairy farmers right now are caught in a “perfect storm,” given bad weather this summer, low milk prices, the decreased demand for milk exports abroad and the high costs associated with producing milk.

“Our farmers have never faced more serious challenges than they do now,” Welch said. “The short-term relief is going to help … (but) we’ve got to have a better pricing system.”

Meanwhile, other farmers and dairy advocates are pushing lawmakers to tackle another problem many consider to be at the root of unpredictable milk prices: an oversupply of milk on the market.

Leicester resident and former organic dairy farmer James Maroney says that, nationally, American dairy farmers produce an oversupply of roughly nine billion pounds of milk per year. Vermont dairies produce 2.6 billion pounds of milk every year.

And in Bridport, dairy farmer Marie Audet worries that the temporary price boost won’t fix a deeper problem in the dairy industry.

“Farmers agree that we want to move away from taxpayer-funded subsidies,” wrote Audet in an e-mail. “Many layers in food production need fixing, but what farmers can control is how much milk we produce. … The work done by our delegation shows incredible support to our diary industry. We, dairy farmers, need to support them in pushing (a) self-help program forward. … We need to keep our eye on fixing the real problems: empowering farmers with a tool to more closely match supply with demand.”

Prior to bumping the support price Friday, the USDA has taken additional efforts this year to relieve the dairy crisis. In March, the department transferred approximately 200 million pounds of nonfat dry milk to the USDA’s Food and Nutrition Service, a move that removed dairy inventory from an oversupplied market and also supported low-income families.

Also since March, the USDA has encouraged the export of 40 million pounds of nonfat dry milk, and has reactivated a dairy export incentive program to help make U.S. dairy products more competitive in the international market. The department is also working with the Department of State to identify foreign aid programs where dairy products can be sent.

All told, the USDA anticipates spending more than $1 billion during the 2009 fiscal year to purchase dairy products through the support price program and make payments to farmers through the Milk Income Loss Contract.

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