Feds take steps to drive depressed dairy prices up

McClatchy NewspapersMarch 26, 2009 

WASHINGTON — California's struggling dairy farmers will get a modest boost from the Agriculture Department, which announced plans Thursday designed to bolster prices and benefit hungry kids.

With dairy prices plummeting, Agriculture Secretary Tom Vilsack said the department will shift 200 million pounds of surplus nonfat dry milk into domestic feeding programs. Reducing the surplus stored in government warehouses is supposed to propel prices upward.

"Providing food to those in need will help many weather these tough economic times," Vilsack said. "At the same time, (this) disposal plan will benefit dairy farmers, who have seen markets disappear."

The department will also be providing an additional 1.5 million pounds of nonfat dry milk for international feeding programs. Taken together, the moves are less than some farmers wanted but apparently enough to provide temporary relief.

"It will make a difference," said Michael Marsh, chief executive officer of the Modesto-based Western United Dairymen, though "I'm a little concerned that there are still some (aid) components that are missing." In particular, Marsh and San Joaquin Valley lawmakers have been urging the Agriculture Department to provide subsidies through the Dairy Export Incentive Program. Agriculture Department officials said Thursday they were "exploring the possibility" of reviving the program.

The federal dairy actions are the first of their kind since the Obama administration took office, and they come amid grim times in dairy country. The milk that cost a little more than $17 per hundredweight last March now sells for about $9 per hundredweight.

This requires a delicate balancing act. The same low prices that sting dairy producers can benefit dairy processors who buy the raw milk. The dairy export program, while popular in some circles, is not universally beloved.

The Agriculture Department's decision also follows weeks of lobbying from the Valley's House members and industry leaders. Through letters, phone calls and meetings both on Capitol Hill and at the White House, representatives from the nation's most productive dairy producing region have been making the case for help.

"Dairy operations are suffering devastating losses after milk prices collapsed, having fallen 33 percent lower than they were a year ago," Rep. Jim Costa, D-Fresno, advised President Barack Obama in a March 6 letter. "This crippling environment has recently led to a tragic event, the suicide of a local dairyman."

Costa's Democratic colleague, Rep. Dennis Cardoza of Merced, wrote a similar letter to the White House, and the two Valley lawmakers huddled with senior White House staff following a recent meeting convened by the Congressional Hispanic Caucus. Last month, they met with Vilsack to press the point.

Costa and Cardoza urged Vilsack to restart the Dairy Export Incentive Program, which pays cash bonuses to U.S. dairy exporters.

The politically well-connected dairy industry, too, has been weighing in with its many Capitol Hill connections. Dairy industry groups reported spending $4.1 million on lobbying activities last year and contributed $4.7 million to federal candidates during the 2008 election cycle, records compiled by the Center for Responsive Politics show.

The new purchases come on top of the more generous dairy provisions included in the 2008 farm bill signed by then-President Bush. Lawmakers used the latest farm bill to expand payments and eligibility for the Milk Income Loss Contract program, which pays farmers when dairy prices fall below certain levels.

Between 2003 and 2007, California dairy farmers received $194 million in Milk Income Loss Contract payments. The payments are scheduled to begin again next month.

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